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Financial Planning

Investing for International Clients

Hello everyone! I'm Poppy and each month I will be giving you an overview of the financial planning and wealth management practices here at Rosecut. To kick start, I will be looking at investing for UK resident non-domiciled (or Non-Dom) clients.

Investing for International Clients

Rosecut is a very international business; many of our clients are not originally from the UK and so we are regularly asked to consider creating a portfolio of investments that works for this set of clients - so called ‘UK resident non-domiciled’ (UK Non-Dom).

There are many considerations (enough maybe for a short book) but for now we will just focus on the main ones:

1. Location of investments

If a UK Non-Dom has chosen to pay the annual lump sum tax charge of £30,000 / £60,000 (known as the UK remittance basis charge) or will do when they have been a UK tax resident for more than 7 years, then it is important they hold investments that are situated outside the UK. We would expect shares in international companies including many of the big tech household names (Apple, Amazon, Tencent etc) to qualify.

This is good news as non-dom status certainly does not restrict access to many of the fastest growing technology and emerging market companies. The same applies for bonds issued by these companies or by governments in many parts of the world. So at one end of the range secure US Treasuries are fine and at the other end so are higher risk emerging market government bonds, although special care may be required with accrued income.

However a word of warning; there are funds including exchange traded funds (ETFs) that hold many international companies including the names above. If these funds are themselves UK domiciled then they will not be effective for a UK non-dom and so should be avoided. Rosecut and Dolfin have done the hard work of researching and developing a portfolio which meets those non-dom requirements.

2. Separate accounts

It makes sense to segregate income from capital, as then if the UK non-dom brings money to the UK from one of their offshore accounts, they can easily identify what it is and what the UK tax rate should apply as the UK has different tax rates for income (up to 45%) and for capital gains (up to 20% for gains on non property assets).

Sometimes there may be three accounts. One should be a cash deposit account holding clean capital (see below*) ready for immediate remittance to the UK when required. The second should be an income account which receives the interest from the cash account and dividends and interest from account number 3 which is the investment account; this is the account where investments are held and traded, hopefully generating gains.

3. Investing in the UK

This may seem to be in direct contradiction to the point 1 above, but many of our non-dom clients want to invest in UK companies. There are a number of ways this can be achieved; perhaps the favourite approach is to invest through a non UK domiciled fund typically situated in Luxembourg or Ireland. The fund itself invests into the UK or an ETF which holds the constituents of certain UK indices or sectors. Rosecut currently favours the iShares UK property ETF and the Vanguard FTSE 250 ETF, both domiciled in Ireland.

For higher levels of investment into the UK, consideration can be given to investing through a non UK holding company or an international life assurance bond. Both change the location of the investment to the location of the company / bond.

The UK treasury encourages entrepreneurship by providing attractive incentives for UK non-doms investing into certain UK businesses or creating their own. Indeed Rosecut has its own non-domiciled professional investors taking advantage of this relief i.e. those who have invested money in Rosecut in exchange for equity ownership in the company itself.

Known as BIR (Business Investor Relief) the mechanics allows UK non-doms to bring income and gains into the UK tax free, providing they are reinvested into a qualifying business within 45 days. If the target business also qualifies for enterprise investment scheme relief then an income tax refund at 30% may also be due.

In short, known for our expertise serving UK non-dom clients, Rosecut will be your trusted partner to guide your investments, both in the UK and globally. Of course suitability and appropriateness requirements should be taken into account as restrictions can sometimes be applicable.

Please subscribe to our newsletter further below if you haven't already, and email us at [email protected] with any questions you may have.

* Clean capital is capital the UK non-dom held before they came to the UK and has not had any income or gains added to it since then.

Link to HMRC page:

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As ever, please remember: Past Performance is not a reliable indicator of future returns

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