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It is time to reconsider the taxation of life insurance bonds
KEY POINTS
- Lobler suggests life assurance taxation is not fit for purpose.
- Carry back would help but perpetuates an artificial system.
- Could introduce US-style exemption for capital repayment without 5% restriction.
- Alternatively abolish regime completely and substitute reporting fund rules.
In his article Sauce for the goose last week Michael Firth looked at the case of Joost Lobler (TC2539) and argued that the new general anti-abuse rule (GAAR) should be extended in the taxpayer’s favour to cancel a liability when it could reasonably be regarded as an “abusive tax charge”.
While I think that idea has much merit and should be explored I would also argue that Lobler discloses a life insurance taxation regime that is unfit for purpose.
It needs to be overhauled at the very least ...
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