The general regime for charging gains on life insurance
policies, life annuity contracts and capital redemption policies,
referred to as the chargeable event regime, enables persons who
purchase these contracts as investments in general to postpone tax
on underlying economic gains until the policy or contract comes to
an end. By which time their circumstances may have changed.
The personal portfolio bond rules provide a stricter regime
where the property that determines the benefits under the policy or
contract is personal to the holder or beneficiary under the
contract in a way that goes beyond the usual choices offered,
commonly described as ‘managed fund’,
‘international fund’ and similar. One example of this
is a policy where benefits are determined by reference to shares in
the policyholder’s private trading company, which he has
transferred to the insurer.
The personal portfolio bond regime is founded on the
principle of an annual charge. The rules apply to a policy or
contract that is a personal portfolio bond at the end of an
‘insurance year’, unless this is the ‘final
insurance year’. These terms are explained at
IPTM3505. The calculation made to
determine whether a gain arises and, if so, its amount is in
addition to any other calculation required under the chargeable
event regime.
The following paragraphs broadly adopt the approach of the
personal portfolio bond legislation at
ITTOIA05/S515 onwards. Practical guidance based
largely on the former Personal Portfolio Bond guidance notes is
available at
IPTM7705 onwards.
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