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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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when I lived in South Africa, I invested some money in an off-shore

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when I lived in South Africa, I invested some money in an off-shore account in Jersey in 2005. Under South African tax laws I had exemption certificates for these funds which meant that if I brought the funds back onshore in South Africa I would not be liable for tax. The money invested was from the sale of my house in South Africa.

Since moving to the UK in June 2005 I have been renting property. I now need to buy a small assisted property so have brought my offshore funds onshore here in the UK so that I can put the money back into property. This is not a capital gains. Ihave not received any income in the UK from this offshore investment. Any dividends received were credited to my bank in South Africa. This was a small sum which covered the costs of my finacial advisor in South Africa who handled my SA tax returns.

Please advise if I am liable to pay tax in the UK on the funds received. The amount in question is £74K,
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you confirm that you sold the house in South Africa before you moved to the UK. Was it your home for all the time you owned it when you lived in South Africa and was it sold within three years of you moving out of it? Roughly how much income did the finds in the Jersey account produce each tax year since you moved to the UK?
Customer: replied 3 years ago.

The house was sold 2 months prior to me moving to the UK. It had been my main and only residence for the whole time I lived in it. I moved out of my property at the time the sale was completed.


I need to apologise, but I got confused over the amount paid each year. I have just phoned my previous financial advisor who explained that the offshore account was set for all income to be reinvested back into the offshore fund held in Jersey. No income was received from it in South Africa or in the UK.


 


I have checked the 6 monthly statements but they only given a current value - they do not show an income amount. The value amount fluctuates depending on the success of the investment.


 

Expert:  TonyTax replied 3 years ago.
Thanks.

Can you just confirm whether you you are a South African national or a UK national?
Customer: replied 3 years ago.

I am a UK national. I was born here but lived abroad for 40 years, although my only income (my pension) originates from South Africa and I am liable for tax at source.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 3 years ago.


Thank you for this. please advise an expected timescale for me to receive your answer.

Expert:  TonyTax replied 3 years ago.
I'm almost finished and have opened this to respond which puts me in danger of losing what I have drafted already.
Expert:  TonyTax replied 3 years ago.

Hi again.

This comes down to whether you consider yourself to be UK domiciled or South African domiciled by choice, ie living there for 40 years. The UK tax authorities won't normally argue with you if you consider yourself to be UK domiciled.

An individual who is UK domiciled and resident in the UK is taxable on their worldwide income and gains. It makes no difference whether the income is brought into the UK or not.

Given that the disposal of the property occurred before you arrived in the UK, you can bring that capital into the UK and have no worries about paying UK tax on it. The fact that it was your main home for the entire period that you owned it would have exempted it from UK Capital Gains Tax in any event under the main residence rules so long as you sold it within three years of moving out.

Without knowing what type of income was produced by the investments held in Jersey its difficult for me to say what the UK tax position would be but if it was interest or dividends then they should have been disclosed in the UK. Some investments such as bonds with life cover attached automatically reinvest the income and there are no tax consequences to consider until withdrawalsfrom the bond are made. You should consult your adviser on that as they should be able to confirm the UK tax position for the type of investment you made.

Non-UK domiciled individuals have a choice as to how they are taxed or not on non-UK source income as follows:

1 They can choose to pay UK tax on their worldwide income as a UK resident and UK domiciled individual would with credit being given for foreign tax paid under the terms of the relevant double tax treaty.

2 If the non-UK source income is very small (less than £100 per annum), they can remit that to the UK and pay no UK tax on it. See paragraphs 9.11 to 9.14 of RDR1 here. A tax return would not need to completed unless the individual wished to be taxed on the remittance basis. You can read about the remittance basis of assessment starting from page 54 of RDR1 here.

3 If the non-UK source income that isn't remitted to the UK is less than £2,000 annually, the remittance basis of assessment can be used without having to complete UK tax returns unless the individual is a higher rate taxpayer and there is further UK tax to pay on the non-UK income that has been remitted to the UK or on UK source income. See paragraphs 9.15 to 9.19 of RDR1 here.

4 If the non-UK source income that isn't remitted to the UK is £2,000 or more annually, the individual would need to make a claim to be taxed using the remittance basis of assessment by completing a self-assessment tax return. See paragraphs 9.20 to 9.28 of RDR1 here.

If an individual chooses to use the remittance basis of assessment and is a long term UK resident (7 of the previous 9 tax years) they may have to pay the remittance basis charge of £30,000 or £50,000 if they have been resident in the UK for 12 of the previous 14 tax years for any tax year that the remittance basis of assessment is chosen. See paragraphs 9.29 to 9.35 of RDR1 here. They may also lose their entitlement to UK personal allowances which reduce their UK tax liability. See section of RDR1 starting on page 51 here.

According to Article 17 of the UK/South Africa tax treaty here, your South African pension should be taxable in the UK only as you are resident in the UK. However, under Article 18 of the tax treaty, if the pension is derived from a South African government service job it will be taxable only in South Africa unless it is paid to a resident and a national of the UK in which case it will be taxable only in the UK.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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