The Financial Services Authority
does not regulate offshore investments
or tax planning. When investing
offshore you may not be afforded
the same protection given to
investors investing in UK-based
funds.
Offshore Investment
Bonds
Offshore investment bonds
are available to UK residents
in various guises, allowing
gross roll up and deferral
of taxation until maturity,
when the penalty will be the
taxation of the whole gain
as income. With the recent
changes to Capital Gains Tax,
offshore bonds have become
more attractive for some individuals.
Offshore Deposit Accounts
The issues associated with
Offshore Deposit accounts
came to the fray in 2009 with
the collapse of Iceland and
most of its banking organizations.
It’s important to remember
that if you deposit your funds
offshore, you will not be
afforded the same degree of
protection as you receive
from the Financial Services
Compensation Scheme on UK
Deposits.
Offshore Investment
Pensions
Pensions investment can also
include an offshore element,
although in the UK the tax
advantages of pensions have
been steadily eroded with
regards to other tax-efficient
investments, which are more
flexible. In particular, for
high-earners, the pension
provision over and above that
allowed for tax purposes can
be invested in an offshore
Funded Unapproved Retirement
Benefit Scheme (FURBS). However,
HMRC has so far refused to
give these investments 'pension'
status. The non-UK life assurance
sector has been particularly
innovative in these types
of products.
Offshore Funds
Many offshore funds are operated
by subsidiaries of well-known
onshore institutions. Such
funds are able to offer a
wider range of investments
than their onshore counterparts
owing to the differing regulation
offshore. Different types
of regulation can mean less
security but the very diverse
nature of the offshore market
means that generalisation
can be misleading. A professional
Independent Financial Adviser
can identify well-run investments
that make the most of the
tax advantages that offshore
regimes have to offer. Income
distributing funds pay their
income gross which is particularly
attractive to non-taxpayers.
Where offshore fixed interest
funds are structured as companies,
investors pay tax on dividends
effectively at lower rates
than they would with equivalent
onshore funds because corporation
tax rates tend to be lower.
Equity-based investments
in particular are intended
as medium to long term investments
(usually considered to be
five years or more). Because
they are equity-based, they
are dependent on stock market
movements. It also means your
capital is not usually guaranteed
to be safe and so you may
lose some or all of it.
If the investment is a unit-linked
one, its value can reduce
in direct relation to the
stock
market prices of its
underlying assets, although
it can also rise. This means
you may not get back all the
money you invested. If it
is a with-profit arrangement,
there is not the same direct
link between the underlying
assets and the value of your
policy. This is because the
insurance company holds back
some profit from good years
to offset losses in poor ones
– this is referred to
as smoothing. The provider
cannot withdraw any reversionary
bonuses declared, although
your early withdrawal may
result in a Market Value Adjustment
– effectively a financial
‘penalty'.
Levels and bases of, and
reliefs from, taxation are
subject to change and any
tax reliefs referred to are
the current ones and their
value will depend on the circumstances
of the individual investor.
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Hedgelands Financial Services,
Hedgelands, Abbotskerswell, Newton Abbot, TQ12 5PW
Hedgelands Financial Services is a trading name
of Honister Partners Ltd. Honister Partners Ltd
is an appointed representative of Sage Financial
Services Ltd, which is authorised and regulated
by the Financial Services Authority. Sage Financial
Services Ltd is entered on the FSA register (www.fsa.gov.uk)
under reference 150452. The information and content
of this website is intended for UK consumers only
and is subject to the UK regulatory regime. The
FSA do not regulate will writing services and some
forms of mortgages and tax planning services. Honister
Partners Ltd Registered Office 1 Nicholas Road,
London W11 4AN. Registered in England and Wales
no. 06923303. |
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