Offshore Banks - why?!
 

OK, sorry if this is a naive question - but, following on from an earlier post about the best offshore accounts, can I ask why people need one at all?

I'm told they are useful for parking some spare cash for emergencies, rather than leaving it in an Abu Dhabi bank (where it could be suddenly frozen if one loses ones job). But:

As far as I can see, they pay almost no interest (unless one ties the money up with a long notice period - which takes away the point of having it for an emergency), and/or have high charges.

Why not keep the money back in ones home country (UK in my case), where, OK, the interest rates are also low, but at least the charges are also low (or zero). For instance, my UK online saver account pays 2.6% gross, and I can transfer it to my usual UK current account instantaneously - and get if from there either by credit card, or bank transfer to Abu Dhabi. Any surplus money one sends straight from one's Abu Dhabi bank either to a UK account, or to an offshore investment (which I do understand!).

Comments? Thanks!

Re: Offshore Banks - why?!
 

A couple of points I can mention:

I find making international transfers from my offshore account , very much cheaper then from my UK bank

If you were to die, then any assets you have in the UK, regardless of whether you are resident or not, would be liable to estate duty, whereas if they are offshore, then they wont.

I would agree though that if either of the above don´t bother you, then yes, you´d be better off to just use your normal UK bank account. Offshore banking can be very useful and tax efficient for some people, as well as a secure way for people who live in " unstable" countries to keep their cash out of the control of such unstable governments

Re: Offshore Banks - why?!
 

Jordan's reply is good and really there is no ned to offshore the money but if you want to keep it hidden then this is where it should be. At present ME residents are not having asets reported to the Revenue.

I had money in Gulf Bank Kuwair, BBI and RBS - the latter (British) banks failed during the crisis and Gulf Bank did not bat an eyelid! Seriously though depository protection may be an issue - you wo9uld have to ask.

Now if you die in the Middle East and you do not have a Sharia will then you are in big sht. I think that is the conseuence of dying.

Re: Offshore Banks - why?!
 

The main reasons:

Political stability
Avoidance of impact of Sharia law
Gross interest
Tax planning
Multi-currency accounts

Re: Offshore Banks - why?!
 

Yes, but in the UK there is/are:
Political stability.
No sharia law.
Better interest rates (as far as I can see) - probably outweighing the fact that it is then taxed.
No need for complicated tax planning assuming one is not keeping vast sums in the account (as I said in my original post, investing surplus amounts in offshore investments).
Multi-currency accounts.

So, I still don't really get it... Why not just send your money straight back to the UK? I'm not advocating keeping it in UAE - which the above points seem to imply.

Re: Offshore Banks - why?!
 

Most UK bank accounts are not multi-currency
Tax planning is a big issue for many expats and receiving gross interest on large sums allows for proper planning. Makes no odds if you have just £10k in there though...

Re: Offshore Banks - why?!
 

Archie, if you receive any interest on your accounts in the UK, it is not taxable as you are not resident. I haven´t had any such interest for some years so don´t know if you still need to fill in a tax form authorising the paying bank to pay you gross or not, but you can easily find that out from your bank. As others have said, if you want to keep the money in England, you´ll have to keep it in Sterling ( maybe that´s what you want anyway). If you don´t plan to move your funds around and don´t plan to have enough to put you in a tax paying position ( estate duty), then yes, send it there.

Re: Offshore Banks - why?!
 

That is not correct. UK income is taxable, even for non-residents, although each person has a tax-free allowance (£6,475 in the current tax year). You may also register to receive interest gross if you are not likely to be subject to tax.
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Re: Offshore Banks - why?!
 

Absolutely spot on.

Something I'd add is that anyone who puts money in a bank to make money (interest rates) has lost the plot to be frank. There are no millionaires in this world who made their money in deposit accounts or who rely on bank account interest rates to maintain their wealth...

N.

Re: Offshore Banks - why?!
 

That may be true, but not all of us are likely ever to become millionnaires irrespective of where we put our savings. There are different categories of people:

- earn the bare minimum to survive in the UAE? Do what you can to squirrel some savings back to a UK bank account, making sure to use a proper FX transfer company to save on the costs
- earn a comfortable living, don't have complicated tax issues and are never going to be a millionaire? Make best use of onshore UK bank accounts (including a safety pot in case things go tits up here), take a look at offshore if you're interested and unlikely to need to repatriate the cash into the UK, but don't obsess about it.
- earn a shedload of money, have family, children, inheritance issues, assets in multiple tax jurisdictions etc etc? Use an IFA who may well recommend the use of offshore accounts for certain purposes.

Incidentally, if that wasn't clear from my garbled advice, I am not an IFA.

Re: Offshore Banks - why?!
 

Unless, of course, you're like the man the subject of a couple of current threads, who earns 25k pa in the UK and intends to donate a million to charity over his working life. (Helps a bit that his wife is an NHS doctor...)

Re: Offshore Banks - why?!
 

Admittedly I am an IFA and so is Meow (who is also one of a handful of UK/Internationally qualified IFAs working in the UAE) ;)

Most people who earn a comfortable middle class living fall within my typical client bracket to be honest...regular people looking to make the most of their time offshore to put something aside for retirement or perhaps the kids education, service debts back home like the mortgage etc while still enjoying a reaonsable standard of living here Those on a shedload of money often don't save like they can or should (the percentage of savings vs salary tends to drop even if the amounts are higher - the richer you are the more crap there is to spend you money on, and more Jones' to keep up with :unsure:).

People who earn more than the UK average tax free plus getting their usual benefits can walk away after 5-10 years with a lot of money if the discipline themselves and take professional advice...most don't though, either by lack of disciple and/or bad advice.

N.

Re: Offshore Banks - why?!
 

Sorry Meow, I have to disagree with you. For as long as I´ve been interested in income tax ( since 1960), non residents have never been subject to tax on any interest received on such investments as say bank savings or deposit accounts, govt bonds, govt pensions, and various other types of income. Maybe you are getting confused with the situation where a non resident has tax deducted at source from his interest income. This is something different , but there´s no reason why he should have any tax deducted at source from his bank if he completes form R105 " not ordinarily resident declaration". As a guide please read this link http://www.hmrc.gov.uk/helpsheets/hs300.pdf

Re: Offshore Banks - why?!
 

You are perfectly correct in your statement, but not every puts their money into a bank to make money; some leave it there whilst waiting for other investment opportunities. You are also correct when you say that no millionaires have made their money in deposit accounts, but also there aren´t people who have lost everything by doing so, whereas we can all recall many millionaires who have lost everything by not keeping some of their assets in a liquid form, and any liquid assets are going to offer lousy rates just because they are liquid. I see nothing wrong if the ME expat wants to leave his cash in some kind of savings account in the UK, until he decides what he wants to do with it on a long term basis- where else should he put it?

Re: Offshore Banks - why?!
 

Hilarious. Just because you haven't been taxed does not mean that there is a potential liability. :rolleyes: Non-residents are liabile to UK income tax on UK earnings. Fact. The facility to have tax deducted at source is something entirely different.