An Offshore Wrapper is a very useful structure for clients who want access to a range of funds with low costs of access and ease of administration. The particular Wrapper we recommend is supplied by Old Mutual and is known as the International Portfolio Bond (IPB).
An IPB – or ‘Offshore Wrapper’ – is an excellent investment structure for capital sums in excess of £500,000. It is not a ‘scheme’, but operates under the ‘Chargeable Event’ legislation, as it has for more than 25 years. It is tax mitigation based on specific legislation, so the position is clear and beyond HMRC’s challenge.
Some of the advantages of an Offshore Wrapper are:
- Gross roll-up – Investments can grow tax free within the ‘offshore’ wrapper and there is no liability until the money is encashed.
- 5% tax deferred allowance on each amount invested can be taken in each policy year for 20 years without incurring an immediate income tax liability. Similarly, if you were to draw 2.5% as an annual income, then the tax-free income would continue for 40 years – i.e. until the original capital has been fully withdrawn. As this is cumulative, if you decide not to take any income for say, 5 years, then in the 6th year you could draw up to 30% of the original capital as a tax-free (and penalty-free) lump sum.
- If administered and advised upon properly, only the growth on the bond will ever be liable to income tax. And that is only when a ‘chargeable event’ occurs – e.g. withdrawing more than 5% of the invested amount in any one tax year, or on surrender of the whole bond. There is no tax on investment growth while in the Offshore Wrapper.
Download our International Portfolio Bonds Product Sheet for full details of this product.