Offshore bond for UK expats – 6 benefits
Some of the key UK taxation benefits which an offshore bond can provide to a UK expatriate investor. These benefits are presented for consideration alongside the other aspects of investment advice.
Time apportionment relief
- Any UK tax will be reduced proportionately for time spent as non-UK resident.
- Additional investments are deemed to be made at the commencement of the contract (even if they are top-ups or regular premiums made when the client is UK resident again) thereby increasing any time apportionment relief given.
- No UK income or capital gains tax charge on the assignor.
- Future UK income tax charged at the new owner’s tax rate (if any).
- Therefore the overall UK tax payable can be reduced if the policy is assigned as a gift to a non-taxpayer, for example a child or grandchild of the assignor who is a university student or a non-working spouse/partner.
- Easy to assign into an Old Mutual International Isle of Man or Old Mutual International Ireland* trust or, for a small yearly fee, Old Mutual International Trust Company** can be appointed as a trustee for an Old Mutual International investor.
- Possible to reduce or eliminate UK inheritance tax liabilities.
- Generation planning and asset protection advantages.
- Can remove requirements of probate.
Gross roll up of funds
- Generally, the funds in which you invest are not subject to taxes in the Insurer's jurisdiction. For example, Insurers in the Isle of Man do not currently pay tax of the funds held for their policyholders.
- However, investment income building up in any fund/asset may be subject to a tax deduction in the country where the income was produced
- We would strongly recommend that you seek clarity from HM Revenue & Customs on individual cases.
5% tax-deferred withdrawals yearly
- Yearly withdrawals of 5% of the initial premium (and any additional premiums from the year in which they are added) are allowed without immediate UK tax charge.
- 5% is cumulative if not used.
- Gain is reduced by a fraction which represents the number of years the policyholder was UK tax resident in comparison to the number of year the policyholder has held the policy.
- This reduced gain is added to taxable income in the year of surrender, which may avoid higher rate (40%) and additional rate (45%) UK income tax on very large taxable gains.
*Old Mutual International Ireland trusts are only available for Old Mutual International Ireland contracts which are written subject to English Law.
** Please note that Old Mutual International Trust Company services are not available in Singapore.
The information provided in this article is not intended to offer advice.
It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.