Guernsey: The Wisdom Of Holding Bullion Offshore

Last Updated: 29 November 2013
Article by Robin Newbould

Most Read Contributor in Guernsey, September 2018

BullionRock Managing Director Robin Newbould looks at the precious metals' markets and the differences in the way onshore and offshore approach such investment. Focusing on Guernsey, where his firm is headquartered, he considers the primary points of note for bullion investors deciding between onshore or offshore and whether to hold the physical asset or a paper alternative.

Physical bullion

There is a commonly-held view that offshore private client investors are comparatively better equipped and more willing to diversify their portfolios into slightly 'off the beaten track' asset classes than onshore investors. When it comes to bullion, though, the merit of the asset is its consistency: a 1kg 999.9 pure gold bar is a 1kg 999.9 pure gold bar no matter where you live, what language you speak and what fiat currency you use to buy it. Investors from literally every continent of the world hold bullion offshore – each of the shared opinion that bullion exposure should form some part of their overall investment wealth profile.

The investors' geographical location is largely irrelevant – what unites each bullion investor is his or her belief in precious metals. It is the personality of the investor that then determines how comfortable he is with the risk and reward profile of the different types of bullion investments available to him: be that unallocated ounces, exchange-traded commodities (ETCs) or physical bullion in bar or coin form. There is an army of gold bugs who believe that if they can't touch it, they don't own it, but simultaneously a huge amount of money is held on banks' balance sheets as unallocated ounces (although it is questionable whether the investors are really relaxed about this or are just unaware that this is how it is held).

In addition, a vast amount of money is also invested in ETCs. For all those involved in the bullion market, there is an acute awareness of the potential misuse of bullion; it is a highly transportable and valuable means of transferring wealth from the proceeds of crime. Onshore, gold and physical precious metal markets are unregulated and are not covered by the Financial Conduct Authority. The rules that purchasers of bullion have to comply with are, therefore, negligible. Contrast that with the position offshore, where Guernsey, Jersey and Gibraltar all require bullion-trading businesses to be registered or licensed with the local financial services commission in order to comply with the local anti-money laundering and antiterrorist-finance measures.

Investors choosing the offshore option will therefore be subject to 'due diligence' procedures prior to trading. This is seen by many as a positive step as investors can be assured of a level of independent oversight of the entity they are investing with and, in the offshore world, where reputation is of paramount importance, the process of obtaining 'due diligence' gives the business itself comfort as to the legitimacy of its investors. The main issue with trading and storing bullion offshore is the cost and time-scale of logistics and delivery.

Some days it is possible to forget these issues as every connecting plane, train and/or automobile (or more usually, an armoured vehicle) connects on time to make the process seamless and just as smooth as could be expected if the business was situated onshore. On other days, however, the unique and gloriously unpredictable weather, tides or mechanics of the Channel Islands mean that businesses are left feeling stranded in the sea.

Fully-insured 'all risks' insurance makes this nothing more than a frustration, and often goes totally unknown to the long-term investor who wants to store his bullion offshore, where length of delivery time to him is largely irrelevant. The only significant point is that the longer the journey from the refinery or supplier to the vault takes, the more expensive it is for the business. Logistics and customs paperwork are no more arduous offshore than anywhere else and, owing to the commonplace transparency between bullion businesses and their offshore border agencies, no undue delay or disruption is experienced at air and sea ports.

A unique advantage of some offshore jurisdictions – Guernsey and Gibraltar to name two – is the fact that there is no value-added or general sales tax that applies to any of the four major precious metals (gold, silver, platinum and palladium). This can save the investor up to 20% on purchases when they buy and store offshore, rather than take delivery onshore. A number of investors do prefer to "keep their assets under the mattress", and in this instance, the advantage of purchasing offshore from a cost perspective might therefore be lost, as customs paperwork requires a declaration of goods and value and therefore the relevant tax must be paid when the bullion reaches its onshore destination.

It should be noted that the same tax saving can be made by investing in ETCs that employ "bonded warehouse" custody but there is something overwhelmingly appealing to investors in physical bullion being held in a place such as Guernsey because they are able to visit and hold or collect their assets if they so wish.

It is safe to say that investors who want to maximise their investment and find a long-term solution which includes storage will prefer an offshore arrangement to an onshore one because of the savings they can make. Investors from all walks of life and from all over the world have seen the attraction of offshore bullion centres, particularly in the Channel Islands. They are English-speaking, they have a reputation for financial know-how and they have an appropriate level of regulation. Against this background they are also self-governing with a history of political stability and enjoy independence from both the United Kingdom and the European Union.

Exchange-traded commodities

It should come as no surprise to anyone that the biggest British bullion collective is based offshore in Jersey. A regular, physically-backed, ETC with the security in question quoted on the London Stock Exchange, domiciled in Jersey (which has a stamp duty exemption) saves buyers 0.5% on consideration on purchases. When looking at the simplest, physically backed, 1:1 gold ETC managed offshore, the investor is able to gain exposure to the underlying commodity, without having to trade in futures or take physical delivery.

When investing, the investor should consider execution and custody charges, above the ETC's annual management fee of, typically, 0.6% per annum. Needless to say, it is important to establish where the gold is held and by whom and who is auditing the bars and how often. Most importantly, if the investor ever wants to take delivery of 'his' gold within the ETC, then the costs, minimum redemption levels and mechanics of such a process, if it exists at all, should be examined – they are often prohibitively high and complex.

Unallocated ounces

In times past, people who wanted exposure to precious metal within their investment portfolios have purchased unallocated ounces and given them to banks to hold for them. There has been much press exposure about whether these institutions in fact hold sufficient bullion to cover off the trades they are making and this is still largely unknown. Unallocated ounces are a cost-effective way to achieve exposure to a precious metal but carry risks as the purchaser remains a creditor of the chosen provider.

There are now more options for investors choosing unallocated ounces and this includes metal accounts at a refinery, rather than at a banking institution. Here, he can be offered the opportunity to convert his unallocated ounces into physical bullion at a later stage should he choose. Although the service provider may be based onshore, and the underlying bullion into which he is buying may also be held onshore, the investor may see tax benefits in this instance by purchasing through an offshore jurisdiction. Precious metals in physical form are relatively simple investments. Free from the normal corporate actions, proxy voting, dividends and equalisation units, they are a little more nerve-racking to settle than a Delivery Versus Payment instruction down a copper wire at the stroke of midnight.

However, that really is the point: they are almost outside the normal financial system in the opinion of their biggest fans. Because there is no 'unique selling point' for the product itself (all 999.9 fine gold bars being equal), precious metals' businesses have to compete on price, security and service, the last of these including liquidity and innovation of dealing and reporting. Whether these businesses are onshore or offshore matters little in the case of gold but Guernsey does have a great advantage over its competitors – in the form of VAT and GST-free sales and storage when it comes to silver, platinum and palladium.

The overarching aim for bullion investors should be to ensure their investment is held appropriately. They must thoroughly explore what they are being offered or what they want. They should question their trustees' and investment managers' positions to ensure that they know whether they are holding physical bullion or promises in the form of ETCs or unallocated ounces. Investors are becoming increasingly sophisticated, which means that the default position of many managers (to invest in ETCs or unallocated ounces) should be challenged. The choice of jurisdiction becomes important when one considers the savings that can be made in some or charges levied in others and, for that reason, the offshore option has a unique appeal.

Originally published in Offshore Red, October 2013.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions