Isle Of Man Provider Offers Investment Product For Expatriates

Investors Offshore, London

08 October 2002

Ernst & Young Isle of Man is offering a tax-efficient Offshore Property Bond which is specifically targeted at expatriates or other UK-domiciled individuals who plan an eventual return to tax residence in the UK.

The Offshore Property Bond uses an offshore life insurance bond for UK tax deferral on investment property and other assets. On return to the UK such investments are normally subject to UK income tax (up to 40%), or capital gains tax (up to 40%) and eventually UK inheritance tax (up to 40%).

There are a number of investment products which are designed to be tax efficient, notably offshore insurance bonds. However, most such policies are very restrictive in the assets that can be held (typically cash and collective investments, e.g. unit trusts). The Offshore Property Bond is a tax effective "wrapper" which is able to
hold any investment but is particularly suited to holding UK investment property.

The benefits of the Offshore Property Bond include:

• Ability to hold UK investment property and other investments not permitted by most offshore life insurance products;
• Assets within the Bond can be bought and sold without limit and without a UK tax charge arising and so can grow indefinitely in a tax free environment (gross roll-up);
• The structure permits back to back loans to be put in place to enable interest to be offset against rental income up to Inland Revenue limits;
• Where applicable deemed gains, resulting from the Personal Portfolio Bonds (Tax) Regulations 1999 (PPB Regs) are deferred indefinitely;
• The initial premium can be withdrawn tax free from the structure;
• Additional withdrawals can be made at any time. Such payments will be taxed in the UK as income rather than capital gains;
• This structure may be unwound tax free if the client becomes non-UK resident just for the year that the distribution is made (rather than 5 years for capital gains tax).

The structure can also be unwound tax free by using a number of other tried and tested tax schemes. In addition, it is possible to achieve an IHT and income tax free exit on death.

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