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International Bonds

Top slicing relief changes for international bonds with effect from 6 April 2013

Where a partial withdrawal above the cumulative 5% allowance is taken from an international bond, the top slicing factor is always counted from the outset, even if there has been a previous excess. However, it appears that the legislation for this was changed inadvertently in the Finance Act 2013. Although the Association of British Insurers has suggested to HMRC that this is an error that needs to be corrected, it seems that there is no intention to do so and that the legislation will remain as it is.

 

To summarise, where an international bond has been taken out on or after 6 April 2013 (or, if taken out before then, has been varied, assigned or held as a security for a debt after that date), the top slicing factor will be calculated in the same way as it is on a UK policy – in other words, where a partial withdrawal above the cumulative 5% allowance is taken, the top slicing factor will be counted from the outset or, if later, from any previous excess event.

 

At the time of writing, HMRC’s Insurance Policyholder Taxation Manual has yet to be updated to reflect the above change, but HMRC have said that it is their intention to do so.

 

Advisers who have clients affected by the change should ensure that the appropriate top slicing factor has been used.

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority.