Thursday, 11 November 2010

Lawful Tax Avoidance

Offshore financial planning is much more open than used to be the case but still has many advantages. This is especially true with the use of Trusts.

·         Legitimate tax avoidance

·         Lost faith in British & Irish Banks

·         Strategic financial planning

The term “offshore” originally comes from financial institutions located offshore from UK in the Channel Islands, but is now used figuratively to refer to banks in many regions, particularly Bermuda, the Cayman Islands, Bahamas and politically neutral European jurisdictions such as Switzerland.

It is important when considering this subject that readers understand the difference between tax avoidance, which is legal and legitimate and tax evasion which is totally illegal.

Tax Evasion - Definition
Unlawful attempt to minimise tax liability through fraudulent techniques to circumvent or frustrate tax laws, such as deliberate under-statement of taxable income or wilful non-payment of due taxes. Whereas tax evasion is an offense (punishable by both civil and criminal penalties), tax avoidance is not.

If you need advice or have a query please email me

Examples

  • Being resident in Spain (i.e. living in Spain for more than 183 days in a calendar year) but not registering with the tax authorities
  • Not declaring income from property letting
  • Spanish resident having an Individual Savings Account in the UK
  • Not declaring gross paid interest on offshore accounts

Tax Avoidance - Definition
Lawful minimisation of tax liability through sound financial planning techniques such as phasing the sale of assets over a period long enough to effect maximum exemption from capital gains tax. Whereas tax avoidance is legal, tax evasion is not.

I am quite happy to answer any queries you may have but I will refer you to an adviser for authorised and regulated advice, if you email me

Examples

  • Approved Pension schemes are legitimate and avoid tax
  • UK residents having an Individual Savings Account
  • The legitimate use of ‘loopholes’ created by poorly drafted legislation or statutory instruments
  • QROPS for UK non-residents or intending non-residents
  • New Zealand Foreign Trust (NZFT)
  • QNUPS
  • Use of Section 615 for overseas workers of UK firms
  • The legitimate use of offshore trusts to hold assets
  • UK IHT and Spanish SSD tax planning

All of these ideas appear in posts in this blog or for more detail please email me


Individuals or organisations (including companies and businesses) may be interested in placing assets offshore for a variety of legitimate reasons, including:

1. The existence of a sophisticated infrastructure of financial institutions and     professional service providers (lawyers, accountants, corporate services, etc). This is particularly true of Jersey and Guernsey where most of the financial services professionals will have trained in the UK

2. Tighter government regulation in the region in which the financial institution is domiciled. This may allow for a relatively favourable investment environment as compared to onshore.

3. Access to politically and economically stable jurisdictions. This may be an advantage for individuals who lack faith in the financial institutions in their ‘home’ country. After experiences of the last few years many British and Irish people might have lost faith in Banks.

4. Tax neutral.  Having no added local tax burden is a useful advantage for individuals who are not obligated to pay tax on worldwide income, or who may be able to defer taxation.  It also allows individuals to structure their assets without having to worry about local tax complications.

5. As part of estate and/or asset protection planning.

6. Broader "global" view than often found with onshore institutions.

7. Strong privacy and confidentiality laws to help protect depositor's privacy.

Before considering any offshore investments you should carefully consider you objectives and decide what you are trying to achieve. The expertise in giving you advice needs to be at a high level. I can recommend advisers with the expertise, if you email me. 

You might therefore also like to read my previous post which covers getting good advice.


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You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email