Currently you either face disclosure of your investment/offshore bank account to your home country or a with-holding tax of 25% eventually increasing on 1st July 2011 to 35%. 

The countries, which have elected to go down the with-holding tax route are Belgium, Luxembourg, Austria, Switzerland, Jersey, Guernsey, the Isle of Man. You can always opt for disclosure or if your are non-domiciled in the UK can apply for waiver of the tax (assuming you are resident in the UK for less than 7 out of the last 10 years).

Legitimate tax planning structures, such as an Offshore Life Assurance Bond allow investment into bank deposits and collective investments schemes without incurring the with-holding tax or suffering the reporting requirements of the EU savings directive, whilst offering valuable UK tax breaks.

Acceptable investment within an Offshore Life Assurance Bond enjoy the following benefits:

• The interest can roll up gross with no tax levied by the insurer
• The policyholder has no annual tax liability
• The benefits are, in certain circumstances, treated favourably, with attractive tax relief available (i.e. 5% annual allowance for UK residents)

In a low interest rate environment, the deferral of income tax until a time when benefits will be taxed at a lower rate can mean the difference between the investment value keeping up with inflation or not. >>