Endowment matures

Mark_Steven

I have just received payment from an endowment policy only to find that even though it was a tax free vehicle the final sum has been docked over £2000 in capital gains tax. HMRC informs me that to claim this back I need an events certificate. Phoenix Life inform me that this is not a personal CGT, but an CGT paid by the company and will not issue an events certificate. Can someone explain this please.

dunstonh

I have just received payment from an endowment policy only to find that even though it was a tax free vehicle the final sum has been docked over £2000 in capital gains tax.

Endowments have never been tax free. They are tax paid.

However, they are not subject to capital gains tax. A qualifying endowment would have no further taxation other than that deducted at source (within the investments). A non qualifying endowment would have a chargeable gain which is treated under income tax. Not capital gains tax.

The internal taxation of life funds is a form of capital gains tax but still benefits from tapering relief. This is taxed on the fund and not on you. So, you cannot claim back any CGT paid by the life company.

Phoenix Life inform me that this is not a personal CGT, but an CGT paid by the company and will not issue an events certificate.

Which is the correct response.

Mark_Steven

Thank you, that explains what has happened. In the policy schedule is states that the company can take cgt that it thinks is appropriate, but I presumed that it would be some thing that I could claim back. I have been a little naive for 25 years.

dunstonh

Mark_Steven wrote: »

Thank you, that explains what has happened. In the policy schedule is states that the company can take cgt that it thinks is appropriate, but I presumed that it would be some thing that I could claim back. I have been a little naive for 25 years.

Life funds are a tax wrapper like pensions and ISAs and others. Each tax wrapper has pros and cons. Higher rate taxpayers and those that use their own CGT allowances can benefit from life funds. However, they are largely niche nowadays as changes over the years have made the other wrappers or unwrapped investment options more common.

25 years ago, those other options didnt exist. Or at least not for the mainstream. So, you havent been naive.