Question re remittance

[joepubli]

An individual has an offshore brokerage account with a Luxembourg based Broker. He wants to send GBP from his offshore account in IOM to the
Luxembourg broker. Unhelpfully, the brokers GBP account is, say, with Citibank in London.

Does this amount to remittnce? If so is there a workaround? It seems quite challening to find an offshore broker whose GBP doesnt clear in London

[maths]

The transfer shouldn't constitute a remittance for UK tax purposes.

HMRC appear to have agreed that the clearance of funds (eg £) through London as part of the normal banking process will not constitute a remittance.

I assume you would instruct your IoM bank to transfer £X to your Luxembourg brokerage account rather than to their account in the UK with Citibank.

The fact that the Luxembourg broker clears the funds via London should not then be a problem.

[joepubli]

Thanks Maths.

Re "I assume you would instruct your IoM bank to transfer £X to your Luxembourg brokerage account rather than to their account in the UK with Citibank"

The Luxembourg brokers (Keytrade) have sent me their details where I should wire the Sterling Funds as follows:

HSBC Bank Plc London MIDLGB22
for Account GB88MIDL40051560107649 in Benefit of Banque de Luxembourg
in Benefit of the account nr LU35 0081 3337 6300 5826 of Keytrade Luxembourg S.A.
Communication : account number + name

[maths]

Whilst by no means am I an expert in international finance but I would suggest the transfer as required should not give rise to a remittance on your part for UK tax purposes.

I assume that this issue is of importance as the individual concerned is UK resident but non-UK domiciled and claims remittance basis treatment for UK tax purposes.

[joepubli]

Mtahs
Yes that's precisely the cicrmstances. Also it would also be relevant to a Non Resident Trust set up by Non dom settlor with potential UK beneficiries.

[maths]

Only if settlor interested ??

[joepubli]

Yes Maths. Settlor interested.
My understanding is that for a offshore Trust set up in say 2000, by a non-UK domiciled UK resident settlor interested, the trust can continue to invest offshore. The gains are rolled up and taxable only when allocated to a UK resident beneficiary. However the Trust funds much not touch the UK or invest in UK situs assets such as UK Listed shares. Is this correct?

Also, I understand that when an allocation is made to a beneficiary the recent gains ared deemed to be remitted first (rather than pre March 2008 exempt gains). Is there a way of segregating these old gains from the new ones? I guess onc could always the new gains to a non UK resident beneficiary first leaving clean funds for the UK resident one. I wondered whether there were any other ways.

[maths]

Yes Maths. Settlor interested.
My understanding is that for a offshore Trust set up in say 2000, by a non-UK domiciled UK resident settlor interested, the trust can continue to invest offshore. The gains are rolled up and taxable only when allocated to a UK resident beneficiary. However the Trust funds much not touch the UK or invest in UK situs assets such as UK Listed shares. Is this correct?

No. If the trust invests in UK situs assets thus potentially receiving UK source income/capital gains no remittance issues arise for settlor and/or beneficiaries.

Indeed UK source capital gains are are treated as non-UK source where a beneficiary is non-UK domiciled thus permitting remittance basis treatment for such beneficiary (under s87) despite the original UK source nature of the gains.

Also, I understand that when an allocation is made to a beneficiary the recent gains ared deemed to be remitted first (rather than pre March 2008 exempt gains). Is there a way of segregating these old gains from the new ones? I guess onc could always the new gains to a non UK resident beneficiary first leaving clean funds for the UK resident one. I wondered whether there were any other ways.

With respect to capital gains of the trust arising on or after 6th April 2008, yes, the LIFO basis applies; the rules pre 6.4.08 continue to apply to pre 6.4.08 trust gains.

Pre 6.4.08 gains of the trust comprise realised gains and pro-rata gains rea;ised post 6.4.08 (ie where the trust has made a rebasing election).

Unless the trust segregated the pre 6.4.08 gains ab initio no such separation is possible post 5.4.08.

Normal option is, as you indicate, to make capital payments to non-resident beneficiaries thus "washing out" any trust gains prior to capital payments to resident beneficiaries.

I take it you are not just a member of the public, joepublic??

[joepubli]

Thanks Maths

I take it you are not just a member of the public, joepublic??

I think a member of the public has no hope of understanding these rules! I think that also goes for some "professionals". More I read more confused I get. Just when I think I am getting somewhere, I read the following in the Inspector's manual:

Chapter 3 - Specific Topics
Example
Fernanda who is not domiciled in the UK creates a discretionary trust for her grandchildren. Under the terms of the trust it is possible for the trustees to make a payment to Fernanda if they wish to do so, so this is a trust in which the settlor maintains an interest. The monies settled are invested by the trustees into an offshore bank account on which interest (relevant foreign income) is paid.
The trustees decide not to make any payments to any beneficiary in tax year 2009-10.
Fernanda chooses to be taxed on the arising basis for that year. As Fernanda (the settlor) retains an interest in the property or income of the trust, the income arising under the settlement (that is, the interest) is treated as hers for income tax purposes irrespective of whether she receives it or not.
If Fernanda chooses to be taxed on the remittance basis she is not taxed on any relevant foreign income arising to the trust in the year because nothing has been remitted to the UK. If the trust received any UK income it would be chargeable on Fernanda as the charging of UK income is unaffected by her domicile position.
http://www.hmrc.gov.uk/CNR/rdrm-remittances.pdf page 184

I thought we agreed that for a offshore settlor interested trust the gains/income weren't taxtable on the settlor unless remitted. The above seems to imply otherwise - is this for an onshore trust ?

[maths]

I think you have misread the quote.

The quote confirms the settlor is subject to tax if the arising basis applies (ie if although a non-dom the remittance basis is not formally claimed as is now necessary) but if the remittance basis is claimed then taxability depends upon actual remittance.