High-Tax Country Resident Planning To Go Offshore: UK

There is a considerable difference between permanent and temporary non-residence.

Temporary non-residence

An individual spending a limited period abroad (eg a diplomat or a business executive) will probably be in a favourable income tax situation during non-residence, but 5 years of non-residence is required before capital gains tax ceases to apply to asset sales, so there is not much point in trying to transfer or crystallise assets offshore unless a very long absence is in view. Offshore assets acquired during non-residence will have the same status as those acquired during residence, so there is no extra advantage to be gained from offshore investment due to non-residence as such.

Permanent non-residence

There are various types of offshore investment available to UK residents which are not liable to tax until they mature or are cashed in, and it is clear that if this takes place after a move into a low-tax area, then UK tax has successfully been avoided. This may even be true of a move into another high-tax country, because the UK tax regime for offshore investments is worse that that in most other high-tax countries.

Once a firm decision to move offshore has been made, careful thought should also be given to existing UK capital assets, including pension assets. The UK government has relaxed its position on pension transfers overseas, meaning that it is now possible to make transfers out of UK company schemes to overseas schemes more easily.

HM Revenue And Customs has also confirmed that if you belong to a stakeholder scheme, and subsequently become non-resident, you can continue to contribute for up to 5 years. However, in the event that you choose not to return to the UK, your pension income can end up fragmented. This is a complex area which needs careful consideration in terms of your personal circumstances.

It is reasonably sure at any rate that continued investment into UK assets by someone planning to move offshore is unlikely to be the most tax-efficient strategy.

www.lowtax.net contains details of the corporate and individual tax regimes for 35 offshore jurisdictions.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.