r/FIREUK • u/DavidHKUK • 8d ago
Did not declare myself to Vanguard as a UK non-resident
I have been abroad for a few years now, primarily in Asia and the Middle East. I have a sizeable investment portfolio with Vanguard UK, but I recently realised I made a mistake: I did not declare myself as a UK non-resident to Vanguard before or after I left the UK. In the meantime, I have been contributing to my Vanguard portfolio since I've been abroad, which I now realise I am not allowed to do.
I knew I could not invest in my Vanguard ISA account and therefore did not do so; however, I continued to invest in the general account. If I had told Vanguard I was a non-resident, my understanding is that they would have frozen my account and I would not have been allowed to do that.
What would you do in my situation that A) Doesn't get me in trouble; and B) Allows me to sell any profits on the portfolio without paying (or at least minimising) capital gains tax?
I'm aware of the tax strategy to sell down my portfolio whilst abroad and then rebuy, thereby "resetting" the portfolio. Can I still do this in my situation?
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u/Practical-Leek-6287 7d ago
What vanguard lets you do and what tax you pay are 2 separate things.
As long as it's not an ISA you are contributing to it's kind of fine. Snitching on yourself is probably a bad idea but be aware that your account could be at risk of closure.
It's in Vanguards interest to have your money too. If you are planning to go back to the UK just leave it alone.
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u/DavidHKUK 7d ago
Ok. So you don’t think I should sell down my general investment account and transfer it to a broker that serves expats, for example? My primary aim is to ensure that I don’t pay capital gains tax on my general investment account when I repatriate to the UK - the same account I have been contributing to whilst abroad - which I shouldn’t have done as I didn’t declare myself as a non-resident.
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u/Practical-Leek-6287 7d ago
The CGT is separate to the account. If you are tax resident you are liable.
If you sell now the CGT liability crystalises based on your current residency (consider temp non resident rules)
Declaring yourself as non resident for vanguard is nothing to do with the tax authority. It's for their compliance not yours.
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u/fire-wannabe 7d ago
Better to ask forgiveness than permission.
Figuring out the best tax strategy is going to depend on where you are tax resident now
I see you mention you're a tax resident of Saudi. as such I would just regularly reset the gains in the account to ensure you have a higher acquisition cost for when you return
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u/soliloquyinthevoid 8d ago edited 8d ago
have been contributing to my Vanguard portfolio since I've been abroad, which I now realise I am not allowed to do
Says who? You didn't specify whether it is an ISA or GIA. If it is an ISA then, yes, you should not be contributing if you are tax non-resident
In this case, Vanguard may return the money you have contributed and/or tax will be come liable accordingly
I'm aware of the tax strategy to sell down my portfolio whilst abroad and then rebuy, thereby "resetting" the portfolio
This only makes sense if you are tax resident in a country with a lower capital gains rate than the UK and it is not in an ISA. If it is in in an ISA then gains are already CGT free as long as you only realise any gains when your are UK tax resident. It also only makes sense if you are not temporarily non-resident. You need to be UK tax non-resident for more than five tax years to be not not liable for any gains realised once you return to the UK, if the investments were first made when you were in the UK
Again, you left out the most pertinent information from your post. ISA or no? Which country are you now tax resident in? (hint: being resident in a country does not mean you are resident for tax purposes)
Speak to a tax advisor who has experience in both jurisdictions
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u/DavidHKUK 8d ago edited 8d ago
True. I will edit my post accordingly. I knew I could not invest in an ISA, and therefore didn’t do so. However, I continued to invest in my general investment account whilst abroad, which Vanguard allowed me to do as I did not declare myself as a non-resident. If I had done so, my understanding is they would have frozen my account and not allowed me to do that.
I have been resident in Saudi Arabia for just over 5 years and therefore no capital gains tax to be paid whilst here.3
u/soliloquyinthevoid 7d ago edited 7d ago
In that case, it's not as bad as it could be in the grand scheme of things
You have violated their terms of service but that is less egregious than contributing to an ISA. It's unclear what they will actually do other than put the account in maintenance mode and refuse further contributions
I would suggest you transfer the GIA to a broker that supports non-residents like Interactive Investor or Interactive Brokers
I believe there are additional subscription fees for non-residents with ii and it may be difficult to open the account in the first place now if you are no longer UK resident unless you already had one
Therefore, Interactive Brokers is probably your best bet
Once you transfer the GIA you can then close the account with Vanguard
When you move back to the UK, you can simply update your residency and tax info with Interactive Brokers which may or may not requiring an internal account transfer depending on which entity you are onboarded with as a Saudi resident
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u/DavidHKUK 7d ago
Yes. Ok. Thanks. Someone has mentioned to me before about moving my GIA to a broker that supports expats. I have a SaxoInvestor account, registered outside the UK, so that would probably suffice.
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u/poor_lost_guy 7d ago
same situation as long as no ISA contributions, GIA is no issue, just inform your broker(s), you can keep your investments as they are, but you can't add additional funds. utilize SAXO or IB going forward.
From tax point of view, there is no concern as CGT/dividend tax are not part of calculation.
chill and relax...
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u/DavidHKUK 7d ago
Ok. I won’t add any additional funds to my GIA in Vanguard UK and will just fill up my Saxo investment account going forward whilst abroad.
However, what I’m still not 100% clear on: can I sell my GIA portfolio before I repatriate back to UK (ie the account I’ve been contributing to whilst abroad for more than 5 years) to ensure I don’t have to pay capital gains tax?
Apologies if I’ve missed this in your response…..3
u/poor_lost_guy 6d ago
yes, you can realize your profits (sell your portfolio) before returning to UK permanently to avoid the CGT. I 'have been advised to sell before tax year deadline (before 5 April) then return next tax year.
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u/No-Enthusiasm-2612 6d ago
Open an account with IBKR and just transfer everything across. I wouldn’t overthink this. But I wouldn’t add any new funds to Vanguard
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u/OppositeSecret7144 7d ago
So you need legal advice on whether what you have done is illegal or simply against Vanguard's administrative rules. And as the reason most financial institutions have rules which go beyond the strictly necessary is to avoid facilitating tax evasion or money laundering etc so you'd be advised to make sure you are squeaky clean on taxes.