JIGSAW may, under the right circumstances, recommend considering investment into offshore investment funds via a tax wrapper facility. This could be beneficial to existing investments together with any new facilities that might be useful for ones portfolio.

By utilising offshore funds you have the benefit of blending a large number of investment strategies across a large number of investment managers and to do this through diversification across a number of markets. There are over 50,000 offshore funds available to the discerning investor today, covering many strategies, regions, sectors, geographies and currency and the risk profile can suit almost any investor from extremely low risk to extremely high.

Offshore funds benefit from their sympathetic tax treatment provided to them as the funds themselves are not subject to tax, especially corporation tax, which onshore funds are charged (at 20%pa in UK). What this means to the investor is, the fund has the ability to produce higher gains by virtue of the fact that the fund distributes its total return to the investor. This is as opposed to, total return less tax which is the calculation for onshore funds.

Furthermore, by purchasing offshore investment funds via an offshore tax wrapper facility, you immediately reduce the cost of buying the individual funds due to the numerous relationships the provider of the tax wrapper has with the fund managers. Most providers have reduced the cost of purchasing funds from typically 5% up front to as little as 1% and in many cases 0% for its clients. In addition to this, the tax wrapper providers also have arrangements with fund managers not ordinarily available to retail investors and as such can enable the investor to participate in additional investments that have the ability to further diversify ones approach.

Moreover, as the name suggests, there are numerous tax advantages for investors placing assets into these facilities. Structured as an offshore bond (a tax wrapper which, is an Insurance contract that is not life Assurance), the wrapper is a ‘package of separate rights’ issued to the plan holder in exchange for ownership which allows the plan benefits to be linked in value to a wide range of assets such as cash, stocks and shares and collective investment schemes etc.

Bespoke investment structure

Another benefit of the tax wrapper is that the investor can create a portfolio of investments within a single investment plan that is tailored specifically to his needs. A mix of assets can be selected and reviewed on a regular basis and can be rearranged in accordance with the investor's changing circumstances without the need to change the investment vehicle.

For UK investors limited to collectives (pooled investments such as Unit Trusts etc), the structure allows them to operate a 'multi manager' investment strategy. In addition, the investor can appoint a professional investment adviser (JIGSAW) to select investments on his behalf, thus delegating investment decisions to someone with the skill and expertise to achieve the investor's objectives.

Centralised ownership of assets

The natural diversity of an international investor's portfolio will mean a greater spread of assets held with many different investment houses, across various jurisdictions. Holding investments via a tax wrapper centralises the investments in one place. This is important during the investor's lifetime, as he/she only has to deal with one investment house who handle all the paperwork. Furthermore, on death the executors only have to deal with one company, thus simplifying and speeding up the probate process.

Centralising the ownership of assets in this way can also be of great benefit in terms of estate planning. Normally where an individual holds stocks or funds that are registered or domiciled in a jurisdiction other than their country of residence, it is generally known that local probate is necessary in the event of their death. What many people fail to realise, however, is that local estate taxes may also be due on the assets, and there may often be no estate tax treaty between the jurisdiction and the country of residence to protect against double taxation. This situation will apply to anyone who invests in the UK or US stock markets.

Investing in these markets through the tax wrapper will give the investor the peace of mind that on their death, their executors will only need to worry about probate in the offshore jurisdiction, and estate taxes in their country of residence or domicile. An offshore tax wrapper/bond in this situation acts very much in the same way as investing in international markets through a company or trust, but at a much lower cost, and without sacrificing any control over accessibility to capital.

Taxation

There is no personal liability to income tax or capital gains tax whilst monies remain invested.

Withdrawals of up to 5% per annum of the original investment may be taken as "income" without any immediate personal tax liability. Any unused annual 5% allowances can be carried forward to be used in future years. This has the benefit of deferring any potential tax liability for up to 20 years from the original investment date or until full encashment if earlier. As a result, this type of investment can be attractive to higher rate taxpayers.

As a general rule, we recommend that any annual withdrawals are limited to 3% or the natural income produced limited to 5% of the original investment - this has the benefit of deferring tax liability and reduces the risk of withdrawals eroding the original capital. On final encashment, or where withdrawals exceed 5% per annum, the Bond will be assessed for tax.

·	Non Residence Relief –UK ex pats Any periods of non-residence will be relieved of income tax. On final encashment, top-slicing relief may be used for any periods of UK residence if the taxpayer is within basic rate band. Hence 18% approximate tax can be saved on any chargeable amounts.
·	Policy Assignment The policy owner can be changed by assignment. The new policy owners can encash the policy and any tax liability will fall to them. E.g. a non tax-paying spouse can offset their unused personal allowances against any gains, and hence pay less tax.
·	CGT v Income tax Individuals who have been UK residents for 4 (or more) out of the previous 7 tax years prior to the year of departure, will be liable to Capital Gains Tax(CGT) on disposals they make whilst non resident, if they return to the UK within 5 years. This is applicable to individuals who leave the UK after March 1998 and applies to assets held prior to departure. If the individual is UK domiciled, the charge will apply to worldwide assets. An alternative approach for such individuals would be to invest in assets that are not subject to CGT which are fully portable, and in most countries no tax charge arises until the benefits are taken. Under UK law the proceeds are subject to income tax and are therefore not affected by the CGT rules.
·	Inheritance Tax The consolidation of assets into one area, simplifies the process of probate. In doing so, it also opens up the opportunity for the careful application of trusts, and other estate planning vehicles, as assets can be re-assigned without affecting the overall structure of the investment.

Additional benefits

·	Nil dealing costs for Stocks and Shares for discretionary accounts.
·	Free switching and reduced fund charges.
·	Share markets available to residents of countries that may not be ordinarily able to purchase stock.
·	Property purchases can be made. Although limited to certain jurisdictions.
·	The tax wrapper combines the fiscal advantages associated with breaking legal and beneficial ownership of assets with the controlled advantages of direct ownership.
·	A simple structure, which clients can understand and feel comfortable with.

In Summary

A tax wrapper is an Insurance contract that is not life Assurance which is issued to the plan holder in exchange for ownership.

It is a bespoke investment structure - a 'multi manager' investment strategy that can appoint a professional investment adviser (JIGSAW) to select investments on his behalf.

It centralises the ownership of the assets - holding investments via an offshore bond centralises the investments in one place which helps to alleviate administration.

It has major taxation benefits:

-	Complete tax relief is given to the policyholder for any time spent outside the UK.
-	Plan assignment can help offset unused personal tax allowances.
-	The tax wrapper is not subject to CGT.
-	Consolidation of assets can simplify the process of probate.
-	Preferential dealing and switching can be achieved via the tax wrapper.
-	The tax wrapper is written under Isle of Man insurance law and as such adheres to the Isle of Man confidentiality laws and the IOM investment protection act. This is an extremely confidential facility which is idea for investors wishing to maintain utmost privacy.