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Offshore Bonds

Offshore investment bonds are tax wrappers, within which you can invest in a wide range of funds covering different types of assets such as equities, fixed interest securities, property and cash deposits. An offshore bond applies the legal and tax advantages of a life assurance policy to an investment portfolio.

Offshore investment bonds offer flexibility, allowing you to take withdrawals when required and can offer an offshore bank account with your own cheque book, credit card and internet banking facilities. You can also use an offshore bond to consolidate other investments not held in tax advantaged wrappers. This allows you to put your portfolio under one roof which makes the on-going administration much more straightforward. So an offshore bond can be used as a platform, or a wrap, giving tax advantages, wide investment powers and the ability to easily manage a diversified investment portfolio since all your investments can be viewed in one place. The range of funds on offer from an offshore investment bond is often more comprehensive than the onshore equivalent. By consolidating investments into an offshore investment bond, tax reporting is made more straightforward and keeping track of your finances is made easier – even if your investment portfolio is complex.

For more on taxation advantages, please refer to our section “Offshore Bonds Tax Treatment“.

Investor protection

The word “offshore” is used to describe non UK locations where investment product providers offer access to funds that are virtually free from taxation. Offshore investment bonds are based in a variety of international jurisdictions where the local regulations and investor protection can differ considerably. Hence it is important to check where the offshore investment bond is domiciled and to check the local statutory protection schemes. If you want to check which country an offshore investment bond is domiciled in, see our “Research & Buy” section where it is listed in the “Offshore” Section, under the column heading “Product Features”.

Care needs to be taken if the bondholder decides to reside in the same country their offshore investment bond is domiciled in and this is explained in our section UK Expat

Moving abroad

If you are a UK resident planning on moving abroad an offshore investment bond can offer you an opportunity to pay less tax since you will be taxed according to the local jurisdiction of the country you are moving to. If this offers a lower tax regime than the UK, you could pay less tax. You always have the option of surrendering your offshore investment bond before you leave for an overseas destination if the local tax regime is higher than in the UK.

Gifting investments

Many offshore investment bonds are made up of segments which can be assigned, or gifted to a beneficiary of your choice. Once assigned, as long as it is not for an immediate monetary consideration, the proceeds are then taxed on the recipient when they encash it. So if they are in a lower tax bracket than you then this can offer a tax efficient way of passing assets to them. Typically, offshore bonds are assigned to non-working spouses or children prior to encashment.