Endowment

Luckydog

I bought a second hand endowment policy with my Brother. I thought it was taken over in both our names but I recently found out that it was just in his name and I have paid my share of the premiums to him for about 20 years. It is due to mature in May 2012 and he says I will be liable to pay tax on my share when he pays it to me. Is there anything I can do now to avoid this? Thanks

dunstonh

What tax is your brother planning to pay?

There is no income tax (unless you bought a non-qualifying endowment). Its only liable potentially for CGT. CGT is a personal taxation so if the policy is not assigned to you jointly then you have no personal tax to pay. If it is assigned jointly, then you would although it would only be on 50% of the gain and after your annual CGT allowance for both of you is used up (so no tax may be payable).

If the policy is not assigned jointly and you refuse to pay part of his tax, then you could turn around and say you wont get any of the maturity and there would be little you could do about it.

Luckydog

Thanks for your reply. I was thinking that if it is paid out to my brother as it is in his name and he gives me 50% won't I be liable to income tax as it looks as though I have just received a lump sum?
Are you saying that the actual money paid out on maturity is tax free regardless of what is done with it?
Thanks again.

dunstonh

I was thinking that if it is paid out to my brother as it is in his name and he gives me 50% won't I be liable to income tax as it looks as though I have just received a lump sum?

No. It is technically a gift to you. He pays the capital gains tax, if any.

Are you saying that the actual money paid out on maturity is tax free regardless of what is done with it?

It is subject to CGT as its a TEP. It only becomes liable for income tax if the endowment is a non-qualifying policy. Any liability for tax though is with your brother. not you.