Banking outside the UK
Discussion
I've been wondering about this one for ages, but my dear departed accountant could never answer the question! Which is one reason why she's my ex-accountant. 
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
So what I was wondering is this. What would be the tax implications if I were to open a bank account in Denmark or Sweden and leave the funds there until they're required? Could I even open accounts elsewhere in Europe, given that I'm resident in the UK?
Presumably I'd still have to declare the funds for UK tax, wouldn't I? But at what point does income stop being income and start being capital? Would I have to pay income tax in the "host" country instead?
Jolly complicated, this tax business. I think we should just streamline operations and stop paying it.
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
So what I was wondering is this. What would be the tax implications if I were to open a bank account in Denmark or Sweden and leave the funds there until they're required? Could I even open accounts elsewhere in Europe, given that I'm resident in the UK?
Presumably I'd still have to declare the funds for UK tax, wouldn't I? But at what point does income stop being income and start being capital? Would I have to pay income tax in the "host" country instead?
Jolly complicated, this tax business. I think we should just streamline operations and stop paying it.
SGirl said:
What would be the tax implications if I were to open a bank account in Denmark or Sweden and leave the funds there until they're required?
I strongly suspect those countries will need evidence of residence
in those countries to open a bank account.
Recommend trying the Swiss - they don't care who you are, they
will look after your money.
SGirl said:
Could I even open accounts elsewhere in Europe, given that I'm resident in the UK?
Have a chat with some folks in Lux, Channel Isles and IOM - all
banking hotspots.
wattsm666 said:
If you are resident in the UK then you are taxed on your worldwide earnings. This is a very complex area, but you should assume you are taxed as though it were UK. HMRC now have the power to find out about overseas bank accounts, in Jersey etc etc so beware!
Don't worry, I'm not trying to do anything illegal.
I was just wondering how to cut down on the amount of money the bank takes from me for the transfers. I don't mind paying a bit for the service, but £20 on a transfer when my client has already paid some charges at their end as well seems a bit "enthusiastic". It'd just be convenient if I could get the money gathered into a single account abroad which I could then "import" in a single hit, rather than via 15 or 20 individual transactions a month as at present. A Swiss account would presumably attract the same transfer charges, wouldn't it dcb?
As you've probably gathered - I know nowt about these things.
HSBC offshore banking?
You can have accounts in various currencies, my Dad's has Euro/GBP/USD all under one screen.
Used when being paid in dollars, but as he has a place in Spain and UK, also has those accounts, don't know what the stipulations are for opening the accounts but google it to find out.
Transfers between the accounts are not charged I believe, and the rate is fair. There may be an annual charge?
Will try and find out some more.
Can't see any problem with having overseas accounts, as long as they're declared, however I stand corrected.
You can have accounts in various currencies, my Dad's has Euro/GBP/USD all under one screen.
Used when being paid in dollars, but as he has a place in Spain and UK, also has those accounts, don't know what the stipulations are for opening the accounts but google it to find out.
Transfers between the accounts are not charged I believe, and the rate is fair. There may be an annual charge?
Will try and find out some more.
Can't see any problem with having overseas accounts, as long as they're declared, however I stand corrected.
I have an account in the US as well as my normal accounts here in the UK. I pay UK tax on the interest earned on the US account. I do not pay US tax due to the tax treaty between the US and the UK. Many countries have tax treaties - you will need to do some research to find out if the countries you are interested in opening an account in have a tax treaty with the UK. Otherwise you could end up paying tax twice.
Richard
Richard
I think this was more to do with bank charges.
In my experience the offshore accounts rape you on charges.
I'm assuming that you are being charged £20 on receipt as it is a company or business account? Generally, most banks would charge if it were a personal account.
Running accounts in the local country would be the best solution but as mentioned, it is very unlikely you would be able to do so.
I think that all you can do is go and have a look at some other banks.
In my experience the offshore accounts rape you on charges.
I'm assuming that you are being charged £20 on receipt as it is a company or business account? Generally, most banks would charge if it were a personal account.
Running accounts in the local country would be the best solution but as mentioned, it is very unlikely you would be able to do so.
I think that all you can do is go and have a look at some other banks.
I had no difficulty opening a current account in France. If you can do it in France, I'd be pretty confident you can do it pretty much anywhere inside the EU. An awful lot banking regulations are now set at the EU level. First thing I'd do is see if your UK bank is part of a group that owns a bank in another EU country. If they do, they ought to be able to pass the necessary information internally to establish your bona fides. In my case, I bank with HSBC in the UK who owned CCF in France (now rebranded as HSBC too).
SGirl said:
I've been wondering about this one for ages, but my dear departed accountant could never answer the question! Which is one reason why she's my ex-accountant.
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
We're in a similar position and these £20 a pop charges seem unavoidable. For us, the incoming payments are fairly large, generally K's of Euro's / dollars or whatever, so we take the view that £20 in neither here nor there. However our outgoing payments can be smaller and we try to consolidate them as much as possible.
I have a bank account here in the US which was waay too easy to set up. I also have one in Denmark but i do have a Danish passport which may help, i set it up ages ago and cant remember all the requirements. This HSBC account may be useful but i dont think it would be hard to set one up there. If there is a LARGE Scandinavian bank of some sort that may be best.
SGirl said:
I've been wondering about this one for ages, but my dear departed accountant could never answer the question! Which is one reason why she's my ex-accountant.
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
So what I was wondering is this. What would be the tax implications if I were to open a bank account in Denmark or Sweden and leave the funds there until they're required? Could I even open accounts elsewhere in Europe, given that I'm resident in the UK?
