Autumn Statement 2016: Personal Portfolio Bonds

A personal portfolio bond can be a life insurance policy, the terms of which allow the policyholder to select some or all of the property in which their premiums will be invested.

If a life insurance policy is a personal portfolio bond, an annual gain ordinarily arises which is chargeable to income tax.

Subject to certain conditions, a life insurance policy is not a personal portfolio bond if the property falls within one of the categories listed under s 520, ITTIOA 2005.

In 1999, HMRC introduced personal portfolio bond rules to prevent policyholders from holding personal property within a life insurance policy and deferring any income or capital gains tax charges arising from that property. Since 1999, these categories have not materially changed despite the evolution of the investment landscape.

The Government has announced it will make legislative changes to the list of assets that life insurance policyholders can invest in without triggering anti-avoidance rules.  The changes include introducing three further investment vehicles in the property categories under s 520, ITTOIA 2005:

  • Real estate investment trusts
  • Overseas equivalents of UK approved investment trusts
  • Authorised contractual schemes.

It is essential to note that any changes to the property categories do not allow policyholders the ability to select personal assets under the terms of their life insurance policy.