Offshore Banking

Gross payment of interest

One of the benefits of offshore banking is that customers enjoy gross payment of interest on any funds deposited offshore (i.e. interest is paid without deduction of tax). However, customers resident in the European Union (EU) must ensure details of their accounts are supplied to the relevant tax authorities in order to avoid paying the EU retention tax which, since 1^st July 2008, has been 20% of the interest due.

It is your responsibility to ensure that any tax liability in relation to funds deposited is accounted for by you to your appropriate tax authorities.

Tax-efficient savings

Before April 2008, if you were resident in the UK but were deemed to be domiciled overseas then any income or capital gain accrued offshore was not liable to UK tax unless it was paid (“remitted”) to the UK.

Recent changes to UK tax rules, which took effect on 6 April 2008, mean non-UK domiciled individuals who have been UK resident for seven of the previous nine tax years must now pay an annual charge of £30,000 if they wish to continue to be taxed on the remittance basis. In other words, if they pay the £30,000 charge they can continue to receive the benefit of income and gains remitted to the UK without their worldwide income being liable for UK tax.

The £30,000 charge is payable for each of the tax years in which the individual wishes to claim the benefit of the remittance basis. If the £30,000 annual charge is paid, any income earned from offshore banking will only be taxable in the UK if and when it is remitted.

Individuals who have been UK resident but non-UK domiciled for less than seven of the previous nine years can still claim under the remittance basis but do not have to pay the annual charge.

The information above should not be construed as the provision of tax advice.  We are not qualified to provide tax advice and recommend that you seek advice from a professional tax adviser.  Levels and bases of tax referred to above are those applying under legislation in force at the time of writing the relevant article.  These levels and bases may change and the availability and value of any tax relief will depend on your individual circumstances.