Savings Tax Directive Is One Year Old

by Amanda Banks, Tax-News.com, London

04 July 2006

It's just a year since the EU Savings Tax Directive swung into action, and IOM-based Derbyshire Offshore says it doesn't seem to have been the disaster for the world of offshore that many predicted.

Introducing a new, higher rate on Derbyshire's Interest Accumulator account, Fiona Passey, Director of Offshore Banking says, 'Whilst the overall impact of the new Directive continues to be far less than expected, this new account gives customers a valuable tax planning option as the interest and tax are deferred for a minimum of two years and then only paid at the customer's request."

The European Savings Tax Directive was introduced a year ago, with the aim of clarifying the position of the taxation of offshore deposit accounts for EU residents. For offshore financial centres such as the Isle of Man, a withholding tax option was introduced for those customers who wanted to preserve the confidentiality of their banking affairs. The impact of the Directive to date for offshore banks and building societies in the Channel Islands and Isle of Man has been limited, suggesting that the vast majority of clients were already passing information on interest earned to their professional advisers or the taxation authorities. The Directive has undoubtedly added a significant layer of bureaucracy to offshore investing, but the core benefit in holding an offshore account, namely the ability to use gross payment of interest for tax planning, still remains.

Fiona Passey continues, “From our ongoing research with customers, it’s clear that the longer term impact of the EU Savings Tax Directive will be upon people’s choice of retirement destination. Whilst cheap air fares to the UK have made France, Italy and Spain highly popular destinations for UK retirees, the taxation regime may become a decisive factor for those looking to make their savings last long into retirement.”

With the numbers of UK citizens expecting to emigrate abroad for work or retirement continuing to rise, the variable rate Interest Accumulator savings account from Derbyshire Offshore offers those planning to leave the UK with another financial option.

Fiona Passey adds, “Our Interest Accumulator account was designed for those clients who are expecting changes to their UK taxation obligations at a future date. It offers clients control over the date at which interest is payable and therefore when any tax liability becomes due. “

The account offers four tiers and variable interest rates up to 4.70% Gross/AER. Interest is calculated and accrued daily, but is only paid on the day an account is closed, which can be anytime after two years of opening the account.

Derbyshire Offshore is the trading name of The Derbyshire (Isle of Man) Limited, a wholly owned subsidiary of Derbyshire Building Society, one of the UK’s top ten societies.

Recommended