Presumably I'd still have to declare the funds for UK tax, wouldn't I? But at what point does income stop being income and start being capital? Would I have to pay income tax in the "host" country instead?
Jolly complicated, this tax business. I think we should just streamline operations and stop paying it.
Most of my work is done for clients in Denmark and Sweden, with significant amounts of it coming from Norway and Germany. Every time they pay me, they pay me by bank transfer - which is supposed to cost me nothing, but effectively it's up to about £20 a transfer depending on the client.
So what I was wondering is this. What would be the tax implications if I were to open a bank account in Denmark or Sweden and leave the funds there until they're required? Could I even open accounts elsewhere in Europe, given that I'm resident in the UK?
Presumably I'd still have to declare the funds for UK tax, wouldn't I? But at what point does income stop being income and start being capital? Would I have to pay income tax in the "host" country instead?
Jolly complicated, this tax business. I think we should just streamline operations and stop paying it.
Surprised Eric hasn't chimed in.
On the charges, you will probably get bank charges added whenever you recieve funds regardless of country, however, it is down to the bank themselves. The one i know charges $12 to recieve funds, but $50 to send funds, so technically you'll be down on the deal.
As for the tax, doesn't matter where you get paid, you are subject to UK tax and must declare it. I don't think you declare it to the country where the account is (unless there are local rules).
Not sure what you mean by capital and income as it makes no difference. You pay tax when you earn it, and then it becomes capital?? If you earn loads, pay the tax on the loads, then you simply have more capital to play with where-ever and whenever you want.
Thanks everybody. 
My problem is essentially that some transfers are worth several K, in which case no problem with the charges - drop in the ocean, and all that. But many of the transfers to my account aren't worth that much at all - they can be worth as little as £25. Which, with a £12 bank charge applied to it (or more!), makes it not worth doing the work in the first place. Then there's the problem that if 40 clients transfer funds to me in the course of a month, that's hundreds of pounds of (potentially avoidable) bank charges. I wouldn't mind paying £50 a month to get the money to my UK account if it meant I could avoid paying £400 of charges under my current system.
There's always the argument that I could just put my rates up (particularly minimum charge rates) to cover the bank charges. Well, yes - but then I'd price myself out of the minimum charge market (which actually might be no bad thing...
) - which often has a knock-on effect by leading to larger jobs once I've gained client confidence.
The way things are going, we may as well just move to Scandiwegia and leave Brown to his anti-business policies in any case.
My problem is essentially that some transfers are worth several K, in which case no problem with the charges - drop in the ocean, and all that. But many of the transfers to my account aren't worth that much at all - they can be worth as little as £25. Which, with a £12 bank charge applied to it (or more!), makes it not worth doing the work in the first place. Then there's the problem that if 40 clients transfer funds to me in the course of a month, that's hundreds of pounds of (potentially avoidable) bank charges. I wouldn't mind paying £50 a month to get the money to my UK account if it meant I could avoid paying £400 of charges under my current system.
There's always the argument that I could just put my rates up (particularly minimum charge rates) to cover the bank charges. Well, yes - but then I'd price myself out of the minimum charge market (which actually might be no bad thing...
) - which often has a knock-on effect by leading to larger jobs once I've gained client confidence. The way things are going, we may as well just move to Scandiwegia and leave Brown to his anti-business policies in any case.
I didn't chip in because I assumed the question was about banking facilities rather than tax - and therefore didn't bother reading it.
As it is, the basic rules on the tax situation have already been mentioned. UK tax residents are liable to UK Income Tax on their worldwide income, irrespective of whether they bring any of that overseas income into the UK. Therefore, interest earned on overseas interest credited to an overseas bank account is should be declared to the UK tax authorities. However, you may not end up paying any UK tax on this, especially if:
a) the overseas country requires that tax is deducted at source from the interest in THAT country
b) the tax deducted at source exceeds what the UK tax would have been
c) the oversaes country has a reciprocal Double Taxation Agreement with the UK.
Regarding "Capital" v' "Income", the money placed into the bank account becomes your invested capital. As capital, it is not in istelf subject to any tax charge. However, the mechanism by which the income was generated in the first place - such as wages, business profits or investment income from some other source (such as shares or a cpaital gain of some sort) would be subject to some tax somehere, either here in the UK or in the overseas country where the money was originally generated.
Again, the mechanism whereby this income was generated should be disclosed to HM Revenue and Customs in the UK and taxed accordingly - again subject to any Double Taxation Agreements in place.
As it is, the basic rules on the tax situation have already been mentioned. UK tax residents are liable to UK Income Tax on their worldwide income, irrespective of whether they bring any of that overseas income into the UK. Therefore, interest earned on overseas interest credited to an overseas bank account is should be declared to the UK tax authorities. However, you may not end up paying any UK tax on this, especially if:
a) the overseas country requires that tax is deducted at source from the interest in THAT country
b) the tax deducted at source exceeds what the UK tax would have been
c) the oversaes country has a reciprocal Double Taxation Agreement with the UK.
Regarding "Capital" v' "Income", the money placed into the bank account becomes your invested capital. As capital, it is not in istelf subject to any tax charge. However, the mechanism by which the income was generated in the first place - such as wages, business profits or investment income from some other source (such as shares or a cpaital gain of some sort) would be subject to some tax somehere, either here in the UK or in the overseas country where the money was originally generated.
Again, the mechanism whereby this income was generated should be disclosed to HM Revenue and Customs in the UK and taxed accordingly - again subject to any Double Taxation Agreements in place.
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