Offshore shenanigans BLOG

May 1, 2016 9:03 am

Offshore shenagigans – politicians are inevitably exposed to public scrutiny, and times have changed since a Chancellor of the Exchequer, none other than Winston Churchill, was able to run up massive debts and unpaid bills without public knowledge or censure.  The eternal truth, however, was expressed in the words of the press Baron Lord Northcliffe, that “news is what somebody somewhere wants to suppress”.

The Government and HM Revenue & Customs have become increasingly vigilant over recent years in relation to what they regard as unacceptable ways of minimising tax, and some of the schemes which are now coming under scrutiny were acceptable in their time.  Much water has flowed under the bridge since 1929, when Lord Justice General Lord Clyde said in a judgement “No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores.”

So what are we to make of the recent exposures of Panamanian tax-based investment schemes and press headlines about the legitimacy of lifetime gifts?

Schemes based in obscure third world locations have always been suspect and should be shunned in the same way as Polish property schemes and investments promoted by advertisements featuring scantily-clad girls and bottles of champagne. Equally, the caveat emptor (buyer beware) warning shines brightly over schemes such as those promoted by fraudster Bernie Cornfield in the 1970s, using the slogan “Why work for money when you can make money?”  The old mantra applies that if it seems too good to be true, it probably is.

As regards lifetime gifts, which become free of inheritance tax after seven years, these have been permitted by the UK tax laws for decades, and the only reason they have become press headlines is that they have a benefited a Prime Minister.  So what?!

Clients taking advice from FCA-regulated independent financial advisers have no cause for concern – particularly if the advisers are members of SIFA (Solicitors Independent Financial Advice).  Offensive tax schemes are invariably created by accountants or foreign law firms, to whom only the mega-rich would refer for advice.  IFAs are under strict control of the Financial Conduct Authority and would be unable to obtain the mandatory professional indemnity insurance if they were to over-step the mark.

The closest most IFAs are likely ever to get to offshore activity is to recommend offshore investment bonds, which are simply a variant of the on-shore bond, but based in a jurisdiction with a different tax regime from the UK, which has disadvantages as well as advantages.  Bonds marketed by providers with household names are 100% respectable and, again, have been in popular use for decades.

The Government is keen to encourage people to save and invest, and has specifically created a range of tax-efficient schemes for this purpose, the most valuable being pensions, with ISAs following closely behind.  There is ample scope for returns to be made by sticking to the straight and narrow.

No responsibility can be accepted for the accuracy of the information and no action should be taken in reliance on it without advice. Please remember that past performance is not necessarily a guide to future returns.  The value of units and the income from them may fall as well as rise.  Investors may not get back the amount originally invested.