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Offshore Tax Planning for High Earning Insurance & Reinsurance Executives (Approved by HMRC) [INFOGRAPHIC]

  
  
  

Offshore tax planning could help high earners legitimately protect their capital from the taxman in a number of ways.

If you’re earning over £100,000 a year, high tax rates are a major drain on your resources. Offshore investment - investing in an offshore tax structure, known as an investment bond, domiciled in a different country - is a highly effective way of reducing many different tax liabilities.

 

Offshore Tax Planning for High Earning Insurance and Reinsurance Executives – Offshore Investing (Approved by HMRC) [INFOGRAPHIC]

 

By offshore, we don’t mean far flung tax havens like the Cayman Islands, but more prosaic tax efficient centres like Dublin and the Isle of Man. As exotic and scandalous as offshore accounts sound, most providers are household name UK investment and life assurance companies using their offshore subsidiary company. These products are fully HMRC-approved.

Go offshore

  • As long as there is a life assured on the offshore investment bond you won’t normally pay any tax on growth. Tax is paid when money is taken out of the bond and will be based on your circumstances at that time; for example, you may wish to draw in retirement, when you are no longer a high rate taxpayer.

  • International bonds have a 5% allowance that you can take out of the offshore investment and pay tax on at a later date. This allowance can be carried forward to a future year if you have not used it. 

If no withdrawals are made in the first four years, 25% of the amount invested can be taken in year five without triggering a tax charge.
Source: Fidelity 

Nothing to declare

An international bond does not have to be declared on your tax return unless:

  • You exceed the 5% allowance of the original offshore investment, for each year it’s been running.

  • You cash the bond in and make a profit.

  • You sell your bond.

  • The bond comes to an end because the life assured dies.

Keep it in the family

  • If your partner is a non-taxpayer it can be tax-efficient to have an offshore investment in their name. Your spouse is also exempt from inheritance tax if you assign the bond to them. 

Careful tax planning meant that 250,278 estates for year of death 2009-10 were fully mitigated against tax. 38,144 of these were for estates worth between £500,000 and £2 million
Source: HMRC, July 2012 

  • Effective offshore tax planning could also help maximise your children’s inheritance. If put in trust, and you live seven years after this, any growth on the investment bond will be immediately outside your estate. 

Sources: Prudential Fidelity 

Your ‘to do’ list

  • Don’t pay tax on growth
  • Take 5% a year without being taxed
  • Protect your family from inheritance tax.

Download our free eGuide What is Intelligent Investing™? now!

Insurance and Reinsurance Executives’ Retirement Planning Toolkit

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We try to ensure that the information provided is correct, but we do not give any express or implied warranty as to its accuracy. We do not accept any liability for errors or omissions. We are not liable for any damages (including, without limitation, damages for loss of business or loss of profits) arising in relation to the information provided or from any action or decision taken as a result of using the information or website links. 

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The information provided does not constitute financial or other professional advice. You should consult a professional adviser if you require financial advice. 

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© Capital Asset Management 2013

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