Your Money - Ask Peter Brooke of Spectrum IFA
August 2009 article - Banking, what does the future hold?
rates at record low levels, new regulation on the horizon, financial
institutions collapsing and many banks going cap in hand to central banks and
governments what does the future of banking look like and how might the changes
affect the yachting industry.
Return: there is currently no return on cash. Even though short term inflation
is very low the factors that saw inflation at high levels in 2007 are starting
to return. The costs of feeding the world are still going to be high and
developing economies will continue to have a huge appetite for natural
resources. All of these will push up inflation but it may take longer for
interest rates to follow. This means that any money in a bank account is likely
to be worth less in a year’s time than it is now. This means that we will all
need to look for greater returns elsewhere.
Regulation & Tax: The regulation of banks is changing too, and
those in offshore centres will be scrutinised even more. The OECD has
formulated a ‘black list’ of jurisdictions which governments and tax
authorities will be targeting. It is very important to understand your personal
position with respect to the tax liability you may have on your offshore
deposits and income, even if you think of yourself as non-resident!
The EU savings
Tax Directive currently allows banks to withhold tax on any interest earned
(currently 20% rising to 35% in 2011) but this doesn’t remove your obligation
to declare the income to the state in which you are resident.
Confidentiality: Offshore centres such as the Isle of Man,
Jersey and Guernsey, often used by crew for banking, have signed information
sharing agreements with many EU countries and full double taxation treaties are
likely to follow. If you are resident in one of these EU states, or the
authorities believe that you are, they will have the ability to approach the
offshore centre and demand information about you from them; and they will have
to provide it. If you spend significant time in one country even on board the
yacht, it is vital to confirm whether you are resident there, don’t just assume
that you are not.
Security: As more banks have stumbled financially the pressure on governments to
guarantee deposits has been discussed for the first time in years. Different
countries have different depositor protection levels so it is important not to
hold too much money with one bank or in one jurisdiction. Although it is
unlikely that any government will actually let a bank fail fully there is a
real concern that sooner or later there will be little sympathy for those who
have not managed to spread their funds between several banks. Knowing how much
protection you have for your cash is vital, and remember that the division is
by banking licence, not the banking brand. For example, six brands share the
same HBOS licence - Bank of Scotland,
Halifax, Saga, Intelligent Finance, Birmingham Midshires and AA Savings, only
£50 000 would be protected even if you had significantly more spread across all
things that you can do about many of these issues but professional advice
should be sought as the field of international tax planning is an incredibly
This article is for information only and
should not be considered as advice.
Peter Brooke is a financial planner to the
English speaking expatriate community. He is based on the Cote D’Azur and is a
member and partner with the Spectrum IFA Group. He can be reached on +33 6 87
13 68 71 or firstname.lastname@example.org
or at www.spectrum-ifa.com/riviera.html
This article was published in the August 2009
edition of Dockwalk magazine.