High-Tax Country Resident Planning To Stay Put: UK

Offshore investment bonds are available to UK residents in various guises, allowing gross roll up and deferral of taxation until maturity, when the penalty will be taxation of the whole gain as income. Even with recent relaxations in the capital gains tax regime, these bonds may still be attractive for some individuals.

Pensions investment can also include an offshore element, although in the UK the tax advantages of pensions have been steadily eroded vis-à-vis other tax-efficient investments, which are more flexible. In particular, for high earners, the pension provision over and above that allowed for tax purposes could traditionally be invested in an offshore Funded Unrecognised Retirement Benefit Scheme (FURBS).

Since 6 April 2006, however, Pension Simplification has replaced the concept of a maximum salary for tax approved pension benefits with a Lifetime Allowance. It is therefore highly unlikely that any new FURBS will now be established. HMRC's preferred term for a FURBS is now an Employer-Financed Retirement Benefits Scheme (EFRBS).

Restrictions to the tax relief rules are to apply from April 2011 for taxpayers earning over GBP150,000, whereby the higher rate tax relief will be tapered away on incomes of between GBP150,000 and GBP180,000. The result will be that those with incomes exceeding GBP180,000 will benefit from the basic rate tax relief only. The government is, however, considering further plans to relax this restriction.

Inheritance tax can be a major consideration for UK residents, and offshore trust structures remain one of the best ways of mitigating or completely avoiding the tax. There is plentiful information available on this subject from UK financial product providers.

For an individual wishing to explore the investment opportunities further afield, www.lowtax.net contains details of the investment and tax regimes for 35 offshore jurisdictions.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.