How to transfer assets overseas

How to transfer assets overseas We're often asked how to transfer assets overseas for tax purposes. We'll run through some of the key points in this blog post. The simplest way is to gift the assets to a person resident or living overseas. The tax treatment of assets is determined by either the location of the assets (known as the situs) or the location of the owner of the assets. The situs of assets of some assets is stated in the appendix. So if you transfer title to an overseas resident, it is the ownership, and not the location of the assets that is being transferred. If assets are transferred to a non UK resident they'll be taken out of the liability for capital gains tax, but will still be within the scope of UK income tax, subject to a number of exemptions. So how would you actually transfer the situs of assets overseas? If title can be transferred by delivery you can literally just take it overseas. So cash for instance can be took out of the scope of UK taxes for non residents and non UK domiciliaries simply by transferring it into an offshore account (if you're a UK resident this doesn't work - as you'll have gathered from the Revenue crackdown on offshore accounts). Investments are the same. If you leave the UK, sell your UK investments (exempting any gain under the non residency exemption) and invest the proceeds into offshore investments the income and gains will be fully exempt from UK tax. What about property? This is less straightforward. Even for a non UK resident a UK property will be treated as situated in the UK. Even the UK's double tax treaty network doesn't significantly effect this. So a non UK resident is still taxed on UK property income, but any capital gains are exempt for a non resident (subject to the five year requirement). The Inheritance tax position is more interesting. UK property is a UK asset for inheritance tax purposes. However a non UK domiciliary is only charged to UK Inheritance tax on UK property - not overseas property. So you can 'convert' UK property or any other assets for that matter into overseas assets by holding them via an offshore company. The UK (non domiciled) individual is then treated as owning an offshore asset (ie the overseas shares) which are exempt from UK inheritance tax. If you're interested in using the offshore company option you'll need to remember that any transfer to the company could crystallize a capital gain, and that even if it's owned by an offshore company the property will still be taxed in the UK on any rental income that it generates. What about UK shares? Any dividends received from a UK company by a non UK resident would be within the scope of UK income tax. However the UK tax legislation applies so that UK tax is restricted to tax deducted at source. As there is only a notional tax credit applied to dividends non UK residents can receive dividends free of income tax. However this doesn't eliminate the need to declare the dividends on a self assessment return as they are still UK source income. It is therefore sometimes useful to own UK companies via an offshore holding company. There are various ways that you can achieve this. The simplest way is to gift the shares to the overseas company. Any transfer would be a disposal for CGT purposes. Provided you make the gift in the tax year after you leave the UK you will be exempt from UK CGT. For inheritance tax purposes provided you survive for seven years the transfer will be exempted from your estate. Appendix Situs of assets - Chattels are situated where they happen to be at the relevant time. - Property is situated where it is actually located - A contract debt is situated where the debtor resides - Shares are usually located at the place where the title of ownership must be registered