Offshore Investments
What is it?
An Offshore Unit Linked bond is a single premium
investment policy that provides an investor with the
potential for capital growth and income if
required. They offer the investor an opportunity to
invest in pooled or collective funds that provide
access to a wide range of investments.
Who is it for?
Due to their offshore status these bonds will
generally appeal to those who are, or intend to be
non-UK resident for tax purposes as well as
trustees of both on-shore and offshore trusts. Such
investments are broadly neutral for UK based
taxpayers so an on-shore bond may be more relevant.
How does it work?
The capital amount is invested in
a fund or funds that are sub-divided into units each
representing an equal share of the net asset value
of the fund. As the fund fluctuates, then the value
of the units rise or fall
Tax situation
Because they are based in tax
havens, Offshore Bonds generally enjoy gross roll up
of investment income and gains. The exception to
this is the withholding tax applied to dividends – a
tax credit at basic rate is granted on dividends
received by on-shore funds whereas no such credit is
given on those received by off-shore funds.
Any gains upon full or partial
encashment, or withdrawals in excess of the annual
5% allowances in the hands of a UK tax payer or
trustee would be subject to income tax at their
marginal rate. Top slicing relief, whereby the gain
is aggregated over the number of years the bond has
been held, is available in respect of higher rate
tax.
The tax due on encashment is
very much dependent on the investors tax position in
the year of encashment. For those who have the
ability to manipulate their income level investment
bonds can prove to be a highly tax efficient
investment vehicle.
For non-UK tax residents tax
free growth is enjoyed however any receipts, whether
taken in the form if income or withdrawals, would
need to be clarified within the then country of
residence.
NB...The favourable tax treatment
currently available for Offshore Bonds might not
continue in the future. Whatever your financial advice requirements are,
you can be assured that Ashton Hoyle are well
positioned to provide an innovative answer and we
look forward to speaking to you on any financial
matter. Contact us now
to see how we can help. |
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