Category Archives: Other Tax & Money Havens

Investors look to offshore havens to beat austerity measures

To protect pensions and legacies savers move to foreign bonds. Wealthier British investors are piling money into offshore bonds, in a bid to escape punitive new taxes on pensions, and to help with inheritance tax planning according to Emma Simon, The Telegraph.

According to L&G – one of the largest insurers in the UK – its offshore bond business grew by almost 50 per cent in the past three months. This is on top of record sales in 2010, which saw sales rise almost five times on the previous year. While Standard Life in an annual results said it had seen sales soar by a third this year.

One reason for these rises has been the recent change which has limited how much people can save into a pension each year.

But a rise in Capital Gains Tax (CGT), and a freezing of the Inheritance Tax (IHT) allowance has meant more investors are looking at ways to minimise tax charges on their investments.

People are now only able to save £50,000 a year into a pension. Danny Cox, of Hargreaves Lansdown said: “This limit is still clearly more than most people can afford to save each year. But it does mean that once high earners have maximised their pension and Isa contributions, then offshore investment bonds become an option.”So what are the advantage of going offshore? Do they allow richer investors to effectively sidestep tax?

The answer is no. Offshore bonds don’t allow you to avoid tax completely, but they can be a good way of deferring it. This can be particularly beneficial to those who are higher-rate taxpayers today, but expect to be basic-rate taxpayers when the investment is cashed in.

As well as allowing investors to choose when they pay tax, some of these bonds will also allow investors to choose whether returns are taxed as income, or capital gains. With careful tax-planning this can help them minimise overall tax bills.

In many ways offshore bonds are similar to onshore bonds. Both are basically wrappers, sold by insurers, through which consumers can invest in a range of investment funds.

They offer a wide range of externally managed investment funds – typically the same choice as people would get when investing in an Isa or unit trust. On offshore bonds there can be an even wider spread of investments, including many not widely available to UK investors.

One of the main advantages is that both offshore and onshore bonds allow customers to withdraw 5 per cent of their investment each year tax-free (although strictly speaking the tax is deferred until the bond is cashed). For retired investors and those looking to produce an income from their investment this can be an extremely attractive option.

The main difference between onshore and offshore bonds, is that with offshore, gains can roll-up tax-free – which should mean higher returns. The downside is that charges may be higher (though the charges on both on and offshore bonds are broadly similar) and that investors may not have the same protection under the Financial Services Compensation Scheme.

See more in the Telegraph here.

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American companies are living the United States because of high taxes

The corporate tax rate in the United States is the second highest in the developed world.

American companies are finding new overseas tax havens to legally protect some of their profits from the U.S. tax rate of 35 percent, among the highest in the world. Lesley Stahl reports. Move your corporation or part of your corporation out of the United States while it still is possible. Do not wait as the current negative sentiment could result in restriction on US companies in the future.

See the video covering the story at: http://www.cbsnews.com/video/watch/?id=7376848n&tag=nl.e882#ixzz1VmZRlPaG

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Start up America – to encourage entrepreneurship

Supported by new initiatives and tax incentives, United States President Barack Obama has launched ‘Startup America’, a national campaign to encourage entrepreneurship and private sector investment in job-creating start-ups and small firms.

He announced this “historic partnership with business leaders, investors, universities, foundations, and non-profits” by revealing that leaders in the private sector will launch the ‘Startup America Partnership’, an independent and private-sector led campaign to mobilize private sector commitments. Steve Case, co-founder of AOL and chairman of the Case Foundation, will chair the Partnership.

The initiatives are aimed at uniting a range of public and private commitments to expand access to capital for high-growth startups throughout the country; increase entrepreneurship education and mentorship programmes; strengthen commercialization of the USD 148bn in annual federally-funded research and development, which can generate innovative startups and entirely new industries; identify and remove unnecessary barriers to high-growth startups; and expand collaborations between large companies and startups.

As examples of the latter, Intel and IBM are committing USD 200m and USD 150m respectively to bring companies together, promote entrepreneurs and new business ventures, while HP and Facebook have also confirmed their participation in the scheme.

While the Small Business Administration (SBA) will commit USD 2bn, as a match to private sector investment, over the next five years to accelerate capital support for startups and high-growth firms, the President’s new budget will propose making permanent the elimination of capital gains taxes on certain investments in small businesses.

The 100% exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years was passed as a temporary provision in 2010 as part of the Small Business Jobs Act signed in September. The amount of gain eligible for the exclusion is limited to the greater of USD 10m, or ten times the taxpayer’s basis in the stock. This provision applies to qualified small business stock issued after December 31, 2010, and before January 1, 2012. However, the government’s 2012 budget proposal would make this provision permanent.

The budget will also propose expanding the New Markets Tax Credit to encourage private sector investment in startups and small businesses operating in lower-income communities.

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