Investment of offshore funds into UK buy to lets
Question:
If someone has funds abroad and wishes to invest those funds in the UK then what are the implications of doing so considering: 1. The funds have have not been declared or taxed. 2. The investor is UK resident and most probably UK domiciled. 3. Only say 25% deposit to be remitted into UK and balance to be financed by a UK mortgage.
Answer:
If the investor is UK resident and domiciled they would firstly need to assess whether the funds should have been declared for UK tax purposes. If the funds were generated without any UK income or gains arising then there may have been no need to declare the cash. If for instance the funds were gifted by another individual or were inherited no UK tax would be due on the actual receipt in any case. Note though that any interest generated on the funds should have been accounted for if the recipient was UK resident & domiciled.
Therefore as a first step it's likely to be advisable to assess whether the funds should have been declared. If they should have been an early disclosure to HMRC is usually recommended.
The actual remittance of the funds to the UK will be irrelevant for UK tax purposes. The tax liability arises for a UK resident/domiciliary when the income/gain arises not when it's remitted. Therefore if there was a liability when the income arose the subsequent remittance to the UK or not would have no impact on the tax liability.
If the funds were genuinely generated free of UK tax when they arose they could be remitted to the UK free of any UK income taxes.
If the individual was a UK resident, but non UK domiciled the remittance of overseas funds would then be an important aspect. If the amount remitted was from clean capital there would be no UK tax charge on the remittance. If the remittance was from income or gains that arose whilst the individual was UK resident but subject to the remittance basis of tax then the remittance back into the UK would be taxable.
The first issues should therefore be to clarify domicile status and assess how the funds were generated.
About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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