can anyone advise how the sum received from an endowment policy maturing is treated for tax purposes.
LYNN
Replies (3)
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It usually isn't!
Most endowment policies are "qualifying" (as defined in ICTA 1988 Sch 15 para 2), and so no tax liability arises on encashment.
To qualify, an endowment has to jump through the following hoops:
(a) the term must be at least 10 years
(b) premiums must be payable annually or more frequently for the shortest of the period from commencement to:
(i)term
(ii) earlier death
(iii)expiry of a set period of at least 10 years
(c) level of premiums must be relatively consistent year on year
(d)guaranteed death benefit must be at least 75% of premiums payable to term
(e)no capital benefits (other than a return of premiums on death) can be payable before term.
If the endowment fails to qualify, the taxation is quite complex. I won't go into that now, unless you need it.
Traded endowments
Our of interest, whats the tax position v traded endowments. This came up in our office this AM and its not something we had come across before. A buys Bs policy on Bs life, B dies, A gets the payout - is As receipt taxable?