EUSD Savings Directive and my Offshore account

I('m being a bit daft, but i'm opening my offshore account and it asks me the following:
#
Following the introduction of new rules under the European Savings Directive (ESD),
if you live in the EU and have savings with HSBC Bank International Limited, you
will be taxed on the interest earned on those savings at the rate of 15% from 1 July
2005. Alternatively, you can request us not to tax your interest but to report your
personal account and interest details to the revenue authority where you live.
If you decide you do want reporting, please check the box below if you would prefer
retention tax, please complete Section 1 of this form only.

I understand that personal details of all my affected accounts and interest earnings
will be sent annually to the islands tax authorities and they will pass the information
onto the revenue authorities in my country of residence.

So.....which is better for me to do as a US citizen, and which is better for my husband to do as a UK citizen as he is going on the offshore as a joint account holder?

Thanks!

Amy - I'll see what I can find out from our EUSD "experts".  This whole directive makes my head spin...but it's a huge deal to the banks. 

thanks, i could email my accountant but he's on holiday and i need to send off the paperwork tomorrow!!!!!

OK Here's what I found out.....

If you are considered Ordinarily Resident in the UK and you report your taxes to the HM Revenue & Customs, you will be declaring any interest earned on a bank account.  You will be taxed at 40%.

If they charge 15% tax,  my powers of reasoning seem to think this is the better deal and a benefit of holding money in an off shore account. 

Since the EU Savings Directive is not relevant to US citizens, I suspect that you and your English husband would be treated in the same way. 

I have never dealt with this personally.  One of my colleagues did mention that banks can levy up to 35% tax under the EUSD.  I guess there are brackets, but not sure how much money would need to be in the account to hit these higher tax brackets.  Maybe  you can wait until you can get ahold of your accountant or maybe one of the ones that visit this site can advise.

But wouldn't you only be charged the 40% on the monies in the UK?

While it is more difficult to argue, as a British Citizen normally resident in the UK that you are not remitting your money in the UK, it may not be the same for a US citizen.

I have been debating myself whether to open an offshore account and only bring into the UK what I need to spend, and make my partner pay for the mortgage/rent.

Are there any thoughts/suggestions from the group on that.  Mainly because I suspect that my UK job will put me well into the > 80K Foreign Earned Income credit and I will be subject to US taxes as well, though I won't need all of my money in the UK in order to live.

I know I really need to buckle down and find a good chartered accountant... but man, this stuff should be at least understandable.

i'm just realizing that it would be on interest, and the interest is really low on this account-i'm taking a hit on earning interest to gain the mass of money i'll get back when i file UK tax due to all my travel i do!

since i'm offshore so much it's best for me to do it this way.

and dave (UK citizen) won't be putting money into the account, he's just on it in case i die!

Hello folks

By way of background:

1. The EUSTD withholding tax is currently 15% but will rise to 35% over the next few years. 
2. The EUSTD is just a withholding tax.  Folks such as Dave who would be liable to UK tax on worldwide income because he are domiciled within the UK could claim a credit for it in any case.
3. However those of us who are domiciled outside the UK can ALSO claim refunds on our UK tax returns, even though we have no liability to UK tax on the interest on our bank accounts!
4. BUT the Channel Islands takes the view that folks who are not domiciled within the UK (who are taxable only on interest remitted to the UK) are exempt from the EUSTD even if they do not agree to exchange of information.  The UK does not agree with the interpretation that the tax authorities in the Channel Islands take.  Nonetheless all banks in Guernsey, Jersey & the Isle of Man will accept that an individual who is not UK domiciled is exempt without exchange of information.  Just ask the bank.  Some want a letter signed by a UK tax adviser confirming non-UK domicile status.  Others just want the customer's signature.
5. It is now compulsory to claim that the remittance basis applies on each UK tax return.  Therefore you will probably mention the interest each year, but say it is not taxable.
6. HMRC are going to know the amounts of interest in any case because following recent tax cases HSBC International will be required to supply them the details.  Consequently it is particularly important to make sure that you have separate income, capital and - if relevant - capital gains accounts.  HSBC will be familiar with setting these up if you ask.
7. Those who are not ordinarily resident in the UK but travel outside the UK for work can pay no UK tax on income related to non-UK workdays provided that the earnings are not brought to the UK.  This includes not using an ATM to take money from the non-UK earnings out in the UK and not using a credit card in the UK that is repaid from those earnings.  Just make sure things run smoothly from the start.
I have rushed a bit in this answer, but please ask for more details if I can help more!

7. Those who are not ordinarily resident in the UK but travel outside the UK for work can pay no UK tax on income related to non-UK workdays provided that the earnings are not brought to the UK.  This includes not using an ATM to take money from the non-UK earnings out in the UK and not using a credit card in the UK that is repaid from those earnings.  Just make sure things run smoothly from the start.

guya, GREAT INFO... thanks... I think I understood everything but this last one.

Correct me if I am wrong, but "Not Ordinarily Resident" is someone who is stays in the UK less then 90 days generally speaking.  Are you basically saying here that if you use your credit card or withdraw money at an ATM this is remitting it to the UK even though you may not intentd to?

Also, am I correct in assuming that being not domicilied in the UK, I only be liable for interest (and income) remitted in the UK, and the off-shore accounts in the Channel Isles will not take the EUSTD withholding?  I guess for a current account, I am never going to get much interest anyways, but am more worried about the protections on income, which I would assume would be similiar that I could claim back taxes on my non-UK remitted income every year.

Also, I maybe in the situation of getting paid for work in the US which I would be performing remotely in the UK and possibly in the US.  Would it be better to have seperate accounts for all this so that I can more easily figure out what is remitted, is there any problems where I can accidently "taint" my money and not be able to sort it out?  Also, should I generally keep my monies seperate from my civil partners accounts, who is a UK domiciled resident... 

thanks guya....as always an incredible help.  as mentioned, for me it will just be a holding account for my salary, i'm not expecting to make interest on it since i'll get the money back claiming my non UK work days (of which i have about 45 this far already!)

Kitsonk

You are sounding a bit confused on this one.  Unusual for you!

The UK looks at residence, ordinary residence and domicile in deciding on who is taxable and to what extent.

If you are coming to the UK with the expectation of staying for at least 3 years then you will be ordinarily resident from the day you arrive. Folks who expect to be here for less than 3 years are not ordinarily resident until the expectation changes.

If you are not ordinarily resident and earn income outside of the UK then it is not taxable unless or until it is remitted to the UK.  For such kinds of income enjoying the use in the UK (eg by using an ATM) makes it taxable.

You have a lot going on to think about from US and UK estate planning issues (re your civil partner); structure of bank accounts and optimising your US/UK tax position.  Taking personal advice may well save you money and or headaches down the road!

Can we just say not ordinarily confused? 

I just need to find a chartered accountant that specializes in Bi-National US/UK Civil Partners Ordinarily Resident in the UK with a Mortgage, Foreign Income in Offshore Accounts and Retirement Investments.  I am sure I can just google that up! 

I actually do not know a single person who is qualified as a Chartered Accountant and is also qualified in the States - let alone one who specialises in what you want.  There are a few (but not many) Chartered Tax Advisers; and these may be a safer bet.  If you want to send me a PM I can expand further on who handles this marketplace.