Investing money abroad may be a wise idea for anyone who wants to protect their financial privacy or who likes the idea of keeping it away from Gordon Brown's clutches, but many of us are daunted by the process, thinking it too difficult to arrange. This view couldn't be further from the truth.
Buying shares
Most well-established stockbrokers can buy foreign shares for you or you can contact foreign banks and brokers directly.
Do remember, though, that if you use a UK broker, you will have to pay two sets of dealing costs as the broker will have to use a local broker, entailing foreign currency charges. Therefore, it may be in your best interests to use an adviser who knows a lot about foreign markets.
You will also have to incude this in your UK tax return when you sell the shares and report any dividends.
Offshore funds
The two types - distributor and non-distributor - are taxed normally but you can defer paying tax until the dividends or interest is taken out. The advantage here is that you can wait until you have accumulated some money and then take it out when you are in a lower tax bracket.
However, both your gains and income are subject to income tax, so you cannot use your annual capital gains tax allowance.
Offshore saving accounts
The most obvious advantage of these accounts is that interest payments are made gross (i.e. without the deduction of income tax). In the same way as offshore funds, you will have to declare it on your tax return but can defer paying the tax until a later date. This is of benefit if you save great amounts in that the gross interest payments will accummulate into a substantial amount, resulting in you receiving a larger final payment than if the interest was paid after the deduction of income tax.
There are various offshore saving accounts that offer higher rates of interest than their onshore equivalents, but they do require minumim account balances and a notice period for withdrawal. It's always a good idea to take a look at the major finance companies that have an offshore presence (e.g. HSBC Offshore, Standard Bank Offshore and Abbey International) and compare their offshore saving accounts with those offered by private and domestic banks.
For further advice on all these ways to invest, speak to an independent financial adviser with an offshore focus who will be able to help you.
12 October, 2005