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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4983
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Husband and wife have invested cash in India. They are both

Resolved Question:

Husband and wife have invested cash in India. They are both UK residents, and would be classified as UK domiciled. Does the interest being earned in India need to be declared and taxed in the UK? There is no tax being deducted in India. Can the interest being earned be deemed as relating solely to the wife (as the husband is a 40% tax payer)? How can we document this?
Also, due to exchange rate movements, the cash amount is now worth less than the original GBP investment. Can this loss be offset against the interest to pay tax on the net amount in GBP?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

If the savings account/investment is in joint names, then interest earned on it would be deemed earned equally, i.e. 50:50. If you are able to support the claim that monies invested were not from joint source but disproportionately then you could argue that the interest should be taxed in that proportion.

As you are UK resident and UK domiciled, you are taxed on your worldwide income and gains and foreign interest earned should be declared on supplementary pages SA106 - Foreign.

You can not offset your investment loss against the interest earned for income tax purposes, I'm afraid.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thanks for your message. Can you give me some advice on how I can ensure the interest is being taxed solely under my wife's name eg can I document a gift to her of the sum, which she has invested in India in our joint account?

Also, we have added my wife's mum as a signatory to the account, for ease of administration. The funds are not hers. Do we need to document this too to ensure that my mum in law is not taxable?

Expert:  taxadvisor.uk replied 2 years ago.
.Thank you for your reply.

If you were to gift the capital sum to your wife and the account was in her sole name then only she would be liable to UK income tax on interest received on that investment.

If the account is in joint names for convenience only but the documents support the fact that the investment is a gifted sum from you then it would suffice.

You would be wise to document the fact that your mother-in-law is purely a third party signatory to the account and that she is not a particant as far as the investment goes.

I hope this is helpful and answers your question.
Expert:  taxadvisor.uk replied 2 years ago.
particant should read participant .. sorry for typing error.
Customer: replied 2 years ago.

Thanks for the update. I need to clarify one more point, which I should have mentioned in my first question.

We are taxed on an arising basis, which generally means when the money is paid. Currently, we are accruing interest, but not being paid this interest. This is due to the fact that the funds are placed on deposit on a compounding basis. So do do we declare this income when the funds mature and we actually receive interest?

Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply.

You should declare interest when received into your account and not on accruals basis.

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.

Customer: replied 2 years ago.

Apologies, I need to clarify a point raised earlier by you. In the first reply you said that any capital loss. In light of your current reply, my understanding has changed. Eg funds transferred to India are GBP 100. Upon maturity of compounding, funds credited to my account in India are equivalent of GBP 95, due to adverse exchange rate movements. Can this loss of GBP 5 be offset against income tax?

Expert:  taxadvisor.uk replied 2 years ago.

Thank you for your reply..

If your investment has lost money then it is a capital loss and you can't offset this loss against interest received and therefore get income tax relief.

You have to separate capital from income.

I hope this is helpful.

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