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The \u2018Panama Papers\u2019 created a media frenzy about offshore investment. Not everything you read was necessarily accurate.
\nNow that the dust has settled and the media have moved on to pastures new (for now), what can the leak of 11.5 million documents from a law firm in Panama mean in the longer term? The fact that there were links to various famous faces gave the story lasting appeal, but unfortunately that also meant more opportunity for misinformation and outright error.
\nOne trap that too many commentators (and a few politicians) fell into was to equate all offshore investment with tax avoidance (or evasion) by the wealthy. While it is almost certainly probable that some names on the Panamanian list had this in mind, offshore investment has a much wider and often less tax-driven appeal.<\/p>\n
For example, one of the biggest areas of fund growth in recent years has been index-tracking exchange traded funds (ETFs). These are used by both institutional and individual investors to gain exposure to a wide range of share and bond markets, as well as some commodities, such as gold. Many of the ETFs purchased by UK investors are based in the offshore centres of Dublin or Luxembourg. These locations were originally chosen because they were established centres for fund management and offered administrative and other advantages for continent-wide sales over, for example, setting up in the UK.
\nThis is only one example of a type of investment which has been placed outside the UK for commercial and sound business reasons. Before we leap onto the bandwagon to condemn every investor who has used a structure which may have an offshore element to it, it may be sensible to check our own investments in this current climate (however small) to ensure that there is nothing which may surprise us.\u00a0 For example, do you know how your pension fund or stocks and shares ISA are invested?\u00a0 Both of these commonly use ETFs and other offshore bond wrappers.<\/p>\n
Offshore trusts and foundations are not used solely for tax reasons; usually the main reason for using a trust is asset protection for and from the beneficiaries.\u00a0 The UK tax rules are continuing to be strengthened in this area under pressure from outside perception but why are offshore trusts and foundations continuing to be used and set up?\u00a0 Interestingly, if you compare the offshore regulation\u00a0 for trusts and foundations in many perceived \u201ctax havens\u201d (such as the Channel Islands), to the regulation for UK trusts, it is surprising to note that in the UK there are fewer requirements to file or keep records such as trust accounts.\u00a0 So, for the parties to the trust there could be a benefit for them as well as better transparency, for the trust to be based offshore under a properly regulated regime.
\nIn conclusion, the \u201ctakeaway\u201d is not to stick with your first thoughts.\u00a0 Test them, adjust them if necessary and ultimately your opinions will be yours and not influenced too much by outside factors.<\/p>\n","protected":false},"excerpt":{"rendered":"
The \u2018Panama Papers\u2019 created a media frenzy about offshore investment. Not everything you read was necessarily accurate. Now that the dust has settled and the media have moved on to pastures new (for now), what can the leak of 11.5 million documents from a law firm in Panama mean in the longer term? The fact[…] <\/p>\n