Gulf News August 8 2009
11 August 2009
Gulf News: Savings in UK Individual Accounts
I am a UK national who has been living in Dubai for the last three years. Whilst living and working in the UK I regularly contributed to ISAs and now have a substantial portfolio. However, as I am no longer deemed to be a UK resident by Her Majesty’s Revenue and Customs (HMRC) can I still pay into ISAs in the UK? And what are my options for the portfolio, is there any benefit in keeping it?
You state that you are no longer deemed to be a UK resident by the HMRC. Yet, ISA’s are only available to those who are over the age of 16 years and resident, or ordinarily resident, in the country. As you are living abroad, and considered a former UK resident, you are no longer eligible to contribute to an ISA.
However, as the portfolio is already established you can continue to hold the portfolio, and benefit from the tax breaks that an ISA provides. In the same way any investment growth will not be subject to tax. Indeed if you were to make any withdrawals from the portfolio they would not be subject to tax.
In terms of future financial planning, there are a couple of options available to you regarding the portfolio. But the most important thing to determine is whether you are likely to remain outside the UK indefinitely, or whether you are planning to return to your home country on a permanent basis in the future.
If you are likely to return to the UK in the near future then it is possible that it may be in your best interests to keep the portfolio in its current format. However, this is dependent on your overall financial planning objectives, and whether you have earmarked the portfolio for any particular financial plan or use. It is always recommended that an individual seeks independent financial advice before making any decision regarding the jurisdictions that their investments are to be held in.
If you are unsure whether you are likely to return to the UK then you should consider transferring the portfolio into an offshore arrangement, namely an offshore bond. An offshore bond is a structure in which various assets can be held. The structure itself is an insurance contract plus bank account, which when linked together creates a holding vehicle through which you can invest and manage your assets.
Importantly, such a structure currently falls outside the remit of the EU saving directive. By holding the assets in an offshore bond, your portfolio will not be subject to UK tax whilst you are residing outside of the country. In addition, it is likely that an offshore bond will provide you with far greater flexibility regarding the overall investments you are able to hold.
Irrespective of whether the portfolio remains held in ISAs in the UK, or is transferred to an offshore arrangement, it is important to ensure that the investments held within the portfolio are aligned with your attitude to investment risk.
You must also ensure that the asset allocation is appropriate, remembering that it is important to achieve a blend of the various asset classes available, such as equities in the UK and other global regions, fixed interest accounts, plus property and cash. It is also recommended that you seek independent financial advice to review the portfolio structure and indeed the investments held.
By Sarah Lord, a chartered financial planner at Nexus Insurance Brokers, Dubai.