The mention of Offshore investing immediately makes a lot of people think of dodgy dealings and hiding money from the tax man, which is why the issue of David Cameron having had Offshore investments received so much media interest!
The truth about the majority of Offshore investing is not that exciting; I thought you might like to know why you would want to use an Offshore rather than Onshore investment.
The main advantage of using an Offshore investment is that you are not subject to UK taxation whilst the money is Offshore. This means that you give it opportunity for greater growth. If you think about your savings account over recent years, as a UK tax payer, basic rate tax has been taken at source before any interest is added to your account. What if you had gross interest added to your account year on year? You’d earn interest on higher amounts of money so making it grow even quicker. This is the principle of Offshore investing whether it is an Offshore Bank Account, Offshore Unit Trust or Offshore Bond.
This is the point where those that don’t understand our tax system start saying but isn’t that illegal or immoral? The honest answer is ‘no’, it is neither – if you were shown a way to make your money grow quicker that was completely legal – why wouldn’t you use it?
From a tax point of view when any of the money is brought back into the UK, through either income payments or lump sums, it becomes taxable to all of the usual UK taxes. You could argue that because the money has had the opportunity to grow at a greater degree the tax payable may well be more than if it had been invested Onshore.
Naturally, there are ways of drip feeding the proceeds back to the UK to minimise the tax payable, which is where a good financial adviser comes in.
Some state that Offshore investing is only for the super rich. Certainly there can be additional costs for using an Offshore fund so you wouldn’t be well advised to invest a smaller sum of less than £15,000 (not exactly super rich territory!) Otherwise this type of investing may well suit you. Sensibly you should make use of an independent financial adviser to go through your individual circumstances as they will be able to advise you of ALL possible investments that would suit your situation and financial objectives, both Onshore and Offshore.
If you would like to know more about this contact me on 0845 680 8910.