Offshore Bank Accounts for City Bonuses

It’s that time of year again when all the headlines are about to be dominated by tales of magnificent bonuses received by the best in the banking industry in the City.  Jealous journalists may question the thinking behind the million pound bonus, but for those in receipt of the cash the fact of the matter is, they face high stress in a job that most of us would not actually want to get up in the morning and do!

If you’re in receipt of a cash lump sum or a bonus what’s the best way to protect that cash?  Pop it into property, gamble it back on the stock market, lock it away in a long-term savings plan – or are offshore bank accounts for city bonuses the way to go?  In this article we examine the potential benefits of offshore bank accounts for those with a cash lump sum to squirrel away.

The first thing to know is that there are no restrictions on who can open an offshore bank account at all.  There are certain pieces of paperwork that have to be completed and a person opening a personal account of course has to prove their identity etc., but in theory anyone can open an account offshore – the real question to ask is whether an offshore bank account is an appropriate vehicle for a given individual. 

Certain individuals can benefit from such an account and yet for others it would just be an expense.  If you have a large lump sum you want to place on deposit, you may get preferential treatment from a private offshore bank for example.  But if you do have such a large lump of cash, you’re going to have a lot of power and sway with whichever bank you choose…so make sure you get what you want.  The customer is always right after all!

If you have a lump sum and you simply want to place it in a secure account then in theory you can open an account for any legal banking activity including the depositing of a City bonus for example. 

In terms of selecting where to bank, to open an account you would need to identify the institution you wanted to bank with and the jurisdiction in which you wanted to bank and apply directly for an account.  Those who are about to receive bonuses may prefer to invest the money offshore, onshore or through real estate instead for example.  Simply placing a large lump sum in a bank account either onshore or off is likely to derive limited financial benefit for someone.

Remember, if you are resident and domiciled in the UK and you’re a UK taxpayer then remember, you have to pay tax on the interest earned on your bank account and it doesn’t matter where the account is.  Even if your money is in a bank in a country that has zero tax on such interest income, you have a reporting obligation to the UK tax authorities and they will expect you to declare your offshore assets and pay the appropriate taxation.  If you invest offshore you can sometimes invest into qualifying schemes and policies that allow for tax deferral so that you can accumulate stronger compound interest and then pay tax at the point of asset or income withdrawal for example – this can make sense for those who are higher rate taxpayers now but who may drop into a lower tax bracket at some point in the future – employing such a strategy will require expert assistance though.

If you’re going for an offshore bank account for your city bonus, in terms of which account to choose, a straightforward bank account will not differ greatly in structure between locations but all institutions offer different account types, different customer acquisition incentives, different interest rates etc. 

It may also be far more appropriate for an individual to consider structuring their offshore banking affairs through an offshore company so that they can gain greater confidentiality in their banking affairs.  A business offshore bank account is far more flexible and attractive for greater numbers of people than an offshore personal account and a business offshore bank account’s activities do not fall within the remit of the EU Savings Tax Directive either.  However, no one should take any action when it comes to the offshoring of their money without first seeking professional advice.  The key to the offshore world is understanding three points – 1) going offshore is not illegal, 2) tax evasion IS illegal 3) not everyone can benefit from going offshore in any way and so it is not worth the time and expense for such people, so get personal advice before you act.

Finally, determine whether you require an offshore business or personal account, if you require the former then establish an offshore company first in a decent and personally appropriate jurisdiction – The Seychelles is a favourite for many Brits.  Ensure anyone who professes to be able to help you open an account or establish a company will give you money back guarantees if they fail to secure you an account.  Figure out the type of activity and accessibility you will need from your account and choose an appropriate one.  For example, if you are high net worth, you may wish to select a private offshore bank where your personal requirements and needs will be handled by your own personal banker…

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