Foreign Income Treatment in Self Assessment for Structured Notes

Last financial year I had a foreign income from payments generated by several investment products called Structured Notes (structured with underlying shares of usually 3 companies). What is the correct tax classification for this kind of investment? Foreign Capital Gain? Foreign Interest Income? Foreign Dividends Income? I don't know where I should specify it in my Self Assessment for this year. Another question. If I have a loss caused by receiving the worst-performing shares instead of the original capital in cash, can I claim this loss as a capital loss? Example: I invested $5000 in a Structured Note, but I received at the final redemption date the worst-performing stocks with an equivalent value of $1500 instead of the original $5000 capital in cash.

Hi Jeephammer,

A structured note refers to a hybrid security that is made up of a derivative and a bond component.

The note can be linked to multiple securities and assets or those of the same nature such as in this case stocks and shares.

The issuer of the structured note can make payments to the investors during the term of the note.

They are normally held for a minimum of two years upwards.

There are different delivery methods but most are classed as income plans and are normally subject to Income Tax in much the same way as a Chargeable Bond or Life Insurance Gain would be taxed.

With UK held investments being deemed as having 20% tax deducted at source whilst Foreign investments are not.

However, there are different methods of delivery and some methods may attract CGT (Capital Gains Tax) rather than IT (Income Tax)

Each issue would need to be considered on a case by case basis.

These are not the run of the mill investments and individuals taking out these type of investments will or should have had financial advise.

I would suggest that you check with either your adviser or the issuer of the investment as to the delivery method and appropriate tax method.

Once established we can assist in the appropriate entry on your ITR schedule.

We would also then be in a better place to advise regarding any loss arising.

Thank you. 


 

Good morning HMRC Admin 25 All these notes have a maximum term of 1.5 years. The issuer told me that the delivery method is quarterly interest payments (but it will only be paid if the prices of all its underlying stocks/shares stay within a predefined threshold). They also told me that the tax method to be applied would be income tax. Regarding the loss I mentioned in my first post, as long as I keep the stocks I received instead of the original amount of the investment, I cannot claim a capital loss yet. Please let me know what would be your recommendation. Regards

Another detail worth mentioning is that all these payments are made into the foreign investment account (i.e. they are NOT being transferred into the UK).

Hi,

HMRC cannot advise you as this is financial advice that you are looking for and we cannot offer this.

Thank you.

You are wrong HMRC Admin 19, I'm just replying to what HMRC Admin 25 asked me. I only need to know the HMRC qualification for this foreign income, not financial advice. Thanks

Hi Jeephammer,

In your last post, you asked for our recommendation.

We cannot recommend anthing, as this would be financial advice.  

 We cannot offer financial advice, as we are not financial advisors.

Thank you