Estate planning bonds

[Anthony Nixon]

Maths and I are clearly not going to agree on this one.

I think the Taube case is of a lot of help in pointing up the ambiguity.

And I hold to my view that TSEM3220 does not "state that gains on foreign life insurance policies are capital items taxed as income", but merely includes them under a heading to that effect, which is, as all headings are, a very brief summary

My recommendation would be:
1. for the trustees to treat the gain as income in their accounts (and I'm pleased to learn that the software will let you do this);
2. for the trustees to distribute it as income, perhaps spreading this over this and the next tax year, to maximise potential repayments for the beneficiaries;
3. for the trustees to write to the beneificiaries, when providing them with tax deduction certificates, to explain that some (or all?) of the income distributed to them represents gains on policies treated by the trustees as income, and that there seems some ambiguity as to whether the trustees were in fact entitled to treat it as income;
4. for the beneficiaries reclaiming tax on the basis of the tax certificate to include details of the trustees' letter in the white space on their returns.

If the Revenue refuse to repay tax, you can consider at that point whether to argue the point further. I think, but clearly Maths doesn't, that they would make the repayments.

If you do not follow this route now, the beneficiaries are giving up any chance of getting back any of the 50% tax.

If you decide to follow my suggestions, I hope you will let us know how it turns out in due course.

Anthony Nixon

[maths]

I agree with Anthony to disagree !

Re Anthony's suggestion as to how to proceed, not wishing to be overly argumentative, but I'm not totally convinced that the approach would preclude a discovery being made by HMRC at a later date despite Anthony's suggestion to place comments in the Tax Return "white space".

Over and out.