A&L Offshore Account - Tax Savings?

Joey122

I stumbled across A&L Offshore :

http://www.alliance-leicester.co.im/default.aspx?bhcp=1

Seems to pay a decent rate of interest 5.7% plus as its offshore they take 15 % tax and dont report you to the tax man.

Now I m wondering if this is a tax dodge that people are unaware of ? It seems that the overment is content in recieving 15% , buti f you had the same money here you would have to pay 22 % plus of course 18% if you are higher tax payer.

Luckily I dont have much savings , but for those who so this could well prove worthwhile investigating

Thoughts?

Joey122

From T&C:

9. Customers who are residents of European Union (EU) member states are subject to legislation pursuant to the European Union Savings Tax Directive. This means that under Isle of Man law and regulation, a retention tax will be applied to interest payments made on or after 1 July 2005 in respect of the accounts of EU resident customers, unless those customers:

Opt for Exchange of Information, in which case their personal and account details will be disclosed to the Isle of Man Government, who will pass those details to the tax authorities of the EU member state in which they are resident; or
Declare to us that they are resident but non-domiciled in their EU country of residence, and provide us with such evidence of that status as we may require; or
Declare to us that they are exempt from tax, and provide us with such evidence and explanation of that status as we may require.
If retention tax is applied to the interest paid on your account, we will advise you of the amount of tax deducted.

Cook_County

This is no dodge. Failing to declare the interest on your UK tax return (unless you are not UK resident or domiciled) would constitute tax evasion.

There is no need to pay the retention tax (of up to 35%) because if you are UK resident & domiciled you'd agree to exchange of information.

There are other issues such whether the level of investor protection is appropriate, the cost of probating your Will on your death and indeed if the interest rate is acceptable.

Joey122

The interest rate is excellent here

Retention tax is 15 %

It looks to me like perfectly legal and known loop hole here

Ian_W

Joey122 wrote: »

The interest rate is excellent here

Retention tax is 15 %

It looks to me like perfectly legal and known loop hole here

Why ask for other peoples thoughts then, if you already know the answer, joey?

AFAIK if you're a UK citizen and resident in the UK for tax purposes you have to declare your worldwide earnings to HMRC - if you don't it is tax evasion.

The tax on savings interest is 20% not 22% and you can get 5.8% onshore with A&L's Direct Saver - https://www.alliance-leicester.co.uk/savings/index.asp?page=dsaver&ct=savingshome

If you don't have much in savings you'd be better using your ISA allowance first which is genuinely tax free, though I don't know why you think you're "lucky" not to have much in savings?

cheerfulcat

Joey122 wrote: »

It looks to me like perfectly legal and known loop hole here

You are wrong. A UK tax payer is still liable to 20% savings tax and must declare the interest.

Cook_County

cheerfulcat is correct. You MUST declare the interest on your UK tax return.

Shuld you be subject to the rentention tax then the 15% rate will increase to 20% from 1 July 2008 and 35% from 1 July 2011. However the retention tax will be claimable on the UK tax return you will file.

meanmachine_2

Offshores are generally for high earners who wish to receive their interest in gross, expecting their army of accountants to find ways to legally "minimise" their end of year tax bill.

Simple as that.

If it's a loophole it's the most well advertised one in the world and Gordon Brown would need to be living on Mars not to know about it.

Really it's no different to tax on earnings. Some people earn gross, then pay tax at the end of the year. Some have it deducted at source (PAYE).

cheerfulcat

There are plenty of onshore accounts which pay interest gross if your deposit is over £50,000. No need to faff about offshore. I'd say the most common users now ( since the new anti-avoidance laws were brought in ) would be people who are not liable to UK tax on their non-UK earnings, like those who are not UK domiciled ( did someone say Mittal? ) or not UK resident. Offshore accounts used to be very popular in southern Ireland, for example, and not just with high earners.

Joey122

cheerfulcat : Thanks

Then please name one account which pays interest gross on deposits of 50K plus

ManAtHome

All of them do if you produce the correct Revenue form (R85?)