Offshore investing
Our preferred approach to lump sum investing is to utilise offshore investment bonds. A fundamental benefit of an offshore bond is that it provides a ‘tax wrapper’ around your investment choices, with potentially more favorable tax treatment than an onshore equivalent.
Investment choice
The investment choices within offshore bonds cover all the major world regions and sectors, and the full risk spectrum from low risk capital guaranteed funds through to hedge funds and higher risk specialist funds.
Virtual tax-free growth
Often referred to as the ‘gross roll-up’ effect, investment in an offshore bond grows virtually free of year-on-year income tax and capital gains tax charges, unlike comparable onshore bonds which suffer tax on any growth. Small amounts of irrecoverable withholding tax may be payable on certain investment funds.
Tax control
Tax deferment is a key feature of offshore bonds. This enables you to choose when or if a tax charge may occur. Bayliss Clarke have taken offshore bonds to the next logical step and are able to offer clients the ability to choose which tax regime (Income or CGT) that any chargeable event (e.g. encashment) under an offshore bond is ultimately taxed.
Inheritance tax planning
Structuring your assets through an offshore bond held in Trust can mitigate, or avoid altogether, taxes due when transferring wealth. Assets above the nil rate band (the threshold above which inheritance tax applies), which are not held in Trust, may be liable to inheritance tax at 40%. Additionally, an offshore bond and Trust can be structured to allow access to the funds prior to your death.
Self-assessment friendly
As offshore bonds are ‘non-income producing assets’ there is nothing for you to report to the Inland Revenue until a chargeable event occurs e.g. when you cash-in more than 5% of each amount invested. You do not have to include any information on your tax return before this point, compared with the potentially complicated requirements for reporting a portfolio of unit trusts. At the point that you do need to include information on your tax return under self-assessment, it is also generally much simpler to report income from an offshore bond.
Non-UK status
As offshore bonds are not UK-based investments, this can help you mitigate your UK tax bill if you are a UK expatriate or a foreign national living in the UK. A fundamental benefit of an offshore bond is that it provides a ‘tax wrapper’ around your investment choices, with potentially more favourable tax treatment than an onshore equivalent.
Please remember that benefits are not guaranteed and that the value of investments may go down as well as up.
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