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Investment Types |
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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.
Even with recent relaxations in the capital gains tax regime, these
bonds may still be attractive for some individuals.
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, the Inland Revenue 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.
Hedgelands Financial Services Ltd, Hedgelands, Abbotskerswell, Newton
Abbot, TQ12 5PW
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Telephone
0845
165 1280
General Insurance
0845 165 1281
Fax
01626 332622
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