Offshore investment bonds could mitigate 50pc tax

A leading tax adviser has recommended offshore investment bonds as a secure and efficient means of deferring income to see whether George Osborne’s declaration that the 50 per cent income tax rate is a "temporary" measure has any weight to it.

Writing for Investors Chronicle, Moira O’Neill said that the bonds may allow Britain’s high-earners to defer their income to a point in time when the income tax rates may be lower again.

“You invest a lump sum and you can draw up to five per cent of the fund each year - up to 100 per cent after 20 years - without triggering any tax charge,” she said. “As you just pay income tax on encashment of the bond, you could defer encashment until income tax rates have been reduced.”

The offshore bonds differ from onshore equivalents in that they do not pay corporation tax on gains within the fund, although it is not possible to reclaim withholding tax on dividends. This generally causes the fund to grow more and faster than an onshore set-up.

Ms O’Neill said that any good independent financial adviser should be able to provide information on setting up such a bond.