The Inland Revenue has closed the gap on tax-loopholes one further this week. The loophole that allowed people to transfer policies between them to artificially create losses has now been closed, meaning more income tax for the Government.
The rules now state that no policy gains or losses can be taken into account before the date the policy was assigned.
Our View
This loophole was quite popular with investment bonds where one spouse was a higher rate taxpayer and the other a non-tax payer. By taking money out of the bond and then assigning it to the non-tax payer, artificial losses were created, meaning avoidance of income tax on any real gains. Whilst this is another blow, the loophole seemed rarely to be used and will not affect the majority of the population.