best tax haven to avoid cgt without living there?
Discussion
pimping said:
As the title states i am speculating on shares and am hoping they will be worth alot in the future.
I am not looking at leaving the uk but am wondering if there are legal ways to avoid cgt.
What stocks have you got?I am not looking at leaving the uk but am wondering if there are legal ways to avoid cgt.
Though I do invest myself, I'm not going to try and advise you on the CGT matter as I'm not qualified or even that experienced.
I had a lot of questions about investments recently, so I booked in a free appointment with a financial advisor at my bank (Who I also use to perform my execution only trades.) It was free and I had someone experienced and qualified answer every question I had
I'm sort of lead to believe from your post that you're not too experienced in this field either. Make sure you're not over exposed to high risk, diversify your portfolio and seek professional advice on matters such as this. Its quick and easy.
Even with forums such as III you still get a lot of people that don't have a clue doling out advice.
Edited by HBFS on Wednesday 2nd March 02:37
The majority of 'offshore' tax avoidance schemes are illegal.
They are a sophisticated fraud. A minority are genuine.
The problem is under UK law if a UK resident controls an offshore avoidance scheme he cannot legally avoid the tax. Most avoiders are in fact evaders.
Its just like driving at 40 in a 30 limit.
You may get away with this BUT its not legal. If you are pulled you are pulled.
UNLESS you have genuine offshore living and domicile like Richard Branson Mick Jagger and others this is, perhaps not surprisingly, impossible.
You live in the UK you trade in the UK.
Legally you should pay UK tax on all your activities.
They are a sophisticated fraud. A minority are genuine.
The problem is under UK law if a UK resident controls an offshore avoidance scheme he cannot legally avoid the tax. Most avoiders are in fact evaders.
Its just like driving at 40 in a 30 limit.
You may get away with this BUT its not legal. If you are pulled you are pulled.
UNLESS you have genuine offshore living and domicile like Richard Branson Mick Jagger and others this is, perhaps not surprisingly, impossible.
You live in the UK you trade in the UK.
Legally you should pay UK tax on all your activities.
pimping said:
As the title states i am speculating on shares and am hoping they will be worth alot in the future.
I am not looking at leaving the uk but am wondering if there are legal ways to avoid cgt.
There are several legal ways which don't include depositing the gains offshore.I am not looking at leaving the uk but am wondering if there are legal ways to avoid cgt.
But, and I might be quite wrong here, I'm guessing you are not going to need to worry about much more than your annual exempt amount which is £10100.00. If you're married you can effectively double this figure. So your first £10100 (£20200 if married) of gains PER YEAR are tax free without need for any tax planning.
To make those gains you will either be investing a reasonably large sum of money (into six figures), be very good at investing or very lucky.
If you know for definite that you are going to exceed these gains, you should speak to a tax accountant because you can minimise your liability and his or her fees will probably be much cheaper than setting up an offshore arrangement. You'll also be at far less risk.
My personal view is that unless you're trying to shelter sums above £1m annually, you're better off playing the rules using good advice.
Funnily enough I have just been offered a scheme to avoid CGT on shares by a very well known global accountancy firm.
What has been said so far here is mainly right:-
1. you have to crystalise the gain at the point you transfer the shares to the offshore entity (in this case a trust in the IOM) so you need to pay CGT at that point (there is a way of deferring this payment as well, but either way you will owe HMRC that amount of tax whether paid then or later)
2. the costs of setting up this scheme are large, so your gains will beed to be high six figures to make it worthwhile.
What has been said so far here is mainly right:-
1. you have to crystalise the gain at the point you transfer the shares to the offshore entity (in this case a trust in the IOM) so you need to pay CGT at that point (there is a way of deferring this payment as well, but either way you will owe HMRC that amount of tax whether paid then or later)
2. the costs of setting up this scheme are large, so your gains will beed to be high six figures to make it worthwhile.
Watch out for global accountancy firms that sell these schemes from subsidiaries (which they can shut down when it all goes wrong). I saw one today and I work for such a firm (that doesn't offer such schemes). These schemes often don't tell you much about how you will unravel the scheme when you want out and want to bring the funds back to the UK...HMRC is cracking down on these more and more (quite rightly). As has been said if you live here and trade from here no matter where the assets are located you are liable to tax on your worldwide income/gains.
The only way you can legally avoid paying CGT is to leave the UK and become legally domiciled somewhere that doesn't pay CGT. It's not as simple as just deciding to leave the country though....it's much harder to escape the clutches of HMRC than it used to be. If you can get a job overseas in a country that doesn't have CGT that's you best bet....though HMRC may have some ability to tax you on any gains whilst you were domiciled here? Don't know.
pimping said:
You have missed the point northernboy. No scheme involved i am just interested in offshore banking.
But you mention that you expect to make money on share dealing. That sounds strange.On the offshore banking bit, you are still liable or the tax, assuming you are domiciled here.
NorthernBoy said:
But you mention that you expect to make money on share dealing. That sounds strange.
On the offshore banking bit, you are still liable or the tax, assuming you are domiciled here.
