UK Needs Offshore Companies and International Financial Centres

Did you know that the UK profits to the tune of hundreds of millions of pounds from offshore companies doing business, operating from and investing out of international financial centres – oft dubbed offshore tax havens?  Don’t worry if you didn’t know, because it’s not really in the British government’s best interests to have you in receipt of such knowledge when on the one hand it’s profiting from offshore havens and on the other hand it’s trying to stop you benefiting from them!

The thing is, the UK’s economy earns hundreds of millions of pounds from the likes of offshore closed ended investment companies in the form of management fees and account fees related to IPOs for example – but it doesn’t want the likes of you and I finding out the fact that instead of being tax evasion dens of iniquity, offshore financial centres are actually more about tax efficiency.  You see, they don’t want onshore Brits going offshore in case they lose track of what they’re up to, (they’ll tell you it’s all about tax avoidance but we have a feeling it might be more about Big Brother).  And they don’t really want expats going offshore either in case they repatriate but keep their offshore assets in place.

So, the UK needs offshore companies and international financial centres – and even more so now that the pound has been crushed by recent revelations about how close Britain came to the brink of ruin thanks to some of its banks - in fact, the UK needs all the financial help and all the fiscal friends it can get.  But it doesn’t want you to know any of this!  So in telling you about how offshore tax havens can be used for tax efficiency and perhaps might be worthy of a closer look, we’re not really going to endear ourselves to your taxman, but indirectly we’ll be helping him because if you invest offshore your fees may well be being fed back to the UK!

In a recent communication Annabel Brodie-Smith from the Association of Investment Companies explained that: “The Foot Review of British Offshore Financial Centres has been an opportunity for the closed ended investment company sector to challenge a popular misconception which confuses an offshore jurisdiction with tax avoidance.”  And she’s absolutely right.  The report has highlighted just how well Britain profits from offshore financial centres like Jersey and the Isle of Man; and as Brodie-Smith details, the likes of the offshore investment company sector in such jurisdictions contributes an estimated £300 million to the British economy in the form of management fees alone each year.

Now, you may question why an investment company would therefore choose to be offshore if they are still paying into the UK’s coffers, and this has to do with the likes of alternative regulation structures that exist in such jurisdictions that relate to how and where an investment company can invest.  So again, it is not about taxation avoidance but more about flexibility, freedom and the ability to diversify far further for far greater potential returns.  You may then question why anyone would choose to invest through such an offshore investment company if not to avoid paying taxation.  But again, it comes down to diversification, flexibility, greater exposure to alterative asset classes, higher potential gains…and also tax efficiency.

Now, tax efficiency does not read ‘tax evasion’ – tax efficiency is one of the keys to the success and popularity of offshore investment companies.  An investment through such an entity can simply protect an investor from being taxed twice – i.e., once inside the fund and then once again when they receive their investment returns.  And this tax efficiency for onshore Britons is just another added benefit – whereas for offshore Britons it can potentially allow them to defer tax payments for even faster and greater potential investment success!  Naturally this is an over-simplified benefit structure overview – but hopefully you get the gist that offshore financial centres are valuable, offshore investment companies that use them aid rather than negatively impact the British economy, and Britons onshore or off who choose an offshore investment company to growth their wealth via are not tax evading scum, they are far more likely to be legitimate, law abiding, tax paying investors!

So you see, the UK needs offshore financial centres that can act as host and home to the likes of offshore investment companies – and it needs offshore investment companies because many of them pay an awful lot back into the British economy in terms of fees for example, and they certainly do not detract from the British economy in terms of encouraging or aiding and abetting Brits to avoid tax on investment returns through such a structure.  So there you are…who’d have thought it!