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Partial event, complete disaster

23 May 2013
Issue: 4404 / Categories: Tax cases , Income Tax

R Anderson (TC2555)

The taxpayer took out life insurance policies issued by an Irish company while he was not resident in the UK. He later moved to this country and surrendered part of the rights of his policies. He gave up more than 5% of the annual allowance for the relevant tax year meaning the whole excess was a chargeable event.

HMRC assessed him to income tax at the basic rate as well as the higher rate because the policies were offshore and the largest policy was classed as a personal portfolio bond within ITTOIA 2005 s 515 to s 526.

This resulted in the taxpayer being charged to tax each year as if there were an actual gain on an amount equal to 15% compounded of the premiums paid less the aggregate amount of any previous part surrender gains regardless of whether or not the policy produced...

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