Offshore Accounts???

H2SO4

I know that it is actually illegal not to declare interest on offshore savings for tax purposes, but before I put any money in some, do you have to do it each year or only when bringing the money back onshore? And what are the implications of the new EU directive?

dunstonh

There are no implications of the new EU directive unless you were breaking the law. The change just makes it easier to catch those that dont declare the offshore earnings or penalise them if they choose not to comply with the directive.

If it is deposit backed or pays dividends, you should declare it each year on your return. Some investment wrappers have no need for this although they get caught for tax when encashed. The gross roll up effect of gross returns and perhaps a better tax position on encashment can make offshore beneficial to some (i.e. higher rate taxpayer now but wont be at time of encashment).

To be honest, apart from investments, the average UK resident will not see a need for an offshore savings account.

nemo183

......and you need to be cautious how you use them. Most pay interest that is linked to the Euro - hence offering you a lower than UK interest rate. As I understand it, there is also now the possibility of many of these accounts applying a "withholding tax" - i.e. deducting tax at source.

It's probably worth remembering that although it's perfectly possible and legal for any UK citizen to open one of these accounts, most of the time the accounts are connected not with individuals but with offshore companies.

Again, it's perfectly legal for a UK individual to own an offshore company - but quite expensive. My understanding is that a UK individual, running an offshore company that trades outside of the UK, has no reason to get involved with any declaration of interest with the taxman, UNLESS the money is moved to the UK.

On the whole, this is an increasingly dangerous area to get involved in, particularly with most countries watching closely for the smallest twitch of a suggestion of money laundering, so on the whole it's probably best left well alone unless you know exactly what you are doing.

Cook_County

There are many reasons why a UK resident might choose to invest 'offshore'. For example:
1. If the interest rate is higher on deposits.
2. To obtain interest gross if one desires.
3. To obtain tax-free growth if not domiciled within the UK.
4. To invest in an offshore roll-up fund to cover college savings or to cash-in after leaving the UK or retirement.

The UK and the Channel Islands and Isle of Man do not agree on the interpretation of the EU Savings Tax Directive for non-UK domiciliaries. Indeed Gibraltar is not even part of it yet. Failure to pay tax that is due is tax evasion which I cannot condone or advise anyone to participate in. However, for many individuals 'offshore' is the right place to go.

In terms of the query interest worldwide needs to be declared as it arises if one is domiciled within the UK or when remitted if not UK domiciled.

nemo183

Cook_County wrote:

There are many reasons why a UK resident might choose to invest 'offshore'. For example:
1. If the interest rate is higher on deposits.
2. To obtain interest gross if one desires.
3. To obtain tax-free growth if not domiciled within the UK.
4. To invest in an offshore roll-up fund to cover college savings or to cash-in after leaving the UK or retirement.

Yes, I agree, these are all perfectly good reasons for using an offshore account.

My use of the word "dangerous" was meant to suggest the foolishness of the use of an offshore account for anything other than a straight forward, and legal transaction.

There is a common mis-conception that these accounts are "invisible" to the UK tax authorities, and hence a good place to deposit an unexpected piece of good fortune.