Offshore Investment Bonds: A Planning Opportunity for Internationally Mobile Clients
For individuals who move overseas, and particularly those who intend to return to the UK, there are options available that are worth exploring to help reduce your UK tax
exposure, particularly for the period where you are a non-UK resident. I n this article, David Collins, Senior Tax Adviser, explores how Offshore Investment Bonds (OIBs) can be one of these effective tax planning tools. And that despite their potential benefits, many people are unfamiliar with how they work and the opportunities they offer.
What is an Offshore Investment Bond (OIB)? An Offshore Investment Bond is a tax-efficient investment wrapper. Unlike direct equity or fund investments, growth within an OIB is not subject to UK tax while it remains invested. Instead, tax is deferred until a chargeable event occurs, such as a withdrawal exceeding the cumulative 5% annual allowance, or the full surrender of the bond. This also allows capital of 5% of the initial amount invested to be drawn down on an annual basis with the tax deferred until a chargeable event occurs in the future.
Why should Non-Residents use OIBs? One of the standout advantages of OIBs, for individuals who are leaving the UK on a temporary basis, is Time Apportionment Relief (TAR). For non-UK residents, an OIB can be an attractive vehicle because investment growth is not subject to UK tax during the period of non-residence. Making it particularly useful for individuals moving abroad for a period and looking to reinvest their gains without incurring immediate tax charges. It also removes any UK tax filing requirements for individuals who have no other income in the UK. When an individual then returns to the UK and becomes tax-resident again, they do not pay UK tax on the proportion of investment gains that accrued while they were non-resident. This can be a powerful planning tool for those who spend several years abroad, allowing them to benefit from tax-free growth outside the UK tax net.
6 | SCRUTTON BLAND | PRIVATE CLIENT
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