Off Shore Accounts 22 July 2004 at 1:31AM in Savings & Investments 47 replies 4.8K views

Legacy_user

Hi all I am reasonably new here and think this site I excellent. Now for my question. I am a high rate income tax payer >:(. I have about £6k to invest and want to pay as little tax as possible (don't we all). I have an Isa which is fully utilised. My partner has a reletave in the IOM and I wondered if anyone had any dealings the off shore accounts there and if so what are the pitfalls... VMT Nick

moana

IIRC when paying UK tax you have to declare income from ALL worldwide sources.
You will then be taxed on that income.

So unless you do not declare you will be taxed.

If you don't declare you may well be looking over your shoulder at the tax man in the years ahead.

DiggingOut

I am a high rate income tax payer >:(.  

Don't complain, lots of people aren't.

cheerfulcat

Hi, Nick,

Most big banks and building societies have an offshore presence, and they generally offer the same protection as their onshore parents ( though this is voluntary ). Your money should be safe with them.

Tax becomes payable when the money is brought back in to the UK; in the meantime, the interest rolls up gross.
Usually, you would leave the money offshore until you become a basic rate taxpayer ( on retirement, say ).

Cheerfulcat

MJSW

UK residents are generally taxed on their worldwide income. Whether the interest is brought back to the UK or not is completely irrelevant - it is still taxable in the UK(unless the taxpayer is non UK domiciled, in which case what you say would be correct).

cheerfulcat

Hi,

I have googled in vain for this one; this is the best I can do -

http://212.53.70.176/investors/index.htm

( go to "tax implications " )

"The tax on the investment growth can be deferred until the investor chooses to take the proceeds, e.g. when in a lower tax bracket at retirement. "


I wasn't trying to imply that you would never pay tax on the money, only that tax can be paid at a time when you are a basic, rather than a higher rate taxpayer. Some offshore deposit accounts are also structured in such a way that interest is calculated daily but only credited when you withdraw the money, so there's nothing to declare on your tax return in the meantime.

Cheerfulcat

lswwong

Tend to agree with cheerfulcat. I have an offshore account in Jersey and the advice I had was that the income from the capital is only taxed when it is brought back into mainland UK.

Jersey is a stable jurisdiction based on UK/common law. I have had an account there for nearly 8 years. I also bank there with HSBC whom I find most helpful, although their interest rates are not as competitive. Have a look at - https://www.offshore.hsbc.com. They have a telephone number which you can call to get some basic info/advice.

MJSW

"The tax on the investment growth can be deferred until the investor chooses to take the proceeds, e.g. when in a lower tax bracket at retirement. "

But that's AXA's site and they are talking about investment bonds NOT savings accounts. (You could do exactly the same thing with a UK investment bond, ie they are taxable when the money is withdrawn, and you can wait until retirement when you are no longer a higher rate taxpayer.) It is not particularly a feature of the bond being offshore, it is a feature of the way all investment bonds are taxed, including UK ones.

MJSW

I have an offshore account in Jersey and the advice I had was that the income from the capital is only taxed when it is brought back into mainland UK.

Well unless you are non-domiciled, you have been advised incorrectly and have been illegally evading tax for the past 8 years.

Have a look at - https://www.offshore.hsbc.com.  They have a telephone number which you can call to get some basic info/advice.

I have had a look, and their website's advice on UK taxation states this: "A key factor in deciding how you will be taxed in the UK is domicile. Individuals who are resident and domiciled in the UK are generally taxed on their worldwide income and capital gains."

I should point out that I am a chatered accountant and a chartered tax adviser, so I would like to think that I know what I am talking about!

cheerfulcat

As I said, there are accounts which are structured so that interest is not credited until you withdraw the capital; example -

http://www.britanniainternational.com/deferred.html

This means that there is no tax payable until the interest is credited, so it rolls up gross.

You may well be a chartered accountant and tax adviser; with all due respect and speaking from experience, I think you're wrong on this.

MJSW

But no tax is payable on UK accounts until the interest is credited to the account - it has nothing at all to do with it being an offshore account! Any bank in the UK could do exactly the same thing, although not many do. For example, several of the guaranteed equity savings accounts on offer at the moment do this, such as the National Savings one. All the interest is payable (and taxable) in the 5th year.

Just to confirm this, an extract from the Inland Revenue's leaflet "IR110 - Bank and Building Society interest - a guide to savers":

"If you get your interest each year, it is taxable when you receive it or when it is credited to your account. If no interest will be paid or credited to you until the bond matures, the interest will be taxable only in the final year of the bond."