Offshore Bonds
Virtual tax-free growth
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. Irrecoverable withholding tax may be suffered on certain investment funds.
No capital gains tax
Fund switches made within offshore bonds do not trigger a capital gains tax liability. Such switches within a portfolio of onshore direct equity or unit trust investments would trigger a capital gains tax computation for the tax year during which the switches were made. Offshore bonds often therefore provide a more tax efficient structure for active investment management.
Access to your money
Offshore bonds enable you to have access to some or all of your investment monies should you need to. As offshore bonds are long term investments there may be some charges which apply if money is withdrawn in the early years.
You can take regular withdrawals from offshore bonds, accessing your capital in a tax efficient way by withdrawing up to 5% of each investment amount every year as "income".
This 5% amount can be taken every year for 20 years, or accumulated over a number of years and withdrawn less frequently without triggering a 'chargeable event 'for tax purposes (a 'chargeable event 'occurs for example when in excess of 5% a year is withdrawn, or if the bond is cashed-in in full, triggering an income tax charge).
Tax control
Tax deferral is a key feature of offshore bonds. This enables you to choose when a tax charge may occur, as this will be when you cash-in some or all of your bond. The tax payable at the point of a chargeable event will depend on your highest marginal rate at that time. This allows you to defer such an event until you are either no longer a tax payer or have moved from being a higher rate tax payer to a lower or basic rate tax payer or have moved to a country with lower taxes.
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 Revenue until a chargeable event. 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 favorable tax treatment than an onshore equivalent.
Simpli Independent are experts in offshore investments, if you could benefit offshore call to arrange to see one our advisers who will be happy to help you.
Please remember that benefits are not guaranteed and that the value of investments may go down as well as up.
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