Some Offshore Investment Bond providers can offer their products globally to non UK residents. Our “Research and Buy” module can show you which providers will accept business for those residing outside of the UK – simply click on the “Product Features” tab and view the column “UK Residents only?”.
For those residing outside of the UK who decide to take out an offshore investment bond, it is essential to consider the taxation regulations in the country they are residing in because when you surrender the offshore investment bond, any potential tax charge is dependent on your country of residence. It is also essential to check what levels of investor protection are available locally since these safeguards vary considerably. Those currently residing in the UK who plan on emigrating should take advice about the local regulations of the country they are moving to.
If the bondholder becomes UK resident at the time the offshore investment bond is encashed, they can gain tax relief for the period of time they were resident overseas with “Time Apportionment Relief”. This involves reducing the chargeable gain by the amount of time spent residing outside the UK. So if a bondholder had a chargeable gain of £20,000 and had resided outside of the UK for half the time the bond was in force, the taxable gain would be reduced proportionately, to £10,000. It should be noted that periods spent outside of the UK also reduce available “top slicing” relief.
It is important to note that the Offshore Investment Bond providers have a list of prohibited countries. These are countries where the Life Office will refuse to accept an application if you reside there. There are two main reasons as to why a country is included in the prohibited country list. It could be that the country has its own regulations which do not permit a foreign product provider to write business there. Alternatively it could be that the country is listed by the Office of Foreign Assets Control, which is an office of the US Treasury and imposes security and other controls on international transactions from certain countries. This list changes over time as countries are added or removed from it.
European Economic Area States
By virtue of being classified as a long term insurance contract, an offshore investment bond can be transacted in many European Economic Area States. The Insurance Mediation Directive (IMD) allows an authorised financial services company to be “passported” into many, but not all, European Area States and allowed to give advice to residents in the following countries:
AUSTRIA | BELGIUM | BULGARIA | CYPRUS | CZECH REPUBLIC | DENMARK | ESTONIA | FINLAND | FRANCE | GERMANY | GIBRALTAR | GREECE | HUNGARY | ICELAND | IRELAND | ITALY | LATVIA | LIECHTENSTEIN | LITHUANIA | LUXEMBOURG | MALTA | NORWAY | POLAND | PORTUGAL | ROMANIA | SLOVAKIA | SLOVENIA | SPAIN | SWEDEN |
Not all offshore investment bonds are compliant with countries on the above list. Spain, France, Cyprus and Malta have regulatory requirements which mean the bond providers have designed specialised products in order to ensure compliance with their reporting requirements. To find out more about which offshore bonds are available to residents of a particular country, you can go to our “Research and Buy” module, select the “Offshore” tab, and then the “Product Features” tab. Under the column “UK Residents only?” you can see which investment providers offer bonds to residents outside of the UK.
It is easy to check the permissions of a financial services company operational in these countries by going to the Financial Conduct Authority register, searching on the name of the firm and checking under the heading “Passport Out”.
Care needs to be taken because some of the countries listed above also appear on the Office of Foreign Assets Control website, as outlined in the previous section. So just because a European Economic Area state allows “passporting”, this does not necessarily mean the investment bond providers will agree to accept an application from a resident of the same country.
Regulation of Offshore Investment Bonds
If the bondholder is resident outside of the UK and the advice is given by a UK regulated company then this advice is regulated by the UK Financial Conduct Authority. The FCA’s suitability requirements relate to the provision of advice to clients, wherever they may be located.
It is unlikely the advice will be covered by the company’s Professional Indemnity Insurance because most policies exclude claims brought outside the United Kingdom or arising from any act or omission done outside the United Kingdom or any proceedings for the enforcement of any judgment or award made outside the United Kingdom.