Off Shore Accounts

Neel_2

Hi all

Just found this site, i think its great.

Ok here goes my first question:

I always hear about how people with off shore accounts and companies save alot on tax

can any shed any light on this or who i should ask, i am about to open a business up and wondering do i sort things out before i open my business


cheers for any help

Neel

lipidicman

The benefit of offshore accounts depends on where you are legally resident.

If you permanently live and work in the UK, and you start messing with offshore bank accounts, you'll end up in trouble very quickly: I think the Inland Revenue claim that your worldwide income is what goes on your UK tax return (not just income earned in the UK). So if you're earning money from abroad, it doesn't matter where you bank it, you must declare it and pay UK income taxes on it.

You have to lose your UK residence (and sometimes domicile too) before the Inland Revenue let up, and then offshore accounts might start to have some advantages.

Please correct me if I am wrong on this, I am no expert!

telly-addict

lipidicman wrote:

The benefit of offshore accounts depends on where you are legally resident.

If you permanently live and work in the UK, and you start messing with offshore bank accounts, you'll end up in trouble very quickly: I think the Inland Revenue claim that your worldwide income is what goes on your UK tax return (not just income earned in the UK). So if you're earning money from abroad, it doesn't matter where you bank it, you must declare it and pay UK income taxes on it.

You have to lose your UK residence (and sometimes domicile too) before the Inland Revenue let up, and then offshore accounts might start to have some advantages.

Please correct me if I am wrong on this, I am no expert!

Absolutely right - UK resident (here for more than 90 days a tax year) and domiciled (born here, ties to this country, parents born here etc) individuals are taxable on their worldwide income and gains.

You can still have an offshore account, for example if you get a better interest rate, but the interest has to be declared on your tax return. There have been recent developments to enforce this more strongly.

adamk1

Hi,

interesting subject. I've been looking into this too, researching around the web. Its hard to find good info.

Offshore accounts can be of benefit depending on your domicile status. You are UK domciled if you and your father was born in this country, in this case, all your offshore activities have to be declared and be taxed in the UK.

However, if your father was not born in the UK, as in the case of my father, and even though I was born in this country, I can inherit my father's domicility and thus be not domiciled in the UK. Thus, although income earned in the UK will be taxed, my offshore income is not liable to UK tax - so long as this is not brought back into the UK.

This is why the UK can be a tax haven for wealthy foreigners - like abromvich etc.

Please not the above is what I have been able to find out researching on the web and may not be totally correct - if anyone with definitive knowledge on this, feel free to correct the above.

Cook_County

Domicile is a complex subject.

You can only have one domicile which at birth (origin) is the domicile ofyour father (the place he considers his permanent home). If he adopts a UK domicile while you are a minor you too take on a new domicile as a domicile of dependency. Once you are of majority you can choose a new domicile if you have grounds to support this choice.

You need specific professional advice before claiming non-UK domicile if born in the UK as HMRC will challenge such claims.

Consult a domicile expert, most probably a CTA.

sneekymum

Apart from the domicile question - Offshore Accounts are useful for probate trusts linked to a single premium life policy as there is no tax liability at all. Other than that they may be chosen for their performance as the underlying assets of the fund grow tax-free.

I have only experience of Clerical Medical as an Offshore - and they treat customers in the UK as if they were holding UK funds - notifying the IR when a CGTaxable 'event' has occured (withdrawing cash). I imagine that the other big names work the same way. I wouldn't like to go with a less well known company though as you are not dealing with UK law and your rights may be not what you expect.

There is an agreement coming in (July 1st?) whereby the EU countries agree to notify each other of folks who have accounts there - The Channel Islands and the Isle of Man have volunteered to be part of this - so nowhere to hide anyway.

The most usual reason to end up with an Offshore if if you work abroad for some years until you decide where you want to end up and then end up back in the UK afterall. But then you wouldn't necessarily be declaring interest on your tax return if your fund just accumulated. If you went to live abroad again and wanted to withdraw cash after many years I don't know if you'd still be liable for CGT - though if someone else knows I'd be interested.

telly-addict

Generally if you are non-resident you aren't liable to CGT, but the law has changed that if you return to the UK within 5 years of realising such a gain, it will be caught and charged to UK tax. A number of individuals were going non-resident to places like Belgium (yes, that exotic!), realising huge gains and then returning in the next tax year.Single premium bonds (not to be confused with Premium Bonds!) are often charged to income tax, although a withdrawal of cash is called a chargeable event. However there are loads of different products around which are taxed differently.

grumbler

Just a few threads:
Off Shore Accounts (58 posts)

offshore accounts (16)

Can we have an Offshore Account discussion or article please?

Phonix

hmm an unrelated question perhaps but,if your parents are livingabroad does this mean you're not subject to inheritence tax?

This is kinda an offshore investment...

sneekymum

Living abroad because they went there or belong there?

UK IHT only applies to folks domiciled in the UK. To get out of this is very hard and takes years after doing the paperwork before it applies. Spouses are not liable to IHT and (assuming they're married) on the death of the first assets would pass to the other. If the surviving spouse is not UK domiciled then IHT does apply on transfers over £55,000 (I think). You need expert advice.