My client, a German national now resident in the UK, took out one of these policies 12 years ago and it will mature shortly. It is a 'capital life insurance' and appears to be similar to an endowment policy. There will be a gain on the policy. The proceeds are atxfree in Germany.
I have researched the HMRC manuals and it appears that it is a non-qualifying policy because of the date it was taken out. The gain is therefore treated as though ti were an offshore investment bond and the client will benefit from the fact that she was resdient in Germany for part of the policy term.
IPTM3810 states that some overseas policies can be deemed as having suffered basic rate tax. It states : 'basic rate tax is only treated as paid when the insurer is taxed on the investment return accruing for the benefit of the policyholders under the so-called 'I minus E' system. Some countries within the EEA employ similar systems'. Does anyone know if Germany is one of these countries?
Also, I understand that the time-apportionment between resdience abroad and residence in the UK has to be done using days. I had assumed that, if the client had been resident in the UK for a tax year, then that woudl count as 365 days of residence. But someone has suggested that one has to take account of all days spent outside the UK in a year of (otherwise) UK residence - counting, for example, 20 days working in an overseas office or 14 days' holiday abroad! I can't believe taht this is the case - has anyone else encountered this suggestion?
I should be grateful for any assistance.