Reasons to Consider Going Offshore
There are a few reasons why you might want to consider taking your banking offshore. Here they are for you to take a look at and consider:
#1 It can offer you more protection. For those who live in countries that are suffering from economic instability, a freelancing career can be a massive risk to take. When you form your company, or store the money you have worked hard to earn in a region like this, you are tied to local policies and regulations – which is not always good for your earnings. Forming an offshore company in an economically stable location will protect your assets, regardless of where you work from.
#2 It can be good for your reputation. Your business image is a massive part of who you are, but when you are freelancing this can be a difficult thing to build, and it can take a lot of time. Two of the main things that can affect your business image is its name and the location of its headquarters. So, having your offices based in an unstable area will often have a negative impact. However, a company that is based offshore will look better and give it more credibility.
#3 It can help you to maintain your privacy. Branching off slightly from the previous point, we can now address the issue of privacy and why going offshore can be beneficial to that. When you work as a freelancer, you are often required to provide an address for your business. Having your home address on your website and business cards can appear unprofessional, and having a PO Box address makes it look untrustworthy and like a potential scam. When your business has been formed offshore, you can give that address – making you look credible while also maintaining privacy.
#4 Keeps you flexible. One of the things about freelancing that people find attractive is the ability to take your work with you wherever you go. When you go offshore, your finances are offered the same level of flexibility. You don’t have to open up a new account every time you move to a different country – all you need is the card issued to you by your offshore bank if you want to withdraw money or complete transactions.
#5 You don’t suffer from exchange rate fluctuation. For freelancers who are paid in a different currency, the exchange rate can have a large impact on how much they get paid for each job – and this can leave them with dramatic fluctuations. An offshore scheme allows them to save in their chosen currency without the exchange rate fluctuation, which is ideal for those who do a lot of work for clients who live abroad.
The Downside to Offshore Schemes
There are a couple of downsides to using offshore schemes. Here they are so that you can have a look and take some time to consider your options:
#1 There are tax risks. You have to be very careful when it comes to forming your business offshore and opening offshore bank accounts. While you often have the advantage of reduced tax, you need to make sure that you follow all the rules very closely when it comes to setting your business and accounts up. After all, if your home country thinks you are avoiding tax and have evidence to prove it, you could find yourself in trouble. Make sure you do it all legally and carefully.
#2 They can be quite costly. You will often find that the fees for offshore accounts are around 5%-7% of your contract value – leaving you with a lot of money going out. However, they do often promise returns of up to 80%, so the opportunity to make a lot of extra money is one that still remains. It can be a bit of a risk, and a large one at that, but often you will find it is worth it.
#3 Be cautious when it comes to high returns. Branching off from the previous point, high returns can appear to be something really amazing, and they are likely to draw you in. However, you should always exact caution when you approach companies that offer very high return rates. This is because you could find yourself engaged in illegal activity without even realising until it’s too late. Always do your research and ensure that you are entering a legal agreement, both in the eyes of your home country and the one you are setting up offshore accounts in.
#4 You could face legal action. If you do not disclose your offshore scheme to HMRC, you could face legal action against you. This can lead to a criminal conviction after a trial in the courts, as well as leaving you with some very hefty legal fees to pay. Plus, if you cannot afford to pay he avoided tax, you could even face bankruptcy or time in prison. This is why it is essential to make sure you are doing everything legally and correctly.
Are There Any Risks for Your Money?
In the UK, those who have money in an account that is authorised by the Financial Conduct Authority (FCA) are covered for the first £85,000 held within each bank that they use. This is an important net to have, especially in case of economic turmoil or the closure of a bank that you use. Therefore, money that is kept in the UK is often safeguarded.
However, if you have money held in an offshore bank account, you will find that it is not protected in the same way – even if you are using the offshore branch of a UK bank. Therefore, you should always check to see if your money will be protected by the bank that you are using via their own compensation schemes.
Hopefully, you have found this article to be both helpful and insightful when it comes to learning more about offshore schemes. While there are a few risks involved, the benefits certainly outweigh them – and you don’t need to be massively wealthy in order to open one. Maximising profits while staying within the law has never been as easy as it is when you use offshore accounts. While you should always do your research and ensure that you are staying within the law, you might find this way of banking quite beneficial.
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