the pre-owned asset tax makes it vital for providers to ensure the products they create today do not fall foul of the revenue Tomorrow
To say there have been a lot of legislative changes over the past few years for those who work in technical support within the life assurance industry would be something of an understatement. These have been challenging times with the Personal Portfolio Bond Regulations to the latest hurdles presented by pre-owned asset tax (POAT).
Any professional adviser or product provider who thinks we are still operating in the same environment as 10, or even five years ago was clearly not listening to Dawn Primarolo in Standing Committee on 18 May 2004.
She said: "The Government wanted to send a clear message that artificial avoidance of that kind is not acceptable. Those who devise and market such schemes, and the people who take advantage of them need to understand that and not assume that avoidance is risk free. Such schemes have grown rapidly because they are regarded as a one-way bet"
She further commented: "The schemes were increasingly contrived and were being marketed as packaged solutions that could be offered to people by their financial advisers."
POAT, in particular, has presented new problems. Even the amendments to the dead settlor regime in Finance Act 1998 ring-fenced existing dead settlor trusts. POAT, however, despite Government protestations to the contrary, has been retroactive and required life companies to review many of their policies written into trust going back as far as 1986. It has also left many financial advisers and product providers having to unravel IHT plans that have been affected by POAT.
What will be interesting to see is how the offshore life assurance industry reacts going forward. One would hope that sound legal and technical advice will prevail at board level and the industry will be showing a more conservative face going forward.
What will be necessary in the future, if the offshore life industry is to support financial advisers in the post-POAT environment, is ever increasing maturity and responsibility. The life assurance industry does not give advice, relying on the fact that the trust document or the structuring suggested is "for consideration only". While I would not suggest that offshore life companies start giving out advice, we as an industry, now have many years experience (some of it painful) behind us and we should ensure that the structures we provide, and how we position those structures, have been thoroughly thought through.
Finally for those of us with long enough memories to recall Sergeant Phil Esterhaus in Channel 4's Hill Street Blues;
"Let's be careful out there."
EIS and Seed EIS sectors
'Truly making a difference'
Avoidance, evasion and non-compliance
From 6 April 2019