Eurolife is to pay out the £5m in assets it withheld from bondholders while it waited for the result...
Eurolife is to pay out the £5m in assets it withheld from bondholders while it waited for the result of a High Court test case with the Inland Revenue over the level of taxation due on high yield and guaranteed growth bonds.
The group withheld 4.75% of bondholders' maturity payments in June 2001 after the Inland Revenue announced that gains on high yield and guaranteed growth bonds were taxable as income, rather than capital gains as groups had believed.
The monies, which in total amount to some £5m, formed part of Eurolife's provision in case the verdicts in test cases brought before the Inland Revenue's special commissioners went against product providers.
Now the case has been won, the group will begin issuing cheques to its clients from this week. Interest will be paid on the money withheld.
The cases centred around the Revenue's interpretation of its guidelines on the loan relationship rules which govern the taxation of these products.
Prior to May 2001 it had been assumed that the yield from high income products should be taxed as capital gains rather than income. Eurolife, Lloyds TSB, HSBC and Nationwide were among those companies which sought to challenge the assertion that they should be taxed as income.
The product provider's argument prevailed and the Inland Revenue did not appeal against the commissioner's verdict, preferring instead to introduce new taxation legislation.
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