Non-domicileYou may be able to avoid UK income tax, capital gains tax and inheritance tax on offshore investments if you are not domiciled in the UK, for example you were born overseas and intend to return to your original home country in the future. The rules are labyrinthine, but can result in substantial tax savings, witness the fact that many of those who top the UK rich lists are non-domiciled.
The Treasury announced a review of residence and domicile rules in the 2002 Budget. Very little progress has been made since. This year’s Budget documentation simply noted that the review remains ‘ongoing’, although this year there have been many voices calling for reform.
EmigrationIf you are planning to live abroad, either to work or to retire, you may be able to use offshore investment to avoid tax both in the UK and in your new home country. This is a complex area of financial planning, as you will need specialist advice about the tax rules of two countries and how they interact.
Sidestepping tax deduction at source If you are on the border of paying tax, it can be difficult to obtain income without tax being deducted at source. The rules that permit the payment of gross interest on UK bank and building society deposits only apply to those who can sign a declaration that they are non-taxpayers. If you cannot do this, there may be no alternative but to go through the tax reclaim process.
You can receive income without tax deducted at source by choosing the right offshore investments. This income is still potentially taxable, a point that many people seem to have forgotten or ignored in the past – hence HMRC’s campaign.
Deferring tax Offshore investments can be a useful way of deferring tax. Many investments, such as offshore investment bonds, create no UK tax liability until they are realised. The tax rules can also be particularly favourable for partial realisations.
Contact Daly Harvey Morfitt now to discuss your financial planning requirements. Call on 01789 299655.
Notes on using this fact sheet: This fact sheet is published solely to provide information and it does not constitute advice or a personal recommendation. Always take detailed financial advice from a suitably qualified individual before making important financial decisions.
