The remittance basis does not apply to offshore bonds but for ND individuals who would prefer not to pay the £30,000 or £50,000 ‘remittance basis charge’, an offshore bond might provide a suitable compromise.
ND individuals who would be liable to the £30,000 RBC with offshore assets producing less than £75,000 gross income (which at 40% income tax would be charged £30,000) or £66,667 gross income (for the 45% tax payers) would not need to pay the £30,000 tax, but could still allow their assets to roll up on a gross basis by using an offshore bond.
Similarly, for ND individual who would be liable to the £50,000 RBC with offshore assets producing less than £125,000 gross income (which at 40% income tax would be charged £50,000) or £111,112 gross income (for the 45% tax payers) would not need to pay the £50,000 tax, but could still allow their assets to roll up on a gross basis by using an offshore bond.
If the capital invested in the offshore bond was not ‘mixed’ then the 5% tax-deferred withdrawal facility could also apply. Assuming a 2.5% gross return on an offshore deposit, investors with sums of £3 million or less are most likely to benefit who are subject to the £30,000 RBC or £5 million or less for investors who are subject to the £50,000 RBC.
However, the actual cost of maintaining the remittance basis is greater than is first apparent, given the loss of the personal allowance for income tax, annual allowance for CGT, etc.
Those with assets substantially above £3 million (or £5 million) in value and preferring not to pay the RBC could also benefit from an offshore bond if their eventual intent was to leave the UK, as returns would be tax-deferred beyond the point that they were UK resident. This would also apply to ‘mixed’ funds (see below) if no encashment were made before leaving the UK.
For some ND individuals, two bonds might be appropriate: one for ‘mixed’ funds and the other for untainted capital. The latter could be used for providing 5% tax deferred withdrawals in the UK, which the former could not.
Although, it should be noted that following the introduction of the 45% income tax rate and the impacts on personal allowance where net relevant earnings are over £100,000, the ND would have lost their personal allowance anyway.