Personal Portfolio Bonds: reviewing the property categories
Published 5 December 2016
© Crown copyright 2016
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Who is likely to be affected
Individuals who hold life insurance policies allowing them to select the underlying assets and wealth managers and insurance companies who provide such policies.
General description of the measure
The personal portfolio bonds (PPB) legislation prevents an individual placing personal assets in a life insurance policy to avoid a tax charge on income arising from those assets. The legislation defines any life insurance policy as a PPB if its terms and conditions allow asset selection by the policyholder, unless only selection of permitted assets (‘property’) specified in legislation is allowed. This measure provides the government with a power to update the list of specified permitted property by regulations.
Policy objective
The measure facilitates both the addition and removal of asset types from the list of permitted property in line with changes in the investment landscape, enabling more frequent updating of the list, as new types of asset are developed.
Background to the measure
At Budget 2016, the government announced its intention to review the property categories a policyholder may select to have within their life insurance policy without triggering the provisions of the PPB legislation. A consultation was held from 9 August to 3 October 2016, seeking views on current property categories and further property types that may be included. A response to the consultation was published on 5 December 2016.
Detailed proposal
Operative date
The measure will have effect from the date of Royal Assent to Finance Bill 2017. The government expects to lay regulations to include new permitted property categories shortly after Royal Assent.
Current law
Current law is contained in sections 515 to 521 of Income Tax (Trading and Other Income) Act 2005.
Proposed revisions
Legislation will be introduced in Finance Bill 2017 to add new subsections to Section 520 of Income Tax (Trading and Other Income) Act 2005. This will provide a power to update the table contained in Section 520 (2) of Income Tax (Trading and Other Income) Act 2005, in secondary legislation. Regulations to remove a property category will be subject to the affirmative procedure, whilst additions will be subject to the negative procedure.
Draft regulations making changes to the table, adding UK real estate investment trusts, overseas equivalents of investment trust companies and authorised contractual schemes to the table, and removing category 7a. An interest in a collective investment scheme constituted by a company resident outside the UK, other than an open-ended investment company, will be published alongside the draft power.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure will impact individuals that hold life insurance policies that allow them to select the underlying assets. It may allow a wider selection of permitted property for those individuals. Impact on individuals and households is expected to be negligible.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure will affect individuals within the protected equality groups that tend to be represented amongst those with above average income.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on asset managers and life insurance companies. Those that choose to take advantage will incur one-off costs to familiarise themselves with the new rules. Ongoing costs for applying these news rules to individual client cases are expected to be comparable to those associated with existing arrangements.
There is no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC, but it will be kept under review as the measure develops.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Marie Madden on Telephone: 03000 529481 or email: marie.madden@hmrc.gsi.gov.uk.