Why I joined this forum

[Quantyquant]

Hi everyone!

I have been reading this forum for a few weeks, and decided to join to learn new things and ask for advice about my situation.

I am based in the UK but European citizen, currently employed, but also trading my own portfolio with Interactive Brokers.

I have been talking with some wealth management firm, recommending me to invest mostly in offshore bonds which would be sheltered from capital gain tax to some extent. So it got me thinking, I have this portfolio that I trade myself, why would I not be able to trade it under the name of an offshore company?

However I am not clear about the setup of offshore company, how it would work to manage it from the UK, or how I would be able to transfer the profit back while keeping an optimized tax path.

I understand Dubai could be an option, though it is probably amongst the most expensive to setup? How about Jersey, Guernesay and the likes as those are also 0% tax I believe? What would be doable in Asia as well, Hong Kong as an example?

I can't wait to start engaging in this forum to learn more and figure out my path forward.

Thanks!

 

[Martin Everson]

I am based in the UK but European citizen

Are you a UK resident non-domicile?

I have been talking with some wealth management firm, recommending me to invest mostly in offshore bonds which would be sheltered from capital gain tax to some extent.

You mean like a life insurance investment bond? Not like a normal OTC bond you buy and put in your portfolio on IBRK for example.

So it got me thinking, I have this portfolio that I trade myself, why would I not be able to trade it under the name of an offshore company?

Because as a UK resident an offshore company will be transparent for tax purposes. Meaning you will be taxed as if the company did not exist and you earned the money directly. You will need to add substance to offshore company to defeat CFC rules. HMRC don't play. There is a low profit CFC exemptions but it is hard to comply with.

I understand Dubai could be an option, though it is probably amongst the most expensive to setup? How about Jersey, Guernesay and the likes as those are also 0% tax I believe? What would be doable in Asia as well, Hong Kong as an example?

See what I said above.


P.S Welcome to the forum .

 

[Quantyquant]

Thank you very much for the reply! And for the welcome!

I am a UK resident non domiciled, yes

You mean like a life insurance investment bond? Not like a normal OTC bond you buy and put in your portfolio on IBRK for example.

I think the correct naming is an internation investment bond, which might be related to life insurance policies.

Because as a UK resident an offshore company will be transparent for tax purposes. Meaning you will be taxed as if the company did not exist and you earned the money directly. You will need to add substance to offshore company to defeat CFC rules. HMRC don't play. There is a low profit CFC exemptions but it is hard to comply with.

How does the UK sees the activity of the offshore company? What if the profits are not brought back into the UK? Does that also depend on the jurisdiction in which the offshore company is established?
I was under the impression that as a non dom, any offshore profit would be excluded for tax purpose, but I may be wrong.


Thanks a lot!

 

[Martin Everson]

How does the UK sees the activity of the offshore company?

As a non-dom if place of management, control and operation is outside the UK and money is not remitted then you are not taxed if you opt for the remittance basis that year.

What if the profits are not brought back into the UK?

No tax then.

Does that also depend on the jurisdiction in which the offshore company is established?

No.

I was under the impression that as a non dom, any offshore profit would be excluded for tax purpose, but I may be wrong.

Not in all cases. Offshore profits even if not remitted and where offshore assets have UK situs will be considered a remittance and taxed. For example using an offshore broker to buy UK stocks and hold offshore is considered a remittance and any profit etc is fully taxable. Hence why for example banks like UBS and CS in Switzerland have lists of investments suitable for UK non-doms that avoid the situs issue.