It’s important to get professional advice on all legal and financial affairs. We asked financial expert Neil Edwards from Clerical Medical, specialists in pensions and investments, to answer some of your questions about all things financial!

You can listen to more of Neil’s financial advice on GaydarRadio between 11am-12pm on Sundays with Jamie Crick.

A reader asks about investing offshore:

I recently sold my business for a substantial sum of money and I’m thinking of investing some of the proceeds offshore, as I understand there are tax gains to be made by investing overseas.  This isn’t something I am familiar with and would be grateful for some starting points.

Name: Clive
Age: 52
Occupation: Management consultant – formerly owner and MD of his own consultancy, now retired.
Income: £90,000 occupational pension per annum; £5,000 rents from Portuguese villa.
Amount to invest: £500,000
Other savings: £40,000 in high interest internet accounts, £30,000 fixed interest bonds, £100,000 stocks and shares.
Debts: Outstanding payments of £8,000 on mortgage.
Assets: Three-bed house worth £300,000, villa in the Algarve worth £200,000 (rented out to holidaymakers when not in use).  Drives a jaguar saloon bought two years ago.
Other pension: £110,000 in personal pension fund.

Neil’s response:
I will probably be among many readers who are envious that you have been able to retire so young in such a strong financial position. You have a high income, substantial assets and virtually no debts. Furthermore, if you need extra income in the future you have a fund that you could at some point convert into an additional pension.

Tax on sale of business
Before making any decisions about the half million pounds you have available to invest, I strongly recommend that you check with your accountant or tax adviser that you have no outstanding tax to pay on the sale of your business. The last thing you want to do is tie up all that money and then get a large bill from the Revenue!

Financial advice
Once you have put aside money to meet any tax bill then there will be a number of options for you to consider. These could include:

• Topping up your personal pension to provide additional income in the future;
• Making use of ISAs and other tax-efficient investments such as Venture Capital Trusts (VCTs) or shares that qualify under the Enterprise Investment Scheme (EIS)
• Putting more money in your stocks and shares portfolio
• Investing in other types of financial products such as investment bonds
• Inheritance tax planning

The above list is by no means exhaustive and needless to say, I strongly recommend that you seek professional financial advice. A competent qualified adviser will help you identify your needs and priorities, and let you consider all the options available.

Investing offshore to save tax
To a certain extent you already have offshore investments, notably the villa in the Algarve, and you may also have stocks and shares in foreign companies or funds. There are some common myths about using offshore accounts and investments, and it is important that these and other misconceptions are dispelled.

Investing offshore is “dodgy” and only for the “rich”
Although there are still some places in the world that could be described as dodgy, the majority of reputable financial centres are well regulated and have strict money laundering laws to prevent terrorists, drug traffickers and other criminals using them to hide their ill-gotten gains.

Furthermore, investing offshore is not just for the rich. In fact, it is possible to open an offshore account for quite modest sums.

You don’t have to pay UK taxes on offshore investments
This is perhaps one of the biggest misconceptions. In actual fact if you are UK resident and domicile you are liable to UK taxes on your worldwide income and gains – even if the money remains offshore.

It is therefore vital that if you do earn income or make gains on offshore assets you tell HM Revenue & Customs and pay any tax due.

The Revenue won’t find out about offshore accounts and investments
Although HM Revenue & Customs have limited or no direct powers in offshore jurisdictions, since the terrorist attacks in New York and Washington DC there has been a far greater willingness for governments to exchange information on the people that have invested in their country.

For instance, the EU Savings Tax Directive means that if a UK resident citizen opens a bank account in another country within the EU (and certain other countries outside of the EU) details of any interest paid into the account will normally be passed on to HM Revenue & Customs.

The Revenue is also targeting individuals and institutions that it believes may have undeclared offshore assets. Recently, the Revenue has requested information from certain credit card companies where it believes that the card repayments have been met from an offshore account.

In short, it is harder, not to mention exceedingly unwise, to hide money offshore because when the Revenue finds out it can impose various penalties and fines or, in extreme cases, launch a criminal prosecution.

You don’t have to pay local taxes for offshore investments
It is certainly true that many offshore financial centres promote themselves as tax havens where there are low local taxes or special dispensations for non-resident investors. The main thing is to check the small print because there may be hidden levies or charges that reduce or eliminate any tax advantage.

So you should never invest offshore?
Although investing offshore is unlikely to save you tax in the long term, there may still be other advantages, such as:

• Tax deferment – some types of offshore investments enable you to defer paying tax for some considerable time, possibly even years. This can give you a cash flow advantage and enable your money to work harder;

• Choice – many offshore investments can provide greater choice and flexibility than their onshore equivalent.

• Types of product – there are certain types of financial products that are only available from offshore jurisdictions and don’t have a UK equivalent.

Ultimately, whether investing offshore is right for you depends on your circumstances and should only be considered after you have taken professional financial advice. 

Don't forget, you can listen to more of Neil’s financial advice on GaydarRadio between 11am-12pm on Sundays with Jamie Crick.

Advice matters
Before you embark on any form of financial planning, Clerical Medical strongly recommends that you seek expert advice from a qualified financial adviser. You also might want to take a look at the Citizens Advice Bureau website.

If you don't have a financial adviser and would like some help in finding one near you, click here.