Bank Deposit Protection Scheme

[Dunroamin]

But if IOM residents put their savings in UK banks then any interest income will be potentially double taxed (first in the UK and then by the IOM).

Presumably you can supply the necessary documentation to say you pay tax in the IOM and receive the interest gross without any tax deduction? That's what I'm doing with my Smile account.

 

I did not know that that option existed. Thanks. Something else to investigate Now that you say it - well it seems obvious.

 

Do you have to fill in a UK tax return in relation to the potential for liability ... ie even though nothing is ultimately due probably ?

 

Depending on size of income received you may have to submit UK tax return annually and apply for double tax relief. Also, should you die, you would have to take probate out in the Uk and, again depending on amount, there may be Inheritance Tax issues!

[Tugger]

IOM Government scheme is useless as amounts "guaranteed" is too small, any repayment would take years, and the IOM Government has "no skin in the game"!

 

It relies on other banks based in the IOM being able to pay enough money out of future reserves into a central pot for the depositors in the bankrupt bank to receive compensation - after enormous fees are paid to IOM Government and its appointees to adminster the scheme. One only has to see how the FSA as a leech on the financial instituions on the IOM has grown like topsy to justify its exisitnece to see how the scheme would work against the depositors!!

 

Furthermore, if one bank went down for billions in the IOM what is to stop the others from pulling out immediately and transferring their business and accounts to UK/Jersrey to avoid meeting any liability under the IOM scheme?

 

As regards the Irish guarantee, two comments:

 

1. for them to have made such an outlandish guarantee, surely the Irish banks must be in serious trouble or why do it?

 

2. As the amounts in deposits held by the Irish Banks is at least twice and more likely three time the Gross National product (the amount Eire Ltd earns per annum in income) how on earth can it meet any obligations under the guarantee? It is like me, with no assets other than my job, signing a guarantee to the bank for someone else's debts knowing that the amount I may be asked to pay amounts to three times my salary!! Do not be fooled by either the IOM or Irish "guarantees" schemes! I would think that the use the National Savings or UK Gilts (which are tax free so far is the UK is concerned) are looking positive!!

 

But hell what do I know.................................!!

 

There is an element of smoke and mirrors to it, I agree, but there's two things to bear in mind: no bank can survive a run, regardless of whether it is fundamentally sound, because lots of its lending is done long term, but most of its deposits are repayable on demand. Secondly, a lot of the withdrawals are being made not because people know that their bank is in serious trouble, it's because they don't know whether it is in terrific shape, just plodding along, or about to go bankrupt. A lot of the time it's uncertainty, rather than actual knowledge, that is driving this capital flight. I agree that the Irish simply can't afford to pay out all depositors if the Irish banks go under, but for the moment it has put a stop to the capital flight, which is good news for those banks.

[pongo]

But if IOM residents put their savings in UK banks then any interest income will be potentially double taxed (first in the UK and then by the IOM).

Presumably you can supply the necessary documentation to say you pay tax in the IOM and receive the interest gross without any tax deduction? That's what I'm doing with my Smile account.

 

I did not know that that option existed. Thanks. Something else to investigate Now that you say it - well it seems obvious.

 

Do you have to fill in a UK tax return in relation to the potential for liability ... ie even though nothing is ultimately due probably ?

 

I'm not convinced that this option does exist. It will be UK sourced income and so it will be subject to UK tax. When you receive your net income in the Isle of Man you should be able to avoid paying additional IOM tax on it under the double tax arrangements between the UK and the IOM, but I would have thought that the UK tax was the one you wanted to avoid.

 

I'm not so bothered about avoiding tax - I don't particularly mind paying tax. Like most domestic savers, I'm more concerned about putting my savings somewhere relatively secure and earning enough income to combat inflation if possible. Especially at the moment.

 

If I am taxed a bit more for the relatively better security offered in the UK then it seems fair enough. As long as I don't then also get taxed by the IOM.

[ai_Droid]

The Investor Protection schemes do not protect the banks as institutions, or the shareholders. They protect the savers. That is quite different.

 

But largely the same thing. If the depositors are protected, they won't bugger off, so the banks protected a little from risky doingses.

