The flames of moral outrage were fanned when the so-called Paradise Papers were published recently. They contained details relating to the offshore financial affairs of multi-national businesses and high-net-worth individuals, including politicians, celebrities and members of the royal family.

But unlike the Panama Papers, which revealed illegal tax evasion in 2016, the Paradise Papers did not uncover any criminality. What inflamed public outrage was an apparent lack of morality from key members of society, particularly the royal family and politicians, at a time when the wealth gap boasts Victorian proportions.

As we’ve clarified before though, tax avoidance is not illegal. Much of day-to-day financial planning involves the efficient organisation of financial arrangements. And just because something is tax efficient doesn’t mean it’s dodgy. It’s when the boundaries start to stretch towards what appears to be a strategy to avoid the Revenue’s radar that things get a bit murkier and could land you in trouble if HMRC decides deliberate steps have been taken to reduce tax liability.

Financial planning can sometimes involve using offshore investment structures, such as funds and insurance-based investment bonds as these offer legitimate tax deferment that is specifically allowed within the rules and which can deliver a legitimate, tax-efficient outcome.

Using an offshore investment bond (whether it be Royal Skandia, Nucleus, AXA International etc) is not akin to the trusts and companies at the heart of the Paradise Papers story. The offshore investment bond can grow and reinvest returns untaxed, which boosts their growth. However, as a UK investor you have to declare any income you receive from the offshore bond. You will therefore pay tax – the offshore bond effectively defers the income tax rather than evades it, which is the issue with the Paradise Papers revelations.

So do not panic if you hold an offshore investment bond as you are not going to be implicated on tax charges and face time in jail.