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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4545
Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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Rakhi Earlier this year you answered some questions for me.

Resolved Question:

Hi again Rakhi
Earlier this year you answered some questions for me. We have now returned to UK after living in Switzerland for just 4 years. We have kept our Qrops pension funds which are based in Malta. These contain mostly structured notes. My question is will we have to pay 'deemed gain' tax on the structured notes. They are not due to mature until Feb2018.
Best regards
Sue Melling
Submitted: 1 year ago.
Category: Finance
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

Many thanks for requesting me again. Nice to hear from you. I believe, you are in best of your health and spirits.

Give me some time and I will revert on this issue. This is just an interim reply to acknowledge the receipt of your question.

Warm Regards,

Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

Many thanks for your patience. I just needed some time to revisit our conversation that we had in February.

No, this will not be subject to any deemed capital gains. The gains would realise only when they mature in 2018.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
Hi Rakhi
Many thanks for your answer. Just to clarify - when the notes mature will we pay CGT on the actual gain NOT the deemed gain?
Best wishes
Sue
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

Yes that is correct. You will pay tax on the actual gain that you will realise.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
Hi Rakhi
The structured products held within the Malta pension fund were taken out while we lived abroad. Now we are back in the UK I believe they are 'offensive' in the eyes of HMRC and possibly will attract the 'deemed gain' charge. Does this affect your previous answer? I'm sorry to ask again, but I would like to be sure.
Best regards
Sue
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

No worries at all. You are welcome to ask question any number of times you wish. I would be more than happy to keep assisting you.

No, so long as I understand your situation and as per my best knowledge, they will NOT be taxed as deemed gain until they are matured.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
Thank you Rakhi
So, to clarify again, they WILL be subject to a 'deemed gain' tax on maturity i.e. 15%deemed gain per annum? Will we also pay CGT and can this offset the deemed gain tax?
Regards
Sue
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

Hello again.

YES -- By all means...!!

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
Morning Rakhi
Do you have any more information regarding 'deemed gains'? Is it classed as CGT or income tax? I keep being told different things!! Is there any way to avoid or offset this tax?
I will be happy to pay or tip you for the extra time involved.
Regards
Sue
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Sue,

Hello and welcome again. Thank you for offering me for extra time involved.

Let us first understand what "Deemed" gains are all about.

Many years ago, Her Majesty’s Revenue and Customs (HMRC) introduced restrictions to limit a UK resident policyholder’s power to select and hold certain assets. This was done to stop highly personal assets being sheltered in an off shore bond and, as a result, obtaining a tax advantage. As such, where a policy holds assets which are deemed to be ‘offensive’
at the end of a policy year, the policy is viewed as personal portfolio bond (PPB) and subject to a ‘deemed gain’ tax charge, irrespective of whether there has been a gain on the policy or not.

NOW, we much shift our attention to the definition of "Offensive" asset.

Offensive assets are things which are ‘personal’ to the policyholder or rather, not freely available to anyone else, however, they can also be structured notes, unauthorised investment trusts and equities. HMRC provides detailed information, on their website, about what is and isn’t deemed to be an acceptable asset, more information can be found at the following link:
www.hmrc.gov.uk/manuals/iptm/iptm7745.htm

Now, coming to your query in specific, I do not deny that they too are structured notes and but they do not fall under the definition of "Offensive" asset BECAUSE -- one of the essential requirement / feature of an "Offensive" asset is -- that they are NOT freely available to general public.

YOURS is not such case as your type of structured notes are generally available to anyone who subscribes to such investment options and therefore they should not fall under the definition of "Offensive" asset and therefore come under the purview of "Deemed" gains.

This is how my interpretation goes about.

So far as offsetting is concerned, yes, this can be done. You may be able to mitigate some or all of the gain by applying Time
Apportionment Relief (TAR), further details on taxation of off shore bonds and the available reliefs can be found in our Guide to off shore bonds.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 1 year ago.
Thanks Rakhi, that's good information.
Regards
Sue