 

The problem for ordinary IOM savers is that they are at a disadvantage compared to UK savers. The local subsidiaries of ordinary UK high street banks are not protected by the UK govt scheme. But if IOM residents put their savings in UK banks then any interest income will be potentially double taxed (first in the UK and then by the IOM). Likewise - products which are tax free in the UK are liable for tax on the IOM (eg some of the NSI products which IOM residents are allowed to hold).

 

Yep, but as was said earlier, it's more protection than other offshores, and we have to maintain competitiveness. Daft that the amount hasn't gone up in line with inflation though at the very least, been £15k since 1991 or something?

 

There's also a collective investment scheme protection, if you're brave you could move to a manx fund: 100% of the first £ 30,000 90% of the next £ 20,000 with a MAXIMUM Compensation of £48,000.

[The Old Git]

But if IOM residents put their savings in UK banks then any interest income will be potentially double taxed (first in the UK and then by the IOM).

Presumably you can supply the necessary documentation to say you pay tax in the IOM and receive the interest gross without any tax deduction? That's what I'm doing with my Smile account.

 

I did not know that that option existed. Thanks. Something else to investigate Now that you say it - well it seems obvious.

 

Do you have to fill in a UK tax return in relation to the potential for liability ... ie even though nothing is ultimately due probably ?

 

Smile said that unless I could supply a ??? document (can't remember the name) I would have UK tax taken from my interest. I asked our IOM tax dept about it and they supplied a letter / certificate to say I was an IOM tax payer and would be paying IOM tax on the interest so I get gross interest from Smile.

 

Later - after logging into my Smile account and looking at the messages it seems I raised the tax question with smile

 

They replied -

 

If you do not complete a R105 form your interest will be taxed at 20% by the Inland Revenue. You can order a R105 over the internet by going to 'Customer Services' and then click onto 'Order Stationary'. Please complete and return the R105 form to, Team 546, The Cooperative Bank plc, PO Box 200, Delf House, Skelmersdale, Lancs, WN8 6GH.

 

Thanks

 

Charlie

smile

 

I sen the document that our tax dept supplied

 

They replied

I can confirm that we have received documentation from you.

Currently we are awaiting confirmation from our HM Revenue & Customs liason officer that this information is compliant with EU Savings directive requirements.

This is due to our advice being that only a certificate of tax residency or a certified proof of your town and country of birth would enable us to update your account.

Confirmation of this is expected no later than 21/03/2006, I will send a further secure message to you as soon as this information is obtained.

 

Many Thanks

Debbie

Smile

 

and they then replied

 

Sorry for the delay in responding to your query.

 

We don't need any further infomation from you we are aware that you tax liability is with the I.O.M.& you have completed an R105 form.

 

Thanks

Julie

Smile

[The Old Git]

Depending on size of income received you may have to submit UK tax return annually and apply for double tax relief. Also, should you die, you would have to take probate out in the Uk and, again depending on amount, there may be Inheritance Tax issues!

 

I don't have a large amount with Smile and I suspect that if I still had the account when I died the money would be t/f back without involving any UK authorities

[manshimajin]

The Irish scheme has been signed into law by the President at noon today.

 

Most banks globally have more liabilities than liquid assets so even the biggest banks could find itself in trouble if there was a run by depositors to get their money back. It is a confidence thing that keeps them afloat - which happened to fail with Northern Rock.

 

Schemes like the Irish one do of course have potential major downside risks if the guarantees had to be called in but hopefully they create that sense of confidence without which banks will crumble. Possibly the UK Government has greater trust in the UK banking system than the Irish Government had in the Irish one - hence, Northern Rock aside, their limited guarantees (mind you B&B, HBOS are not exactly confidence builders or shining examples of good regulation). Aternatively they may have less trust so are very worried about offering too much to protect the public?

 

The other element of the Irish legislation looks likely to be much increased supervision of the banks and steps to make sure that the benefits of the guarantee are not passed through as higher bonuses to bank management which has cocked-up and dividends to shareholders, but instead go to the customer/Irish taxpayer.

