Investment Bond Flashcards
1
Q
Evaluate the tax efficiency and suitability of N and J’s onshore bond (16)
A
- BRT is paid within the bond
- up to 5% of the original capital
- can be withdrawn tax deferred
- cumulatively for each year the bond has existed
- withdrawals are taken into account when a chargeable event occurs in calculating tax payable
- Jane is HRT so would incur additional 20% tax on her share of the gain
- Nick will be BRT from 19/20
- and with top slicing
- will have no additional tax to pay on his share of the gain
- Jane could assign her share to nick
- and then strip out the gain over multiple years to avoid additional tax charge
- the full gain on encahsment is used to calculate adjusted net income
- if that exceeds £100k then will start to lose personal allowance
- to maximise tax efficient income from the bond they will need to rebase it so 5% of 295 can be taken
- bond forms part of their estate for IHT
- chargeable event will occur on second death
- as no additional lives assured
- bond could be placed in a DGT
- which would immediately reduce the IHT liability
- and fully remove it after 7 years
- whilst allowing them to continue to receive an income
