With investments that are held inside an offshore Life Assurance, discretionary Trust, (or Capital Redemption) is it possible to choose when to apply the 5% deferment?
Payments are to be made to a beneficiary who is has not used his annual allowance or certainly would be a lower rate tax payer. In the future payment are likely to be made to another beneficiary who will almost certainly have greater tax liabilities. Therefore, it would make sense not to apply the 5% tax deferment to the first beneficiary, allowing the deferment to be build up over the years (maximum 20 years allowed) and then use that deferment for the second beneficiary, who is likely to be a higher rate tax payer.
If this is possible, how is the use of the 5% is reported. Is it done by the assurance company, or by way of the beneficiary’s self-assessment? If the later is simply a case of instructing the first beneficiary that the payments he receives are immediately taxable and not deferred? Or, would such action result in the tax liability going to the Trust at the Trust rate (which I think would be 45%) and then the beneficiary claiming a tax credit (if applicable to them)?
Thanks
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