 

Incidentally I assume that any sterling denominated saver wanting to put money into Ireland would have to convert into € and then back into £ on the way out plus accept any currency risk.

[Mutley]

http://www.independent.ie/business/irish/f...ee-1487117.html

[Skeddan]

http://www.independent.ie/business/persona...ll-1487132.html

 

[irish] BANK charges are set to spiral as a result of the state guarantee for four domestic banks and two building societies

[pongo]

@ O l d G i t : thanks for taking the time to dig out that info. I was looking at the terms and conditions of the various Irish Banks - similar rules apply if non residents put their money into Irish based banks (ie actually in Ireland as opposed to Manx based subsidiaries) ... ie non residents apply for 'DIRT' exemption.

 

Also: (Bank Of Ireland)

9.1 In order for Non-Resident personal account holders to avail of an exemption from D.I.R.T., a minimum balance of €6,500 must be maintained at all times. Where the account balance falls below the minimum requirement, the Account will be subject to D.I.R.T. The Bank shall advise you in writing in event of this occurrence.

 

Incidentally I assume that any sterling denominated saver wanting to put money into Ireland would have to convert into € and then back into £ on the way out plus accept any currency risk.

 

On the +ve ... the banks in Ireland are offering good rates to savers. On the -ve ... the cost of € / £ exchange / exchange rate uncertainty etc.

[BigDave]

Incidentally (as I read in the papers a couple of weeks back), if you have a loan and savings with the same bank the limited guarantee does not apply where you have a net liability. Your savings are deducted from what you owe if the worst happens, but on the plus side ALL of your savings are deducted from your loan, not a percentage or capped amount so in theory you get the lot back in the sense that you would owe less than bottom line on the loan statement.

 

If you owe less than your savings with the same bank, the difference is covered by the compensation scheme, not the original balance of the individual account, so if you have £30k savings but a loan of £20k you've got £10k left to claim on.

 

Something to think about before racing down the bank to withdraw the lot anyway - especially if you're saving to pay a lump sum off your mortgage anyway!

[Dunroamin]

You can open sterling denominated accounts with Irish banks in Eire avoiding requirment to convert into euros.............

 

I note that the Times today states that the Irish guarantees were put in place as one of the major banks was about to default on a 1.5 billion loan from a German bank and this would have meant bankruptcy today and another bank being immediately brought down........................not much confidence in them from me methinks!!

[Lee54]

I know of one Irish Bank on the Island that cant take anymore new deposits and is asking other banks to take them on, Big deposits too. Its going to hurt one or two Banks

[oldmanxfella]

2. As the amounts in deposits held by the Irish Banks is at least twice and more likely three time the Gross National product (the amount Eire Ltd earns per annum in income) how on earth can it meet any obligations under the guarantee?

 

Your right its a joke. The guarantee is nearly three times Irelands GDP - even the AIB admits that on its own website

 

http://www.aibcorporate.ie/servlet/Satelli...d=1214389012508

 

Technically Ireland can't afford to guarantee anything as if something goes wrong its economy is totally and completely bust. They are lucky they are in Eurozone as if the UK went on risk for 3 times its GDP there would probably be a run on Sterling.

 

Many of the banks were already shaky and one was rumoured to be at risk of serious trouble. So what has changed with the guarantee scheme? As I said you can't spray a turd with gold paint and fool everyone into thinking its solid gold. This makes no sense whatsoever. I won't be sticking my money in.

[manshimajin]

Many of the banks were already shaky and one was rumoured to be at risk of serious trouble. So what has changed with the guarantee scheme? As I said you can't spray a turd with gold paint and fool everyone into thinking its solid gold. This makes no sense whatsoever. I won't be sticking my money in.

So what is your recommendation for depositors?

• Belgian banks look shaky
  
• German banks look shaky
  
• UK Banks look shaky and government dithering
  
• Manx deposit protection scheme looks shaky
  
• Channel Islands have no guarantee
  
• Irish banks have 100% guarantee but Irish goverment will have to take over the UK to pay it
  
• EU arguing amongst themselves over what to do
  
• US banks disappearing almost daily
  
• Japanese banks look the best capitalised
  

 

Weimar Republic here we come?