By Iain Yule
The answer is, you may not. But most working expatriates will at some time in their career, if not throughout their time abroad, find offshore banking useful in a number of ways.
First and foremost is the potentially huge tax saving you can make by placing your savings offshore. If you achieve UK non-resident status (see below) then you do not have to pay UK income tax on interest from your savings. Trouble is, any savings income you earn from an account held back in the UK will automatically have tax at 20% deducted from it by the bank on behalf of the taxman.
So you should send as much as possible of your money to a bank account based in one of the offshore centres most trusted by British expatriates – the Isle of Man, and the Channel Islands of Jersey and Guernsey – where no income tax is deducted from savings interest. You should also if you can have your earnings from overseas employment paid straight into the same account, so that you earn gross (i.e. untaxed) interest as soon as possible on it.
If you have funds on deposit with a bank or building society in the UK, it is sensible to move these offshore as soon as you know you will be moving abroad. Specialist expat tax advisers at The Fry Group say that if you can delay the date when interest is credited until after you leave, you can start accumulating tax-free interest even before you travel.
You should also close any offshore account before you return so that all interest is paid while you are still outside the tax net.
Money on the Move
Another reason to open an offshore bank account is that it is a handy, neutral base to keep your money if you are travelling the world from contract to contract. You can leave your money there gathering untaxed interest rather than move it around endlessly as you move, with the inevitable loss of interest and the possibility that you fall into a tax net. With secure internet messaging you can still operate your offshore account from however remote a destination your work takes you to.
A third reason to choose an offshore bank is that you are likely to find services which are attuned to the internationally-minded. You will find a range of currency facilities, allowing you to save – and often to borrow – in currencies other than sterling.
Achieving Non-Resident Status
If you are leaving the UK to work abroad you are provisionally considered non-resident from the day you leave. But this beneficial status has to be confirmed by you remaining out of the country – except for relatively brief visits home – for a complete tax year, which runs from 6 April until 5 April the next.
To retain non-residency those visits home must not exceed a total of 183 days in any one tax year, nor an average of 90 days per tax year for the whole of your time abroad.
These rules apply to Britons moving abroad. But similar rules may apply if you are non-British and moving from your home country to the UK or elsewhere.
If you are unsure of your status you should consult a specialist tax adviser. If you cannot prove you are non-resident, the taxman will want his cut of your money.