The ABI is lobbying the Government to reduce the capital gains liability on life funds from 23% to 2...
The ABI is lobbying the Government to reduce the capital gains liability on life funds from 23% to 20%.
In light of the pre-budget changes to CGT rates, the ABI plans to renew its efforts to get the Government to re-examine the way in which life funds are treated on capital gains.
At the moment life funds are taxable on their investment income and capital gains less management expenses.
The rules for splitting the gain between policyholders and shareholders is that shareholders are taxed at the normal rate of 30% corporation tax. Policyholders are taxable at 20% on investment income but at 23% on capital gains.
There are no capital gains allowances given to life funds. With unit trusts, the fund itself does not pay capital gains, the end investor does.
Benedict McHugo, head of taxation at the ABI, said: "With life funds the fund pays the capital gains tax for the investor but no allowance applies. Reducing the rate from 23% to 20% will reduce the tax burden on policyholders and investors."
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