Assigning Interest on Indian Bank Deposit

by **peter@2711.co.uk** on Mon Jan 23, 2012 6:02 pm

Husband & Wife (UK Nationals & Residents) propose to place £100,000 at 9% on an External Account with an Indian Bank.
They plan to assign the Interest on the Deposit for the sole benefit of the wife's younger Brother (Indian National & Indian Resident). Assuming formalities completed, can they avoid paying UK Tax on the Bank Interest, on the basis they will receive no benefit?
Many thanks JazzPete.

by **pawncob** on Mon Jan 23, 2012 11:01 pm

What they do with the interest is up to them, but they're still taxable on it.

by **peter@2711.co.uk** on Tue Jan 24, 2012 9:02 am

Many thanks, pawncob
JazzPete

by **King_Maker** on Tue Jan 24, 2012 9:48 am

Some form of loan and/or Trust agreement might be effective. Indian Law may be relevant.

However, it will only work if the interest is not re-routed back to the lender(s) - unless they are not UK DOMICILED.

by **maths** on Tue Jan 24, 2012 8:23 pm

In principle an assignment of rental income without transfer of the asset's underlying beneficial ownership is feasible in the UK.

It would first be necessary to ascertain (as the deposit is one in India) whether such is feasible under Indian local law.

If possible, rents should be paid directly into the assignee's bank account not that of the assignor.

No UK income tax should arise son the part of the assignor.

by **peter@2711.co.uk** on Thu Jan 26, 2012 4:51 pm

Thanks for the further comments. No problem under Indian Law, as I understand it. Similarly No Problem in paying direct into the Banking Account of the Indian National Beneficiary.

I am confused about the reference to "rents" when it is " interest" on a Bank Deposit?

Also I assume, as per pawncob, it is impossible to be certain that HMRC will not mount a challenge for Income Tax?

JazzPete

by **section 44** on Thu Jan 26, 2012 5:09 pm

I think that "rents" rather than "interest" is merely a typo.

by **maths** on Thu Jan 26, 2012 7:23 pm

Sorry, as section 44 states a typo.

If pawncob is suggesting that husband and wife are still taxable then I do not agree.

Assuming all the paperwork is satisfactorily completed; the assignees become absolutely entitled to the interest; and there is no agreement/understanding that the interest really still belongs to the parents all should be well.