Question
You recently replied to someone's question concerning UK tax on disposal of an offshore etf which does not have reporting/distributing status, saying that any loss could be written off against any other capital gains (eg stock gains). Is this correct?
I thought that since gains/losses on selling offshore etfs are treated as income, any loss could not be offset against capital gains and, even worse, the loss cannot be offset against income from selling another offshore etf.
If you could agree or disagree I'd appreciate it, thanks for help.Answer
If an offshore fund does not have reporting/distributor status then gains are taxed as income. Losses cannot be offset against income tax, but can be offset against capital gains you may have made elsewhere for the purposes of capital gains tax.
I know this sounds illogical, but it is correct. It's confirmed on page 82 of the HMRC Offshore Funds Manual (see 'losses' paragraph). There's also a good summary of offshore fund taxation in this Grant Thornton factsheet (losses are covered at the bottom of the left hand column on the first page).
I suppose the reason HMRC doesn't allow losses to be offset against income tax is that it could be open to abuse and assist income tax avoidance. Offering no relief for losses would be unfair, so it's given via capital gains tax as a token gesture.
You recently replied to someone's question concerning UK tax on disposal of an offshore etf which does not have reporting/distributing status, saying that any loss could be written off against any other capital gains (eg stock gains). Is this correct?
I thought that since gains/losses on selling offshore etfs are treated as income, any loss could not be offset against capital gains and, even worse, the loss cannot be offset against income from selling another offshore etf.
If you could agree or disagree I'd appreciate it, thanks for help.Answer
If an offshore fund does not have reporting/distributor status then gains are taxed as income. Losses cannot be offset against income tax, but can be offset against capital gains you may have made elsewhere for the purposes of capital gains tax.
I know this sounds illogical, but it is correct. It's confirmed on page 82 of the HMRC Offshore Funds Manual (see 'losses' paragraph). There's also a good summary of offshore fund taxation in this Grant Thornton factsheet (losses are covered at the bottom of the left hand column on the first page).
I suppose the reason HMRC doesn't allow losses to be offset against income tax is that it could be open to abuse and assist income tax avoidance. Offering no relief for losses would be unfair, so it's given via capital gains tax as a token gesture.
Read this Q and A at http://www.candidmoney.com/questions/question331.aspx
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