By Ross Martin, Accountancy Director at Hive Business.
The word “offshore” has been irreversibly tarnished through propaganda in the press that’s been swallowed by almost everyone, yet people seem to forget that there are loads of conventional reasons for registering companies and individuals offshore. This may not serve the Government’s insular perspective but one obvious one is to help internationally mobile individuals not intending to be in the UK permanently.
Offshore finance is ever an emotive topic, cut through with misguided sanctimony at all levels of society, a bit like the kind of vitriol we see in popular media for people who are outed at playing HMRC at their own games (think Gary Barlow, Jimmy Carr et al).
Here’s what this climate of fear — cooked up on purpose by HMRC and happily espoused by the mainstream media (who have questionable commitment to paying their “fair share” themselves, but we’ll come to that) — does to people on the ground: I was speaking to a client who was buying a property in London. He could afford to buy it in cash and it would suit him perfectly to buy through an offshore pension. When I mentioned this he said: “Ah no, ah jeez, I’m probably not going to get into anything dodgy like that thanks.”
Actually as far as wealth management goes it doesn’t get much more benign and pedestrian than a Qualifying non-UK Pension Scheme (QNUPS) if you’re intending to retire abroad. This man was born in Ireland and has family overseas, so why on Earth did he have the preconception that he has to locate his pension in the UK? It makes far more sense for him to use a non-UK pension, but there we go. Fear won out over maximising wealth — and he missed a chance to bulwark his wealth in way that he’s perfectly entitled to do under British law and recognised by HMRC.
So the decision was made even though an offshore pension would have been a beautiful home for this man’s property because it would have sheltered him against capital gains tax and inheritance tax too. This option is just a run of the mill fact for overseas individuals and entities. It isn’t a clever weaze, it’s standard and well known rule for everyone. Clearly the trouble was I mentioned the word “offshore”.
I have to say, it annoys me that the propagandists are winning. Are we suddenly not allowed to admit the reality? It’s only globalisation, which everyone seems fine with in other contexts; we like budget airlines, we marry foreigners, we buy cheap stuff from Taiwan, we buy furniture from a well-known Swedish outlet, yet money seems to have different rules attached to it — not legal rules, you understand, cultural ones.
Perhaps popular culture dislikes offshore financial arrangements because people can remember all those peers in the house of Lords who enjoy non-dom status including Lord Rothermere, owner of the Daily Mail — ironically a prominent mouthpiece for attacks on unscrupulous “tax dodging” Brits. Pretty rich considering Rothermere himself avoids paying tax on his stately home, Ferne House, set in 240 acres of grounds in Wiltshire, a saving of several millions of pounds in tax annually. Daily Mail & General Trust plc, of course, is controlled through a company that’s registered in Bermuda but run from Jersey.
The other side of this problem (if it is a problem) is our progressive tax system. People earning more are asked to pay a higher proportion of their income as tax, the idea being that people with the broadest shoulders bear the biggest burden. The unavoidable truism is that this system grates too much. Being conspicuously penalised doesn’t resonate well with the super wealthy and it’s little wonder they look for ways around this unfairness. Jenson Button, for example, lives in Monaco. He might be missing his home town of Frome in Somerset but injustice keeps him away; he doesn’t live there because he doesn’t want to pay 45 per cent on his earnings.
I heard about a wealthy entrepreneur who worked in London and would drive to Stansted, get on a private jet, fly out of UK airspace for the night, freshen up with a shower on board, and then land back in London in the morning. If he wasn’t in UK airspace at midnight he wasn’t deemed a UK resident. People use trusts, they shelter money in limited companies and they fly out of UK airspace at night for one reason: they believe our tax system is intrinsically unfair. And it is — that’s why you need a plan to make your circumstances work for you within the law, nothing less, nothing more. And don’t believe everything you read in the papers. Call us on 01872 300232 or email us at [email protected].