Lobler case
The announcement follows a lengthy consultation process last year which looked at overhauling the rules governing the part surrender and part assignment of life insurance policies.
It was based on the 2007 Lobler case where Dutch national Joost Lobler was ordered to pay $560,000 (£390,418, €495,000) in tax on the $1.42m he withdrew from a policy he set up with Zurich Life just two years earlier.
Lobler took his case court and eventually won.
As a result, the tax office set out three proposals, of which only one would be implemented, including taxing the economic gain; deferring any excessive gains; or introducing a 100% allowance to replace the current annual 5% tax free withdrawal.
After feedback from the international life industry, HMRC decided against tampering with the current 5% tax free allowance.
Instead, it revealed in the Autumn Statement last November that for the first time ever the tax office will allow policyholders to correct hefty tax bills resulting from money being withdrawn from a life policies in the ‘wrong way’.
