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I have an investment fund with Generali in Guernsey, worth

Resolved Question:

I have an investment fund with Generali in Guernsey, worth 59k GBP (made up of 52.4k contributions over 7 years) so capital gain of <7k GBP. Do I have any tax liability on encashment?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

There can be no possibility of a Capital Gains Tax charge in the UK since the annual CGT exemption is currently £11,100, ie more than the paper profit you appear to be sitting on.

However, without a lot more information on the nature of the investment including documentation, whether there is life cover, whether you can make partial withdrawals its not possible for me to confirm whether any gain you make would be subject to CGT or to Income Tax in the UK. Take a look at HS321 here which deals with the UK tax implications for gains made on offshore investment bonds. Your plan may be one of these or it may not.

I would have to suggest that you gather all your paperwork on the investment and make an appointment to see an accountant or tax adviser unless you have one already in which case you should consult them. It may be that the answer is in the small print of the investment documents. I'd be happy to look at them or at any web page you can direct me to which gives some information on the type of investment you made.

I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.

If you look at the following site it gives you details of the plan:

http://www.generali-intl.com/international/vision/

Regards

Patrick

Expert:  TonyTax replied 1 year ago.
Thanks.

I'll take a look.
Expert:  TonyTax replied 1 year ago.
Hi again.

Can you tell me whether the contributions you made over seven years were regular, identical monthly payments or irregular payments of varying amounts. What was the proposed term of the policy?
Customer: replied 1 year ago.

Policy started in 2003 and was for 10 years. I paid regular annual payments over the 7 years of 7,200 GBP

Expert:  TonyTax replied 1 year ago.
Thanks.

I'm afraid the Generali notes were not that helpful.

However, I believe that your policy is similar to the one described here. Most foreign policies, particularly single premium policies, are not qualifying policies as far as UK tax law is concerned and will almost always give rise to a taxable gain, if there is a gain.

Provided your policy runs for at least three-quarters of the term or 10 years whichever comes first , you may not have to pay UK tax on the gain if the policy is treated as a qualifying one by HMRC. If it is not a qualifying policy, then you will have a chargeable event gain of about £7,000. If that is the case, you will have a tax liability of at least 20% of the gain.

If 1/7th of the gain takes your income for the tax year of surrender into the 40% tax band then you will have some more tax to pay but only equal to 7 times the amount of tax on that part of the gain which goes into the 40% tax band. If you are a higher rate taxpayer regardless, then you will pay tax on the gain at 40% or 45% (income over £150,000).

You may need to ask Generali what their understanding of the tax situation is if you surrender the policy early. They should know as they are obliged to report such events to HMRC in the UK under international agreements between governments.
TonyTax, Tax Consultant
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Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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