Northern Boy is right, just because funds are deposited in an offshore account doesn't mean you can avoid UK CGT. You have to transfer the shares into a different legal entity (eg a trust)On the offshore banking bit, you are still liable or the tax, assuming you are domiciled here.
Probably not very sophisticated but:
1. Use your allowance
Each UK resident has a yearly tax-free allowance for CGT, which is £10,100 in 2010/11. Any gains below this 'annual exempt amount' are CGT-free.
In effect, this allowance could save you up to £2,828 this tax year.
2. Use your losses
Your gain for CGT purposes is calculated by adding together your gains and losses. For example, a £5,000 gain combined with a £4,000 loss gives you a net taxable gain of £1,000.
Therefore, you can lower your CGT bill by 'crystallising' losses to offset larger gains.
3. Take your time
There is no law that says you must deliver all of your capital gains in a single tax year. Hence, by spreading gains over two or more tax years, you can make use of multiple tax-free allowances.
For example, selling half of an investment on 5 April and the other half on 6 April neatly spreads your gain over the 2010/11 and 2011/12 tax years.
4. Give gains to your spouse
When you gift assets to your spouse (or same-sex Civil Partner), you also pass on any gain to him/her, because gifts between spouses do not lead to a taxable event. Therefore, a £20,000 gain may be split into 'his and hers' gains of £10,000, both of which lie within the yearly tax-free allowance for CGT.
Be warned: this must be a 'gift without reservation', so your spouse could legally do a runner with this gift!
5. Bed and breakfast
If you sell an asset and then buy all or part of it back within 30 days, then this does not count as a complete disposal for CGT purposes. However, if you wait 31 or more days before buying back the same asset, then this will produce a legitimate capital gain.
Thus, you could sell some shares to generate a gain and then wait a month before buying them back, known as 'bed and breakfasting'. However, be warned that the market could move against you during this 30-day period, which could leave you out of pocket.
6. Get an ISA
With over 19 million fans, the UK's most popular tax shelter is the Individual Savings Account (ISA). This tax-free wrapper allows you to produce income and capital gains while keeping the taxman at bay. In 2010/11, investors can put up to £10,200 inside an ISA, of which up to half can be in cash.
All capital gains made inside ISAs are tax-free, making them the number-one way to avoid CGT. Since ISAs started in April 1999, a few investors have built tax-free ISA portfolios worth in excess of £1 million, completely free from CGT.
Plus 6 more on this link: http://www.fool.co.uk/news/investing/2011/01/05/12...
1. Use your allowance
Each UK resident has a yearly tax-free allowance for CGT, which is £10,100 in 2010/11. Any gains below this 'annual exempt amount' are CGT-free.
In effect, this allowance could save you up to £2,828 this tax year.
2. Use your losses
Your gain for CGT purposes is calculated by adding together your gains and losses. For example, a £5,000 gain combined with a £4,000 loss gives you a net taxable gain of £1,000.
Therefore, you can lower your CGT bill by 'crystallising' losses to offset larger gains.
3. Take your time
There is no law that says you must deliver all of your capital gains in a single tax year. Hence, by spreading gains over two or more tax years, you can make use of multiple tax-free allowances.
For example, selling half of an investment on 5 April and the other half on 6 April neatly spreads your gain over the 2010/11 and 2011/12 tax years.
4. Give gains to your spouse
When you gift assets to your spouse (or same-sex Civil Partner), you also pass on any gain to him/her, because gifts between spouses do not lead to a taxable event. Therefore, a £20,000 gain may be split into 'his and hers' gains of £10,000, both of which lie within the yearly tax-free allowance for CGT.
Be warned: this must be a 'gift without reservation', so your spouse could legally do a runner with this gift!
5. Bed and breakfast
If you sell an asset and then buy all or part of it back within 30 days, then this does not count as a complete disposal for CGT purposes. However, if you wait 31 or more days before buying back the same asset, then this will produce a legitimate capital gain.
Thus, you could sell some shares to generate a gain and then wait a month before buying them back, known as 'bed and breakfasting'. However, be warned that the market could move against you during this 30-day period, which could leave you out of pocket.
6. Get an ISA
With over 19 million fans, the UK's most popular tax shelter is the Individual Savings Account (ISA). This tax-free wrapper allows you to produce income and capital gains while keeping the taxman at bay. In 2010/11, investors can put up to £10,200 inside an ISA, of which up to half can be in cash.
All capital gains made inside ISAs are tax-free, making them the number-one way to avoid CGT. Since ISAs started in April 1999, a few investors have built tax-free ISA portfolios worth in excess of £1 million, completely free from CGT.
Plus 6 more on this link: http://www.fool.co.uk/news/investing/2011/01/05/12...
Beardy10 said:
The only way you can legally avoid paying CGT is to leave the UK and become legally domiciled somewhere that doesn't pay CGT. It's not as simple as just deciding to leave the country though....it's much harder to escape the clutches of HMRC than it used to be. If you can get a job overseas in a country that doesn't have CGT that's you best bet....though HMRC may have some ability to tax you on any gains whilst you were domiciled here? Don't know.
