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In March 2002 the taxpayer took out an offshore investment bond of £66 000 with an insurance company based in the Isle of Man.
Shortly afterwards he began to make monthly income withdrawals from the bond and occasional capital ones to fund his pilot training. The insurance company told him there was a 5% withdrawal allowance for tax purposes.
The insurance company made more income payments than were available from the fund and sought repayment from the taxpayer. After he complained the firm agreed to treat the overpayment as an ex gratia payment to settle the dispute.
HMRC informed the taxpayer his withdrawals had exceeded the 5% limit and that chargeable event gains arose under ITTOIA 2005 s 498.
The taxpayer appealed.
His argument was largely that the...
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