Expat Finance Guide
Accountancy services
“Your accountant does not necessarily need to be an expert
in offshore finance,” says David Franks, managing director
of specialist firm Blevins Franks. “What he needs is to
understand the different tax laws in the country where you are
living and your country of origin.”
Of course, you do not have to get an accountant, but if you
do, he should be able to help you in numerous ways, including
inheritance tax avoidance and the creation of offshore trusts.
Accumulation fund
A fund that ‘accumulates’ value rather than paying
dividends. By keeping the value within the fund, you will not
add to your income tax bill, but you could add to your capital
gains tax bill.
Expat Finance Guide & Antiques
Antiques
Two antiques investing golden rules: don’t buy things
you don’t like and purchase the best quality you can afford.
Websites are starting to provide useful research tools on
the subject and some have live auction rooms. Try the following
(with a www. prefix): ebay.co.uk, phillips-auctions.com, sothebys.com
or christies.com.
Asset allocation
Financial institutions to whom you entrust your hard-earned
money take an overall view of how the world’s various
markets are going to perform. They allocate their assets accordingly.
This view then filters down and affects all the weightings
on all the portfolios the institutions offers. So, if Forsyth
thought Japan was on the precipice of a depression, all of its
assets would be weighted outside the country - as much as the
portfolio’s rules permitted.
Expat Finance Guide & Banking
Banking
The cornerstone of all sensible investment strategies. Low
risk - provided you avoid non-reputable banks in non-reputable
jurisdictions - coupled with steady returns.
The bulk of the world’s offshore retail banking operations
tend to be located in places like Guernsey, Jersey and Isle
of Man, while Gibraltar is also a popular destination.
However, for investors who are based further afield, there
are also numerous offshore branches in areas like Hong Kong
and the Middle East.
Bear & Bull
“Bears are pessimistic about the future of the market
- and therefore advise you to sell their investment,”
says Scottish Life International’s marketing director,
Neil Lovatt. “Bulls on the other hand are positive about
the future of the stockmarket and advise you to buy or hold
your investment.”
The term bear seems to have evolved from an old Trappist Expression
about “selling the bear’s skin before you’ve
killed it”. Answers on a postcard for the origin of ‘bull’!
Expat Finance Guide & Bermuda
Bermuda
This offshore centre does not offer much of a retail service
for either mutual funds or offshore banks, meaning offshore
companies is one of the jurisdiction’s big retail enterprises.
Bermuda is also becoming a leader for hedge funds, although
many of the best are already closed to new or retail money.
Bid/offer spread
The difference between the bid price at which managers will
buy a unit-linked investment and the offer price at which they
will sell the investment.
Bond
When a government or a company wishes to raise capital, it
issues bonds, offering a fixed payment over a specified period
in return.
There are different classes of bond, which depend on the security
of the issuer. Government bonds from countries with secure economies
are the most stable. Similarly, corporate bonds from secure
blue-chip companies tend to be safe bets.
Small companies and insecure governments also offer bonds that
are less secure. These are often called junk bonds and can be
extremely volatile but potentially more profitable.
Expat Finance Guide & Capital Gains Tax
Capital gains tax
A tax levied in the UK (and elsewhere) on the capital appreciation
of an asset from the time it is purchased and the time it is
sold.
The UK Budget in 1998 introduced rules so that you will remain
liable for UK CGT when you sell assets, where you have not been
resident or not ordinarily resident, for less than five tax
years. The UK CGT allowance for 2001-2002 is £7,500.
Compensation schemes
In the UK there is a depositors’ and investors’
protection scheme that will pay you money in the event of your
bank or investment house going bust.
Since, in the world of offshore banking, some of the banks can
be smaller and potentially more unstable, it is helpful that
many centres are developing compensation schemes.
Both Gibraltar and the Isle of Man offer banking compensation
schemes which, they claim, are on a par with the UK’s.
Jersey and Guernsey have been building up their compensation
schemes in recent years, too.
Expat Finance Guide - Derivative
Derivative
The great mistake many investors make about derivatives is
thinking they are some sort of asset in their own right. They
are not - they are an investment tool.
Derivative investors are betting on the direction of the markets.
If they bet it will go down, they take a PUT option and will
benefit from a market fall. If they buy a CALL option they think
it will go up.
“On their own, derivatives are very high risk,”
says Scottish Life International marketing boss, Neil Lovatt.
“But when combined with other investments they can allow
investors to manage their risk extremely efficiently.”
Designated territory
Jersey, Guernsey, the Isle of Man and Bermuda are all ‘designated
territories’. This means that, although none is part of
the European Union, all are allowed to market their collective
investment schemes (offshore funds) in the UK, with FSA approval.
Expat Finance Guide - Distribution Fund
Distribution fund
A distribution fund is a fund that pays investors dividends
rather than reinvesting all capital gains. Such funds are good
for investors who need to avoid capital gains tax and maintain
liquidity, not necessarily so good for those with already high
income levels. (see ‘Accumulation funds’).
Domicile
While an individual may be resident in more than one country,
or have no nationality or dual nationality, under English law,
you can only have one domicile.
This is your permanent and natural home and the one to which
you will eventually return. It is determined by origin, dependence
or choice.
If you manage to lose your UK domicile by choice (this is not
easy) then you will be free of UK inheritance tax.
Expat Finance Guide - Dublin
Dublin
In the 1980s, Dublin became known as an offshore finance centre
after the Irish government gained permission to create a low-tax
business zone.
These days, the country’s taxes are being harmonised,
meaning it is technically not really an offshore centre at all.
But Dublin is popular with European citizens who wish to take
advantage of the funds domiciled there, which are still offered
with better tax rates than elsewhere on the Continent.
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