Standard Life ezine - Make surplus cash work harder – Standard Life Savings & Investment Ezine

Standard Life's Savings & Investment newsletter for advisers

Issue 7: September 2007

Investing in a bank deposit account through an offshore bond can provide an attractive investment option for companies with surplus cash.

As well as providing the general security of traditional bank accounts, an offshore bond deposit account offers virtually tax-free capital growth, giving the potential for higher returns. There is no tax liability until the bond is cashed in.

It can also be an attractive option for companies seeking a higher yield for their monies than is typically offered by a traditional business bank account.

Reduce corporation tax
Not only can a company benefit from access to accounts offering virtually tax- free growth, they also decide when they wish to cash in their bond, and consequently when they will pay tax on the proceeds. No corporation tax is due until the bond is cashed in, and this could be at a time when company profits, and therefore the rate of corporation tax, are low.

Flexible pension planning
An offshore bond can also provide an effective way for companies to plan for the retirement of senior staff who may exceed the pensions lifetime limit (£1.6m for tax year 2007/08). Whereas payments to a pension scheme will attract corporation tax relief, funds cannot be taken until age 50. An offshore bond is more accessible, with no restriction on how the money is spent. After cashing it in, the proceeds of an offshore bond can be invested immediately in a registered pension scheme and still qualify for corporation tax relief subject to the approval of the local Inspector of Taxes.

Standard Life International Bond Bank Deposit Accounts
We offer a wide range of notice and fixed term bank deposit accounts encompassing a variety of terms. Two examples are highlighted below.

For increased liquidity, we can offer an instant access account from Anglo Irish Bank (Jersey) (Moody’s A1), which follows money market rates and pays interest monthly.

Nationwide International’s (Moody’s Aa2) Base Rate Tracker Premium Account currently includes a premium on top of a variable interest rate for the first year. This account also permits unlimited withdrawals.

For up-to-date information on bank deposit rates please speak to your usual Standard Life contact.

“Keeping Cash Healthy” calculator for International Bond
If an International Bond customer wishes to invest part or all of their money in Mutual Funds, Whole of Market Funds, Deposit Accounts or via a Discretionary Fund Manager, they will be required to have an International Bond Bank Account (“IB Bank Account”) to manage the charges, investment transactions and withdrawals.

Determining an appropriate amount to place in the IB Bank Account depends on a number of factors, including the types of investments chosen, the size and frequency of any withdrawals, and the commission terms. To help advisers to determine an appropriate amount, we have built the “Keeping Cash Healthy” calculator.

The adviser simply enters the details about the customer’s payment, withdrawals, investment choices and commission terms. The calculator then projects an estimated balance for the IB Bank Account over each of the next six years. The adviser can then adjust the details and recalculate as required.

To access the calculator, click here.

Tax and legislation are subject to change. The information in this article relating to taxation is based on our understanding of law and tax practice in Ireland and the UK at the current time. The future tax position of the bond or a company’s own tax position may alter.

No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of this content.