A spokesperson for HMRC told International Adviser, “A summary of responses to the consultation will be published following the Autumn statement. This summary will set out the next steps in full.”
All or nothing approach
On Tuesday, Canada Life International’s technical manager Neil Jones revealed that out of three proposals set out by HMRC in April, he expects the UK to either pick the 100% allowance option or leave the rules as they are but allow for providers to correct case where a ‘mistaken’ withdrawal leads to a huge tax bill.
Meanwhile, David Downie, technical manager at Standard Life International said he expects the rule changes to be published in the draft legislation of Finance Bill on 5 December and called for a “clear and easy” rectification process.
HMRC’s response now cast doubt over whether any changes to the taxation of offshore bonds will take place at all.
The reforms are intended to redress the unfair tax bills which some individuals face if they withdraw money from an offshore bond in the wrong way, said HMRC.
It is based on the 2007 case of Dutch national Joost Lobler, who was ordered by HMRC to pay $560,000 (£390,418, €495,000) in tax on the $1.42m he withdrew from a life insurance policy he set up with Zurich Life just two years earlier. Lobler took his case court and eventually won.
Rachael Griffin, head of product law and financial planning at Old Mutual Wealth, has previous called for HMRC to implement a case-by-case rectification process for withdrawals, arguing that the issue only “a small number of policyholders”.
In its consultation paper, published in April, the UK tax office revealed that just 600 UK policyholders are at risk of facing hefty tax liabilities if they make large withdrawals from offshore life bonds.