Avoiding capital gains tax through investment company

If I set up a HF in Dubai, I pay no tax.

what stops people from setting up an ‘investment company’ in dubai which they funnel their investment money through. E.g, invest in s&p500 from dubai instead of UK to avoid CGT?



I think the OP is referring to capital gains, rather than income. My understanding of the tax code is that there's effectively a look through applied, so you need to report capital gains made by any company of which you're a >5% shareholder (Taxation of Chargeable Gains Act 1992). You could look into offshore bond wrappers though (although these have their own costs associated with them, so pensions, ISAs, etc., are still more efficient until you've exhausted them.

You'd also be taxed when you bring the gains back as income, and income tax is a whole lot higher than CGT, but I guess you were envisaging moving abroad to a low tax jurisdiction when you realised the gains.

Disclaimer: Speak to a wealth advisor (and don't trust this forum or other random people on the internet :) )

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For ISAs, no - any money you withdraw from an ISA is not taxable. As an example, if you deposit £20k in year T, and withdraw it in year T+20 (when it has grown to £100k), you pay 0 in income tax and 0 in capital gains (and 0 on any dividends, etc., receive in years T through T+20 which accrued inside the wrapper).

My second paragraph was referring to a situation when OP used an offshore company, got the hypothetical capital gains and avoided CGT, then paid it to himself using, say, dividends. As dividends, they would be taxable (that said, the whole thing doesn't work anyway).

I should add though that some tax wrappers like the offshore bond can be taxable. 

Friendly reminder that I'm not a wealth or tax advisor (and even if I were, I couldn't give advice over WSO), just a humble investment banker who has tried to look into this kind of thing for his own benefit, so please check with an actual wealth advisor and don't make decisions based on what I say.


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