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An Offshore Bond

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An Offshore Bond can invest in a range of holdings such as insured funds, unit trusts/ Oeics etc, as per the Onshore fund. Its difference is that they benefit from gross roll-up as they grow i.e. all growth in the fund will be free of tax, apart from a small element of withholding tax in certain countries of origin. On final encashment, a calculation is completed to decide what your tax position will be against any gain you hold.

As per the Onshore Bond, 5% withdrawals can be taken from the investment. There is no immediate liability to these for tax. Effectively, 5% can be taken tax-free for 20 years.
As you can see, 5% for 20 years simply equals 100% of your capital back. After 20 years, withdrawals are simply classed as taxable income for the year.

There are many breaks available within an Offshore Bond that allow in future years for a policy-holder to assign his investments over to non-taxpayers, such as children and grandchildren, so that the gain is assessed against them who, as non-taxpayers, would be unlikely to pay tax. Offshore Bonds are particularly suitable for non-residents of the UK and non-taxpayers who, like all investors, cannot reclaim the tax paid within an offshore bond as well as UK residents wishing to benefit from gross roll-up.

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