Overseas Assets

Investors should not delay in disclosing their assets

With the latest HM Revenue & Customs (HMRC) campaign aimed at targeting investors with overseas assets, some investors could be worried about the impact this could have on their overseas investments, and others could be put off from investing overseas altogether. However, it’s not all doom and gloom. Once assets have been appropriately disclosed, there are ways in which the investments can be restructured, or new investments made, to make them more efficient going forwards.

Minimise the administrative burden

There has been a genuine market available for people to invest overseas for many years, and people should not be discouraged from this method of investing in the fear that it is somehow not above board. Providing assets are disclosed accordingly (and for new investors the investment will likely be coming from an already disclosed source), there are many ways in which assets can be structured to minimise the administrative burden and tax liability.

Once assets are disclosed, they become visible to the UK authorities and investors will need to start reporting on the assets every year via their tax return. Tax will have to be paid on an arising basis; therefore, any proposed active management by the investor will lead to more onerous tax reporting via self-assessment, as investment decisions will need to be balanced with tax considerations.

Greater control

This particular tax and reporting scenario can be delayed if the assets are restructured into a single premium offshore bond. Once the assets are held within the offshore bond, the investor gains much greater control over the timing and nature of any events that are chargeable to tax. All taxes are deferred within the structure (except for any withholding taxes that cannot be reclaimed on income or dividends received), and only on a planned encashment would a tax situation arise.
Investors are then able to use the advantages the offshore bond brings to manage any tax events, by using features that work uniquely well for offshore bonds, such as assignment, change of tax residence and top slicing. However, the biggest area which many investors may see a tax advantage is with regards to Inheritance Tax (IHT) planning.

New disclosure requirements

Investors often believe that money held offshore will not fall into the UK IHT net; however, this is not correct. Whilst assets held offshore have always been subject to IHT, these assets were not necessarily visible to the UK authorities and hence not always disclosed. All this is now changing as new disclosure requirements take hold. These assets will become visible and completely open to scrutiny by the UK tax authorities.

This could severely impact estate planning for some investors, as UK IHT is set at a substantial flat rate of 40%. Placing an offshore bond into a trust can help reduce this IHT liability and help with estate planning and tax mitigation. Trusts can also ensure the right people get the right proportion of assets at the right time, helping with succession planning, and can enable funds to be paid out on death without any delay as the need for probate is removed.

Pension and Investment advice will be provided by our sister company ad+ Financial.

The value of investments and income from them may go down. You may not get back the original amount invested. This information sets out the basics of portfolio diversification. It is not designed to be investment advice and should not be interpreted as such. Other factors will need to be taken into account before making an investment decision. The value of an investment can fall as well as rise and is not guaranteed. You may get back less than you put in. Past performance is not a guide to future performance.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future.

The Financial Conduct Authority does not regulate taxation & trust advice or will writing.

This article featured in our Smart Money magazine and is for your general information only and is not intended to address your particular requirements. This article should not be relied upon in its entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation.