'Chargeable event' on a Distribution bond and the tax liability from it?

TUVOK

I have held a Clerical Medical Distribution Bond since about 2001. I have taken several with drawls from the bond and believed that they were 'chargeable events' incurring no tax liability, C/Medical never indicated that they were in my discussions with them about taking a with drawl.
However last year I requested a with drawl and after the with drawl they sent literature indicating that I was liable to pay tax on it.
I am in the process of completing my HMRC self assessment return for the year 2022-23 so need to clarify the taxation query on the with drawl.

Can any one help please/ 
I'm also not sure if I have posted on the correct forum section?

Thanks in advance for any help etc that members can provide.

Jeremy535897

It may be that your previous withdrawals attracted no liability because they were too small (5% or less). You should have received a chargeable event certificate describing the amount chargeable to tax. Tax will only be payable if you have a higher rate tax liability after adding the gain to your income (subject to top slicing relief). 

TUVOK

Thank you for your reply.
I believe that you are correct in that in previous years I asked specifically to C/Medical to make the payment below any amount which would incur taxation.
I have has a terrible time in any dealings with Clerical Medical in the last few years, almost impossible to speak to any one and I have been awarded a fairly large payment from them for their shocking bad service.
I have not proceeded yet this year in asking for a with drawl, I will have to I believe try to contact them in order to try to ascertain the amount that I can withdraw tax free? or is it that any amount that I withdraw liable to taxation?
Any help on this would be most welcomed, thank you.

Jeremy535897

You will have to ask them whether there is any further amount you can withdraw tax free. You may have some of the 5% annual withdrawal limit left. Remember that the basic rate of tax on any excess withdrawal is treated as paid, so it would only be if you are or become a higher rate taxpayer that there would be tax to pay.

TUVOK

I have just contacted Clerical Medical and after explaining that my Distribution bond was taken out in 2001 and the amount of £20K invested, I was told that I should not have paid tax on my with drawl of £1000-00, being 5% or less of the initial investment.

On informing the contact that Clerical Medical had sent me documentation stating that I should disclose a taxation gain on my self assessment return,  I was then informed that they will investigate and get back to me inside 10 working days.

A bit confusing, hopefully I will get clarification very soon in order that I enter the correct details on my self assessment return and complete it.

Jeremy535897

You won't need to enter anything if they confirm that there is no chargeable event. Unfortunately if they have already informed HMRC that there is a chargeable event, that could be a nuisance when you don't disclose one. Be sure to raise this issue with C&M.

TUVOK

Yes, thank you, I can well see your point.
One thing that I have tried to avoid is any reason for HMRC to query my return, this has always been the case, so yes I will need to bring that up if they correct their previous reply that I have exceeded the 5% in a with drawl.
Thank you for this reply.