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HMRC internal manual

Insurance Policyholder Taxation Manual

From
HM Revenue & Customs
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Personal portfolio bonds: meaning: bonds made before 17 March 1998

The conditions for a policy or contract to be a personal portfolio bond are slightly narrower than those in IPTM3610 where a policy or contract

  • was made before 17 March 1998 and 
  • has not been varied on or after 16 July 1998 to increase the policy benefits or extend the term.

General rule

In these cases, the policy or contract is not a personal portfolio bond if any of the benefits under the policy or contract have not at any time since 6 April 1994 been capable of being determined by reference to

  • the permitted property and indices listed at IPTM3630 and IPTM3640 
  • shares or securities listed on a recognised stock exchange, or
  • shares or securities of a company dealt in on the Unlisted Securities Market or the Alternative Investment Market, unless

    • the whole or any part of the benefits under the policy or contract may be determined by reference to shares or securities of the company that represent more than 10 per cent of its issued share capital, or
    • the amount invested in the company exceeds 10 per cent of the total amount of premiums paid up to that time on the policy or contract.

Transitional rules

Where a policy or contract fails the conditions of the general rule, it will still escape being a personal portfolio bond if

  • no benefits since 6 April 1994 were actually determined by reference to the property or indices listed in the general rule, even though under the policy or contract it was possible to determine benefits in this way, and 
  • the terms of the policy or contract were varied before the end of the first ‘insurance year’ which began on or after 6 April 1999 so that the benefits could only be determined by reference to the property and indices listed in the general rule.

The time limit for varying the terms of the contract given in the second condition is extended if the policyholder has become UK resident after 17 March 1998. If, on arrival in the UK, the holder did not then intend to become UK resident, or to remain in the UK for at least two years, the holder is given until the end of the ‘insurance year’ in which UK residence was established to vary the bond as described. The date of arrival in the UK is substituted as the reference date for determining the ‘insurance year’ if the holder intended to establish UK residence on arrival. No annual personal portfolio bond charge is made in these circumstances for any ‘insurance year’ before that in which the variation was made. More details at IPTM7815.

When the personal portfolio bond rules were introduced, insurers were aware that most existing policies needed to be varied to avoid being a personal portfolio bond and most contacted their policyholders to arrange for the necessary variation to be made in time.

Further reference and feedback IPTM1013