PAM Guide to Wealth Management

Offshore investments

There are still opportunities for tax planning involving offshore investments, particularly if you are UK non-domiciled. These planning possibilities are looked at in depth in chapter four. For domiciled individuals, offshore insurance policies enable you to defer tax until the bond is cashed in. If you then cash in the bond when you are retired or living overseas, you could reduce your tax bill, but this depends on the local tax regime. As with onshore insurance bonds, any switches between funds within the policy are free of CGT.

An offshore bond can also be written with multiple lives assured. If the life assured dies, the bond does not have to be cashed in and therefore the investment carries on.

If the bond is held in trust, during the tax year following the death of the individual, the income tax charge will fall on the UK trustees of the trust at a rate of 45 percent. Alternatively, the trustees could assign the policy to a UK beneficiary who could cash it in and pay income tax at his or her rate, which may be lower than the trustee's rate. This works best when you assign the bond to a spouse or adult children who are in a lower tax band than yourself.

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