Where Taxpayers and Advisers Meet

How do you/When does income/interest become capital?

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Postby shawn_phade@yahoo.co » Sun Oct 24, 2004 11:55 am

Hello. I am not domiciled in the UK.

If I have an offshore bank account in Jersey (which has had gross interest paid into it along with contract income) - at what stage does this become capital allowing it to be remitted to the UK?


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Postby cranleys » Sun Oct 24, 2004 12:14 pm


You are taxed on income as a Resident to the UK. If you have received money in any offshore account during the period in which you were resident here it is income which should be taxable.

If you were resident in Jersey or anywhere else you must declare it to the local tax authority in question.

There are many other situations in which you may be in but ASSUMING that this does not have a claim to the UK authorities it can be remitted.

I guess you would have been Resident but working outside the UK - you will qualify for a deduction of your earnings for the period in which you did not reside here.

Colin Davison

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Postby moonshine » Mon Oct 25, 2004 1:15 am

First of all, if you have not already done so, speak to your tax advisor and work through whether you are non-domiciled. Then seek a ruling from the Revenue.

Secondly, the rest of this response should not be acted on without seeking specific advice relevant to your circumstances! This is a highly specialised arena, and as such, you should speak to an expert.

As background, an individual who is resident but not domiciled in the UK, whilst UK source income will be fully chargeable to UK income tax, income arising overseas can only be liable to UK income tax if such income is “remitted” the UK.

The term “remittance” has a wide definition.

The basic planning for a non-UK domiciliary who is resident in the UK is to identify a pool of funds which are not subject to UK taxation - termed “capital” - and to maintain separate “capital” and “income” accounts rather than a single bank account offshore where the interest is added to capital.

This allows the non-UK domiciliary to draw down funds from the capital account and remit these to the UK without incurring a UK tax liability. The following, generally speaking, will be ‘capital.’
• income received prior to establishing UK residence
• proceeds from the sale of assets prior to establishing UK residence;
• items of a pure capital nature
Please seek advice regarding the tax exposure of your income sources.

A potential disadvantage with the above is that the funds in the income account usually need to be retained offshore on a permanent basis to avoid a UK income tax liability. However, by adopting more sophisticated planning arrangements it is possible overcome this disadvantage (in respect of investment income only)

This type of planning is not straightforward and I urge you to speak to your tax advisor to run through. Cutting corners will not work!

By the way – sorry if I bored you to death!



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