A pragmatic response
In November 2016, HMRC made it clear it would not proceed with any of the proposed solutions and will adopt a totally different process. The new proposal is that where a disproportionate gain is created following a partial surrender, a policyholder will be able to approach HMRC and it will then decide whether to tax them on an alternative basis.
The precise details of how this will work have yet to be released but the legislation in the draft Finance Bill 2017 starts to clarify how the process will work in principle:
l First, if the policyholder creates a disproportionate gain they can write to HMRC within two years of the chargeable event (or a longer period agreed by HMRC).
l If HMRC agrees the gain is disproportionate, it will recalculate it on a ‘just and reasonable basis’.
l HMRC will advise the policyholder of the recalculated gain and this figure will be used for all future chargeable event purposes.
This pragmatic response by HMRC certainly answers the question set. It will be interesting to see how the definition of ‘disproportionate’ develops and what circumstances warrant an approach to HMRC.
The results from the Lobler case and the changes announced will no doubt develop interest from similar cases, with many others now also seeking redress. LW
