We have assisted several clients with mixed fund cleansing already and now outline here how we have helped one particular client.
Our client had an offshore investment portfolio with a value of £1M. The portfolio was invested in 10 different assets.
The portfolio had been established with pre-arrival capital and was added to with UK taxed employment income, income and gains within the portfolio have been reinvested.
A remittance to the UK from this portfolio would have triggered taxes on the income and gains within the portfolio.
This was the perfect opportunity for our client to utilise the Mixed Fund Cleansing rules.
We were able to trace all transactions within the portfolio, applying the UK’s complicated special mixed fund rules and particularly the offshore transfer rules.
This exercise allowed us to identify the makeup of the underlying capital invested in each asset and ultimately we identified that the client's portfolio consisted of:
Pre-arrival clean capital invested £600K
UK taxed employment income £100K
Non-UK Dividend Income (untaxed) £100K
Unrealised Offshore Income Gains £200K
We were able to advise the client on how to segregate the £700K of the £1M so that it could be brought into the UK without triggering any UK tax charges.
The segregated income/gains of £300K would have triggered taxes of approx £128K if they had been been remitted. So the planning has produced a considerable saving and was a worthwhile excercise.
If you or your client(s) have an offshore mixed fund and would like assistance in segregating those fund in accordance with the Mixed Fund Cleansing rules please contact us.