life insurance

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    just a quick question in regard to a bond that has a life insurance element attached to it. If we are able to disregard the surrender value of the bond due to the life insurance element – are we able to disregard the income derived from it…

    I have look back on previous posts that seem to suggest we would disregard the income also but I was unable to find this anywhere else….

    any help would be great

    Carol Meredith

    I think that gets treated as capital.



    The amount invested in the bond is capital. Income from it is disregarded. I know there was a Commissioner’s decison to the effect that these are life insurance policies but I simply do not believe this is the intention of the scheme we operate. They have a notional life insurance element for tax purposes. I believe we should look at the intention behind the purchase. A life insurance policy is not usually one you draw down on. Quite the opposite in fact – you invest against a future contingency. It is a legal contract and there will be terms and conditions showing what precisely is covered and how much the policy holder has to pay. They may well never get anything back (depending on what is covered). An investment bond is just that, money invested which the investor will get back after a period of time, with interest. In my view the learned commissioner was mistaken and I continue to treat these bonds as capital. You then get into an argument as to whether they are available becuase the money is usually tied up for a term of years, but that’s a different issue.


    [quote:c6d1148b43]In my view the learned commissioner was mistaken and I continue to treat these bonds as capital.[/quote:c6d1148b43]

    I think you’re referring to R(IS) 7/98. I attempted this argument in front of a judge a couple of days ago… he wasn’t impressed. I argued that the nature of savings bonds has changed a lot over the last 15 years and the legislation simply had not kept up. Still not impressed. Until the law is changed I think we have to accept that these savings bonds are disregarded and all we can rely on is the deprivation argument.

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