Through sales of books in other countries - US, Spain and Italy so
far, I have income coming into the UK that is taxed at 40%. With 20%
already going to the agent, this is a fair old bite. It occurs to me
that if I have the money moved to an offshore account instead of UK,
say in Jersey or Geurnsey (Non EU, by the way) then it would never
enter the UK. I
could then use it as a holiday account, paying for hotels etc on trips
abroad. This is worthwhile if it saves that tax. Can anyone confirm if
it is completely legal? I would also like to know what would happen to
the account in the event of my death. Would my heirs be able to use
it?

Hi iggulden,


   I'm afraid that you can't escape tax, even with offshore accounts,
though you may have a slight advantage because of the delay in the
Inland Revenue collecting tax from you. If interest is paid into your
account just after the end of the tax year (after April 5), you would
not need to declare the interest until the end of that tax year. This
means that you could have up to 20 months to earn extra interest in an
offshore account.
(Source :: http://www.fsa.gov.uk/consumer/pilot_learn/financial_products/Saving/da8.html
)

The UK Taxes act (760. Non-qualifying offshore funds)
http://www.inlandrevenue.gov.uk/taxes_act_2001/vol02/ictapt17a/ictapt17a-03.htm

A Legal document on Offshore Funds
http://www.inlandrevenue.gov.uk/consult_new/offshore_funds.pdf

Alternative methods of saving can be found at the fsa site :
http://www.fsa.gov.uk/consumer/pilot_learn/financial_products/Saving/intro1.html

Offshore funds are legal as long as you declare it.

In the event of an account holder's death, various banks have their
own rules. In some banks, joint accounts are a must to ensure that
your funds are not lost in the event of your death.

Have a good day

Cheers,
aditya2k.

---

Clarification of Answer by aditya2k-ga on 26 Jun 2002 07:19 PDT

Just to clarify,  
 
   Whether or not money "ENTERS" UK or not, you have to declare it,
whether it be a holiday account or not.
 
   As far as heirs are concerned, I've mentioned in the answer that it
depends on the bank, and also some banks require a joint account.
 
   If you're unhappy, you can request for a refund/repost as mentioned
in the FAQ, and you will not be charged.
 
   Apologies again if I was not of any help. 
 
Have a good day, 
Aditya,

Unfortunately, this does not answer the question, as posed.
Specifically, I was trying to find out if money that NEVER enters the
UK and is used only as a 'holiday account' can escape UK income tax.
Such accounts did not form part of the answer and neither was any
mention made of heirs. I am unhappy at being charged for this.

Hello iggulden,

I cannot speak with confidence on the labyrinthine workings of the UK
Inland Revenue.  However, I wish to make two comments:

1.  There are special rules which apply to artists and authors, which
might or might not be of relevance to you
http://www.inlandrevenue.gov.uk/consult_new/profit_ave_draft.pdf

2.  If you are a 40% taxpayer, you would certainly benefit from the
services of an accountant.  Most accountants in the UK charge between
£250 and £500 to deal with an individual's tax affairs, and in most
cases save the client more than their fees in tax savings.

Thanks Tehuti, I have an accountant and was going to ask them the same
question, but thought it would be worth trying the researchers at
Google Answers as well. Seems to be a flaw in the system that a
researcher can claim an answer fee for an incomplete or flawed answer.

Iggulden

I won't be asking for a refund - I'll just chalk this one up to
experience. However, I think the answer may be wrong. If I was working
in America, and spending my pay there, I would hardly need to declare
it to to UK tax authorities. It would be outside their area, surely?
Even if I were living in the Uk, money earned abroad by my agents or
interests cannot be the business of Uk taxes? Perhaps I'm just not
getting the answer I want, which is hardly the fault of the
researcher.

Hi again iggulden, 

I braved the bowels of the UK Inland Revenue web site and came up with
this:

"If you are ordinarily resident and domiciled in the UK, you will be
liable to UK tax on all your overseas income, whether or not it is
brought to the UK. So you will have to pay UK tax on your overseas
income even if you keep it overseas or spend it abroad."

So what is ordinarily resident or domiciled?

Not the same as being "resident"!  

"You will be resident in the UK for a tax year if  you spend 183 days
or more in the UK during the tax year, or your visits to the UK
average 91 days or more a tax year over a maximum of four years."
"You will be ordinarily resident in the UK if, broadly, you are
resident in the UK year after year. You can remain ordinarily resident
in the UK even if you are not resident in the UK during one particular
year - for example, because you normally live in the UK but go abroad
for a long holiday and do not set foot in the UK during that year. Or,
you can be resident in the UK in a particular year without being
ordinarily resident in the UK - for example, because you normally live
abroad but spend more than 182 days in the UK in that year.  You will
usually be domiciled in the country in which you have your permanent
home."

The info goes on into various permutations and combinations, as well
as possibilities of relief if the money has already been taxed abroad,
which are too much to summarise here.  You can read it at
http://www.inlandrevenue.gov.uk/pdfs/ir139.htm

Please note that I am simply pointing you towards information in the
public domain, and that this comment cannot be construed as specific
advice  :)

Thank you for the research, Tehuti. Not really what I wanted to hear
from the Inland Revenue, but it couldn't be clearer.

Best,

Iggulden