Offshore funds, life policies and pensions

Offshore bonds and other foreign policies

The term offshore bond usually refers to a life insurance policy taken out:

•
with a non-UK life insurance company, such as one based in the Channel Islands or the Isle of Man; and/or
•
when the individual was overseas

However, the rules are complex and the treatment of foreign life policies depends on a number of factors, including the date the policy was taken out and whether there were subsequent variations.

For tax purposes, offshore policies will usually be non-qualifying foreign policies. If a policy is a qualifying policy, most profits thereon will not be taxable in the hands of the policyholder. See Practice Note: Offshore bonds and other foreign policies—Qualifying policies.

Offshore policies are commonly used for tax and wealth planning purposes, as the premium is used partly to buy insurance on the life of an individual, and partly for investment by the insurance company. This is in contrast to term insurance, where the premium is used to buy only life insurance.

Offshore policies may be 'with profits' policies or investment-linked. Where a policy is 'with

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