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Where Taxpayers and Advisers Meet

A challenging International Income Question - Help

gusmac26
Posts: 5
Joined: Fri Jul 07, 2017 9:37 pm

A challenging International Income Question - Help

Postby gusmac26 » Wed Jun 26, 2019 12:16 pm

Dear All,

I am seeking your help. I am British born, but lived abroad for circa 45 years, and returned to the UK 5 years ago.

Whilst I was abroad, I invested in a company as an angel investor. I own 50% of the company (as per registered in the respective country) and it is based in Latin America, but I have no involvement in the running or day to day management of the company. The company simply owns the land and has a few assets on the land.

I then subsequently made a private arrangement with a friend of mine to give him 25% of the company (this was agreed with other shareholders). However, this is not reflected in the company in Latin America as he is was never resident there.

The company has now signed a deal to (a) rent out the land for x years (b) rent the assets on the land for x years. Over the X years this rent will be paid to shareholders.

So illustrative purposes...
- My Initial Investment was £100
- Dividend/Rent/Gain is £30.... so it will take around 3+ years to return my investment before a gain is made.

Question How should I deal with the funds coming in? Is this income? Is this Investment return?

Question How should I deal with the payment to my friend? I will receive the monies as per my official ownership of the company (50%) and I need to pay my friend...? How can we avoid paying tax when the money is received to me... and then he pays tax on it again....

Kind regards

A.

AGoodman
Posts: 854
Joined: Fri May 16, 2014 3:47 pm

Re: A challenging International Income Question - Help

Postby AGoodman » Wed Jun 26, 2019 3:37 pm

If the income is paid to you it will be a dividend and you will be subject to income tax to the extent it is not absorbed by your dividend allowance of £2,000.

The underlying income could be at risk of direct attribution to you under the "transfer of assets abroad" legislation but you should have a reasonable defence so long as UK tax was not a factor in the use of a foreign company to hold the property - which seems unlikely if you were not in the UK when you made the investment.

Any capital gains made by the company could also be directly attributed to you. These provisions also carry a statutory defence but you would need a proper analysis to assess whether they apply.

The position with your friend depends on the terms of your agreement/agreement with him. In what way/on what terms did you "give" them to him. If the shares are still registered in your name then your best hope is that you can be treated as holding his shares as nominee for him.

gusmac26
Posts: 5
Joined: Fri Jul 07, 2017 9:37 pm

Re: A challenging International Income Question - Help

Postby gusmac26 » Wed Jul 10, 2019 10:06 am

thanks for your response.


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