Off Shore Accounts

DiggingOut

If I had problems with incontinence, I wouldn't discuss it here. ;D

In America they use the "off-shore" terminology as well.

MJSW

I think it may be my ignorance on these matters but are you saying that you can put UK investments into an Overseas bond? If so, do you know of any 'identical' products (i.e. onshore and offshore) where the favourable overseas tax regime (but with probably increased charges) can be compared with the same onshore product?

The insurance company can put UK investments in the offshore bond if it wishes. The investor generally isn't allowed to decide which assets are purchased within the bond, unless they want to get clobbered for tax (although there are some exceptions to this rule, eg collective investments such as unit trusts and OEICS). If the investor is able to choose the property purchased within the bond, the Inland Revenue will regard it as a 'Personal Portfolio Bond'. The tax charges on these are pretty nasty (and the same rules apply to both onshore and offshore PPBs). You are treated as having made a gain of 15% of your investment every year, even if you have in fact received nothing. Even worse, the 15% compounds, so if you invest £1000, you are treated as having made a gain of £150 in year 1, £172.50 in year 2, £198.38 in year 3 etc, etc.

I don't know of any sites which compare UK and offshore returns. As yuo suggeest, a good way would be to try an find an insurance company with both an onshore and offshore presence, and then compare their projected returns.

Another point that needs mentioning about investment bonds is the treatment of capital growth. Gains within the bonds are effectively subject to Income Tax. The gain on encashment will usually be a combination of accumulated income and capital growth, but it is all taxed as income to the investor. Consequently you would not benefit from CGT annual exemptions as you might have done if you had invested directly in the underlying investment.

Pal

Just don't do it on the pensions board.  That Pal guy is dangerous. ;D

Moi? No!

halcyon_drift

Firstly, i have spent ages reading the WHOLE of this thread and have learnt loads already, although still slightly confused about a few things.

maybe MJSW could help me with this one: i am currently a UK resident, but this time next year i could be working outwith the UK (less than 3 months spent in UK april-april). is it worth me putting my income into one of these IOM accounts. if so, on returning to the UK after work finished, would it be better to withdraw the money just before i come back to UK or after i am back in UK, or is it secret option no. 3, doesnt make any difference?

and after reading all the stuff from before, i DO realise i am going to get taxed regardless, just wondered if the tax would be any less depending on when i transfer the money.

many thanks in advance

Halcyon

MJSW

It is difficult to say whether you will still be regarded as UK tax resident from the infomation given. If you are just spending 9 months abroad, then I would say you are likely to remain tax resident in the UK. However, it really depends on your dates of departure, and your living arrangements etc. See http://www.inlandrevenue.gov.uk/pdfs/2003_04/non_res_etc/sa109_notes.pdf for further information.

When you say you want to put your income in an IOM account, I'm assuming you mean your employment earnings (rather than investment income). Unless you are non-domiciled, I would say the answer is likley to be option 3.

If you are still UK tax resident despite working overseas for a while, then you will have to pay UK tax on your worldwide earnings whether or not the funds are remitted to the UK (unless you are not ordinarily resident, but that doesn't sound very likely from the circumstances you describe). If you manage to become non-resident, then you would generally not have to pay UK tax on employment abroad, even if the income was remitted to the UK. So the treatment in both scenarios is the same whether or not the funds are brought back to the UK.

halcyon_drift

MJSW: thanks for replying so quickly, just to clear up any confusion, i will probally be away for a couple of years (ie 9 month total gap would most likely occur at some point). i kinda thought that it wouldnt make any difference when or where i saved the money, but had to make sure.

thanks again,

halcyon

halcyon_drift

doh, totally just misread your reply.

as i stated in that last post i probally will be counted as non-domicile, therefore that makes a difference right??

Halcyon

ps soz for being a total lamer at reading