Offshore Bonds: Key Tax and Practical Issues for Individuals & Trustees

Overview of Tax Rules on LA Bonds

• Comparison with other investment-holding vehicles
• Holding bonds in segmented form
• Tax charges on encashment, including
  • ‘Top slicing relief’ (TSR)
  • Impact on Personal Allowance abatement and High-Income Child Benefit Charge
• FA 2020 changes to TSR calculations
  • Treatment of personal allowance
  • Allocation of other allowances
• Finance (No.2) Act 2017 changes to the rules on partial encashments
• Comparison of UK and offshore bonds

Personal Portfolio Bonds (PPBs)

• What they are and why they need to be avoided
• Permitted investments

‘Time-Apportionment’ Relief

• Following periods of non-residence

Bonds Held in Trust

• Who is liable for any tax charge on encashment?
• Tax rates applying
• Practical problems and tax traps
  • Case study on the appropriateness of an investment bond for trustees of an interest in possession trust

Uses of Offshore Bonds

• ‘Gift and loan’ trusts
• ‘Discounted gift trusts’

Losses

• Deficiency relief

Our offshore bonds training specialist is a Chartered Accountant who qualified with PwC in 1988, spending his last 18 months there in the Tax department. In 1989 he joined a leading financial training company as a tax tutor. Since 1992, he has been self-employed as a Professional Tutor and Training Consultant, specialising in tax update courses for accountants, lawyers and investment managers.

Our trainer has been teaching in the financial services industry since 1994 and writes regularly for Tax Insider, as well as speaking at conferences of bodies such as the ICAEW and CIOT.

By the end of this course, participants will:

• Know what a ‘personal portfolio bond’ (PPB) is and why they must be avoided
• Understand what investments can be held in a non-personalised offshore bond
• Understand the planning opportunities presented by the segmentation of bonds when partial encashments are made
• Know the pros and cons of using an offshore bond as a tax wrapper, including:
  • How top slicing relief (TSR) can mitigate tax charges
  • How ‘time-apportionment relief’ can reduce charges where the investor has lived abroad
• Understand the changes to TSR in Finance Act 2020 and how they impact tax liabilities
• Appreciate how apparently well-timed encashments can produce large tax charges
• Know that there is only very limited relief (‘deficiency relief’) for losses
• Understand how encashments of bonds by trustees may produce a tax charge on the settlor, trustees, beneficiary or no one (depending on the circumstances)
• Understand how ‘gift and loan’ and ‘discounted gift’ strategies involving trusts can mitigate Inheritance Tax

• Redcliffe’s offshore bonds course trainer is a Chartered Accountant with over 35 years of experience in Tax Training, who has written on this subject for the Law Society Private Client journal and Taxation magazine.
• Unlike most tax trainers, he has wide-ranging experience in lecturing in the financial services industry, including for many regulatory examinations.
• There are many numerical examples to aid your understanding of potential tax exposure and a case study on the suitability of an offshore bond as an investment for trustees.
• Tax traps and planning areas are highlighted throughout, along with relevant cases.

This course will introduce delegates to the area of offshore bonds and examine the main advantages and tax traps associated with them. It will be of use to wealth managers, lawyers and accountants who deal with them in practice.

Delegates will be reminded of the main characteristics of investment bonds and the distinctions between UK and offshore bonds will be explained. Of particular importance is an understanding of the limits that are placed on the investments that can be held in the latter, in order to avoid the onerous anti-avoidance rules covering ‘personal portfolio bonds’.

The tax issues associated with bonds held by trustees will also be covered.

The course material will contain plenty of numerical examples to help explain what are often complex tax rules.