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Non-domiciles targeted in Autumn Statement, offshore bond an attractive solution

03/12/2014

In the Chancellor’s Autumn Statement non-domiciled individuals living in the UK have been targeted. The amount non-domiciles pay as a ‘remittance basis charge’ will increase, making it more expensive for them to defer paying UK tax on their overseas income or gains.

The amount of the remittance basis charge for non-domiciles has changed as follows:

• If resident in the UK for 7 out of 9 years, the charge will remain at £30,000
• If resident in the UK for 12 out of the last 14 years, the charge increases from £50,000 to £60,000
• There will be a new charge of £90,000 introduced for people resident for 17 out of last 20 years

Non domiciles have two options when it comes to paying tax on overseas income and gains. They can pay UK tax as and when the liability arises, or they can defer the tax, known as a ‘remittance basis’. If they choose the remittance basis they have to pay a ‘remittance basis charge’.

However, rather than paying the annual remittance charge, if the non-domiciled individual only holds investments, then an alternative solution to this higher charge could be to wrap the investments inside an offshore bond.

Taking this action could save thousands in remittance charge and, for those who have been in the UK for long time, could save them £90,000 a year. The offshore bond essentially defers any income tax and capital gains tax liability until the bond is encashed, which is why there is no tax to declare on an annual basis.

The benefit of using an offshore bond rather than paying the remittance charge is compounded by the fact that if the individual pays a remittance charge they will also lose their capital gains tax allowance and personal allowance.

Rachael Griffin, head of technical marketing at Old Mutual Wealth, comments:

“By significantly raising the amount of remittance charge non-domiciled UK residents pay, the Chancellor is forcing them to look for alternatives. An effective solution for those who hold investments overseas is to restructure these assets inside an offshore bond. This approach can be extremely beneficial providing the individual doesn’t hold other overseas assets outside of the offshore bond.”

For more information contact:

Sophie Lenton Old Mutual Wealth 023 8091 677007834 499 558

Notes to editors:

Quilter is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

On a ‘go forward basis’, Quilter oversees £ 111.6 billion in customer investments (as at 31 March 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

The Quilter businesses will be re-branded to Quilter over a period of approximately two years following separation from Old Mutual:

  • Intrinsic to Quilter Financial Planning
  • Private Client Advisers to Quilter Private Client Advisers
  • The Multi-Asset business to Quilter Investors
  • The UK Platform to Quilter Wealth Solutions
  • The International business to become Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name.

On 19 December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Quilter is part of Old Mutual plc, a FTSE 100 group that provides investment, savings, insurance and banking. For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.

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