Delayed, but not forgotten

Well, it was predicted that it would happen – not least in Investment International. The European Union has formally accepted that their central bit of offshore annoyance, the Savings Directive will not now come into effect until July 1st next year. It was meant to start bothering offshore savers on January 1st. Switzerland was the fly in the ointment, as everyone predicted it would be. The UK Inland Revenue has issued a guidance note to the effect that the first taxation period that will have to be reported to them will run from July 1st 2005 until April 5th 2006. It has also said that withholding tax paid on offshore investments will be able to be offset against UK tax liability. Quite how that will work is still unclear. Get onto your tax lawyer forthwith.

(A brief recap for anyone who has just joined us: the Savings Directive means that offshore interest paid on savings and investments will, for the fist time, be taxed directly at source. Previously, offshore investors could benefit from what is known as ‘gross roll-up’ which meant you could enjoy a number of years of gross income before paying tax on it. Now, a ‘witholding tax’ of 15 per cent will be levied on any savings or investments you have offshore. Confidentiality will remain for the time being, though.)

The Directive could still get delayed, though. The EU has made it clear that the 10 accession countries - Slovenia, Slovakia, Poland, Malta, Lithuania, Latvia, Hungary, Estonia, Czech Republic and Cyprus – will be covered by the ruling. It was hard enough getting all the original member states to implement the Directive. Let’s wait and see whether the ten new member states implement it fully and on time.

This month we have a couple of basic guides for you to enjoy. First, a look at what is involved in expatriating and banking and investing offshore for the first time. It isn’t complicated, but there are a few things you should bear in mind. Setting up banking arrangements is a first step. Sorting out investment funds and taxation issues is slightly more complicated, but not by much.

Next, our property guru Saundra Satterlee runs through how you can keep your wits about you when buying property abroad. Again, keeping certain basic tips in mind when dealing with the likes of estate agents and lawyers will save you a lot of hassle in the long run.

Elsewhere Jacqui Canham has badgered some banks on your behalf to discover some ways of squeezing and extra pound or two out of them. You’d be surprised how possible it is to improve your financial situation with a few basic rules in place.

Hugh Fasken looks at what ought to be an eminently sensible way of investing money: funds of funds. These are investment funds that essentially pick the best funds and best fund managers and invest your money across the lot. Are they any good, though?

Finally, we update you on the shameful saga of the ‘frozen’ expat pensions. It is a sorry tale of government meanness which has left thousands of pensioners who retired abroad with pensions frozen the day they left, but other pensioners abroad enjoying annual upgrades. Next year the House of Lords will rule on whether such discrimination is legal. There seems no doubt that it is unfair. But you may have noticed that what is legal and what is fair do not always march together.

James Featherstone
Editor
jfeatherstone@ccplcemail.co.uk