Offshore Bonds

Many offshore funds are operated by subsidiaries of well-known onshore institutions. Such funds are able to offer a wider range of investments than their onshore counterparts due to the differing regulation offshore. Different types of regulation can mean less security but the very diverse nature of the offshore market means that generalisation can be misleading. As professional Independent Financial Advisers, we can identify well-run investments that make the most of the tax advantages that offshore regimes have to offer.

If the investment is unit-linked, its value can reduce in direct relation to the stock market prices of its underlying assets, although it can also rise. This means your return may not equal your investment.

An offshore investment is one which is held, literally, offshore, i.e. not under United Kingdom jurisdiction. If you invest in an onshore bond then the fund manager will be liable to pay certain UK taxes on the underlying fund, which as well as being non-reclaimable, will also hold back the growth of your investment. An offshore bond is liable for no UK tax and therefore grows virtually tax-free at a potentially higher rate.

This does not mean you can necessarily avoid paying UK tax. You may still find you will have to pay some but, with careful planning, you can control when you pay.

Offshore investment bonds do not generate income and hence generate no UK tax liability until the proceeds are brought back onshore.

If you are currently living abroad, or you plan to move abroad during the life of your investment, you may baulk at paying UK-based taxes, particularly as these are non-recoverable, and therefore an offshore bond enables you to invest without any liability to UK taxes.