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Sam, Accountant
Category: Tax
Satisfied Customers: 14166
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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This is a little complicated. I had a £100,000 investment

Customer Question

This is a little complicated.
I had a £100,000 investment starting in December 2007, in the Isle of Man with a company called Brandeaux via Skandia. They invest in ground rents income and student accommodation.
They have suspended trading on both of these some time ago and no interest has been paid. However,as they are winding up the company I have in the past few months withdrawn approx. £21,000 in capital on ground rents. Is income tax payable on this withdrawal, out of the approx. £50,000 I was left with £21,000. I had been withdrawing approximately £625 per month from 2009 until September 2013. Skandia not Brandeaux paid this as there was no interest on the bond. I withdrew £500 per month from Jan. 2008 until Dec. 2008.
I am a pensioner with no other income other than a state pension of approx. £135.32 per week.
My financial advisor informed me that my withdrawal of my own capital may be liable for tax. Can you please explain. I have had no profitable income on this bond for about 3-4 years.
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Thanks for your question
Withdrawal of your own capital is not going to be liable to tax, but it may well be that some of the withdrawals were more than just capital.
You will need to get your financial advisor to establish what growth had been achieved during the early years as we have two issues here
1) The ongoing income position which would have had some consideration for tax over the years
2) The final position where it is without doubt that you have been left with a loss
The income position should have been declared each year - as tax would have been due on it (as your state pension plus the amounts you advise were taken exceed your age related allowance exemption for the years 2007 onwards
As from what I understand interest was set at approx. 8% each year - and this is chargeable to tax.
It would appear (reading between the lines) that this may have been declared at the appropriate time ?
Then we have the period of time when you were not being paid any interest at all, and its question of how this affected the original capital amount invested - and then finally the position where you had withdrawn less capital than the original amount invested.
It may be that you have a claim on the loss you made -
I am sure you can appreciate this is not something we can work out for you as this is complex and you would need to engage the services of an accountant local to you to review all years, to ensure that the correct tax position for all stages is handled correctly, so you pay no more than you should.
But if the interest has already been declared for the years it was paid, then all that is left to do is calculate the loss position to you and have the accountant submit a negligible value claim to HMRC on your behalf.
let me know if you have any follow up questions