His and hers

A married couple who are retired have an investment bond in their joint names which was funded by the husband. Neither spouse is a higher-rate taxpayer. The wife's income is small and she receives a tax repayment each year because her income does not exceed her personal allowance. Chargeable gain excesses are paid direct to the husband by the insurer each year but the insurer issues annual certificates in the joint names pursuant to TA 1988 ss 540(1)(a)(v) and 552.

Each year the whole of the chargeable gain excesses of about £500 p.a. have been included in the husband's annual tax returns. It appears that there has been no loss to HMRC as notional tax at 20% is applied to each year's gain.

I propose to recommend that when dealing with the 2007-08 tax returns 50% of the annual excess should be included in the return for...