Offshore bond changes

Expatriates who invest in offshore portfolio bonds (OPB) may have to carefully consider their financial planning following changes to OPB tax by the UK government.

The UK government has now closed up a loophole that allowed offshore bond-wielding expats to legitimately avoid paying tax on investment gains.

Simply put, an offshore portfolio bonds is a ‘wrapper’ in which other investments can be held. They’ve always been a popular choice amongst UK expatriates due to the ability to withdraw more than five per cent of the bond’s value without paying tax on the withdrawal, providing the individual is out of the UK when making the partial surrender.

If the expat subsequently returns to the UK, the “chargeable event” can be used to be offset future chargeable events , despite not paying UK tax had been paid on the previous surrender.

What’s happened is that this loophole has been closed so now if an expat with an OPB returns to the UK they will no longer be able to offset earlier chargeable gains if no UK tax has been paid.

However, the people this will affect most are those who hop onshore and offshore frequently, a practice which is not advised to those seeking non-UK residency status anyway. Utilising an offshore bond to legitimately reduce the amount of UK tax you are liable for if you become an expatriate is a sensible and popular aspect of offshore tax financial planning. However to ensure you do not fall afoul of HMRC keep up to date with legislation and always consult an independent financial adviser.

News.