How to calculate chargeable gains tax on investment bond

Sea_Shell

How long do HMRC have to come after someone who may have fallen foul of the tax rules on cashed in bonds, but didn't realise and didn't submit a tax return or make any additional tax payments ?

Would the provider send all the "chargeable event certificates" to HMRC?

Doctor_Who

Sea_Shell said:

How long do HMRC have to come after someone who may have fallen foul of the tax rules on cashed in bonds, but didn't realise and didn't submit a tax return or make any additional tax payments ?

Would the provider send all the "chargeable event certificates" to HMRC?

My understanding is that the investment bond issuer (typically a life insurance company) has to send the chargeable event certificate to HMRC under section 552 Income and Corporation Taxes Act (ICTA) 1988. My late mother's chargeable event certificates state 'Inland Revenue, Insurer's report under S552 ICTA 1988' at the top.

https://www.gov.uk/government/publications/life-insurance-chargeable-events-certificates/electronic-flat-text-file-specification-for-chargeable-event-certificates-for-gains-occurring-on-or-after-6-april-2002

Sea_Shell

Thanks for that.

So if HMRC have all the information, would they do all the calculations and contact the policyholder (taxpayer) of any additional tax due?

Or does the onus remain with the individual to make a submission?

In either case, what would the timescales likely be?

Doctor_Who

Sea_Shell said:

Thanks for that.

So if HMRC have all the information, would they do all the calculations and contact the policyholder (taxpayer) of any additional tax due?

Or does the onus remain with the individual to make a submission?

In either case, what would the timescales likely be?

Some more information here as to whether or not you need to contact HMRC after receiving a chargeable event certificate, seems to depend if you're a basic or higher rate tax payer. Although it's probably best to let them know in either case.

As for time scale, in the link to the Gov.uk website it says:

Insurers are required to deliver Chargeable Event Certificates to HMRC before the end of the relevant 3 month period. The relevant period is whichever ends the latest out of:

• the period of 3 months following the end of the year of assessment in which the event happened or, if the policyholder is a company, the period of 3 months following the end of the financial year in which the event happened
• the period of 3 months following the end of the year (as defined in section 499) in which the event happened (if the event is a surrender or assignment of a part that is a chargeable event by virtue of section 498)

So HMRC should get the certificates pretty soon after you receive them, and almost certainly within a year or so. I have no idea how long HMRC may then take to contact you if they calculate that tax is due on the gain.