Russia !!Out here income tax is at 13% as long as you work over 186 days and no CGT
I think we must distinguish between avoidance and evasion.
In a recent case the Revenue went for a very wealthy titled individual who owned an island in the Caribbean and claimed non Domicility in the UK.
HE CLAIMED HE LIVED ON THE ISLAND AND DID OWN HOUSES THERE.
The revenue admitted he had NOT spent more than 92 days ( three months ) in England in any tax year over last thirty years.
But they claimed his family was based here and his lifestyle was based here and he was actually domiciled here. HE ALSO OWNED A NUMBER OF MASSIVE PROPERTIES IN THE UK. His family are here and the Revenue obviously convinced the Court.
Because THEY WON.
I was staggered at this but the fact is they did win.
He now has a back duty case over the last 30 years.
I cannot find the case reference currently.
I am in California and then Italy but I will find it on return to the UK and post it up.
Fact is the greatest part of OFFSHORE dealings are simply not declared to the Revenue.
In just the same way as driving in a 40 limit will not get you booked for speeding most of the time so non declaration of offshore income is generally undiscovered.
BUT THIS IS NOT LEGAL NOT LAWFUL FULL OF DIFFICULTIES AND I DO NOT RECOMMEND IT.
If you have a family in the UK history in the UK and business in the UK it is extremely difficult to claim Non Domicility.
Yes. Richard Branson and Mick Jagger and Rupert Murdoch may be able to but ask yourselves this. What is it costing them and how long has it taken them?
Is it a practical proposition for the average taxpayer.
NO NO and thrice NO!
In a recent case the Revenue went for a very wealthy titled individual who owned an island in the Caribbean and claimed non Domicility in the UK.
HE CLAIMED HE LIVED ON THE ISLAND AND DID OWN HOUSES THERE.
The revenue admitted he had NOT spent more than 92 days ( three months ) in England in any tax year over last thirty years.
But they claimed his family was based here and his lifestyle was based here and he was actually domiciled here. HE ALSO OWNED A NUMBER OF MASSIVE PROPERTIES IN THE UK. His family are here and the Revenue obviously convinced the Court.
Because THEY WON.
I was staggered at this but the fact is they did win.
He now has a back duty case over the last 30 years.
I cannot find the case reference currently.
I am in California and then Italy but I will find it on return to the UK and post it up.
Fact is the greatest part of OFFSHORE dealings are simply not declared to the Revenue.
In just the same way as driving in a 40 limit will not get you booked for speeding most of the time so non declaration of offshore income is generally undiscovered.
BUT THIS IS NOT LEGAL NOT LAWFUL FULL OF DIFFICULTIES AND I DO NOT RECOMMEND IT.
If you have a family in the UK history in the UK and business in the UK it is extremely difficult to claim Non Domicility.
Yes. Richard Branson and Mick Jagger and Rupert Murdoch may be able to but ask yourselves this. What is it costing them and how long has it taken them?
Is it a practical proposition for the average taxpayer.
NO NO and thrice NO!
How much time do you spend in the UK?
Is your business controlled in the UK?
Where do you bank?
Where do your children go to school?
Are you writing to this forum from the UK?
Can you prove all of this?
I do not want to know but you should be aware of the ramifications of these questions.
If you never come here, never spend money here, have no connections here, then possibly. BUT ONLY POSSIBLY.
But the Politicians and therefore the Revenue are getting seriously fed up with this technique because if it works there is no way the Revenue can pursue you.
And many taxpayers are not entirely honest with their explanations.
Sad fact.
Unless you are permanently abroad merely shifting the gain abroad or the profits abroad or your salary abroad OR YOUR BENEFITS IN KIND ABROAD, using offshore banks is a no no. Its just will not wash.
It is possible but NOT if your businesses are really based, controlled, directed, connected or in an way seriously influenced by UK based businesses, or individuals.
The legislation has been drawn up by successive governments to make this virtually impossible and as non cost effective as possible.
And so it is. For ordinary taxpayers this is a chocolate teapot.
Not much use. Just decorative.
Is your business controlled in the UK?
Where do you bank?
Where do your children go to school?
Are you writing to this forum from the UK?
Can you prove all of this?
I do not want to know but you should be aware of the ramifications of these questions.
If you never come here, never spend money here, have no connections here, then possibly. BUT ONLY POSSIBLY.
But the Politicians and therefore the Revenue are getting seriously fed up with this technique because if it works there is no way the Revenue can pursue you.
And many taxpayers are not entirely honest with their explanations.
Sad fact.
Unless you are permanently abroad merely shifting the gain abroad or the profits abroad or your salary abroad OR YOUR BENEFITS IN KIND ABROAD, using offshore banks is a no no. Its just will not wash.
It is possible but NOT if your businesses are really based, controlled, directed, connected or in an way seriously influenced by UK based businesses, or individuals.
The legislation has been drawn up by successive governments to make this virtually impossible and as non cost effective as possible.
And so it is. For ordinary taxpayers this is a chocolate teapot.
Not much use. Just decorative.
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