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UK Expat Investors

If a UK expat returns to the UK, it is essential to “endorse” the offshore bond so that you can continue to benefit from tax deferred gains. If you fail to endorse the offshore bond you could find yourself paying income tax on annual deemed gains of 15% of the original sum invested, regardless of whether the investment bond produced any gains. By instructing the offshore investment bond provider to endorse the policy if you return to the UK, you restrict the invested assets to those which are permissible. We can help guide you on this topic but you need to let us know your future intentions when it comes to residence.

Expats returning to live in the UK can mitigate tax liabilities using an offshore investment bond.

Many returning UK expats are concerned about being investigated for tax evasion if they do not disclose all their offshore assets. These concerns have been heightened by the current principle that HMRC is under no obligation to prove ‘dishonest intent’ to break the law. HMRC is particularly concerned about offshore jurisdictions which are not currently listed as “disclosure jurisdictions” because they decline to share information them.

Once returned to the UK, expats must disclose all offshore assets on their tax returns and are liable to UK tax on international income and gains on an “arising basis”. Failure to disclose could mean tough penalties especially if assets have been held in a non-disclosure jurisdiction.

After disclosure, assets become visible to the UK authorities and returning expats will need to start reporting on their assets every year via their tax return. Restructuring assets into an offshore investment bond can minimise both the administrative reporting and tax liabilities. By transferring assets into an offshore investment bond, the bondholder gains control over the timing of future “chargeable events”. This is because all taxes are deferred within the offshore investment bond, apart from withholding taxes that cannot be reclaimed by fund managers on dividend income received. Only when a “chargeable event” is triggered would tax be potentially liable and this can be timed to take full advantage of reliefs available, such as “top slicing” and “time apportionment relief”.

Offshore bondholder locating to the same country the bond is domiciled in

When an offshore investment bond provider offers a policy to a UK resident bondholder who decides to relocate to the same country where the offshore bond is domiciled, there can be taxation consequences. The offshore investment bond provider may have to pay tax on the bond and pay the tax authorities in the new country of residence. It may be possible to claim local tax reliefs but each overseas jurisdiction will have its own legislation so you would need to be aware of the taxation regime which would apply should you become resident in the same country as your offshore bond is domiciled in.

To find out more about where an offshore investment bond is domiciled, go to our “Research & Buy” module, click on the Offshore Section and under the heading “Product Features”, you will see each offshore bond’s country of domicile listed.