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Chargeable Events - OUCH!

Chargeable Events - OUCH!

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No question really just a comment re the pitfalls of chargeable events on life policies as suffered in TC02539: Joost Lobler

To quote the judge:

In this appeal a remarkably unfair result arises as a result of a combination of prescriptive legislation and Mr. Lobler’s  ill-advised actions.

and

The appeal takes place at a time when there is great media and political comment about a fair tax system. That interest focuses on the avoidance of tax by those who have substantial income, but to our minds it is more repugnant to common fairness to extract tax in Mr Lobler’s circumstances than to permit other taxpayers to avoid tax on undoubted income.

Tax due 560k. Actual gain on the policy overall apparently only 65k. What the court can do about, despite their best efforts, nothing

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04th Mar 2013 16:52

when you can afford to invest 1.5mill

then you can afford to pay for proper advice (although since when is taking a loan to make an investment in anything other than bricks and mortar good advice)

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04th Mar 2013 18:31

It is not unique

Some years back client came to me who had left his (large and well known) employer. He had to exercise share options on shares held within an approved scheme. No-one told him these would be liable to income tax as they fell within the 3 year rule i.e. less than 3 years from issue.

He sold the shares some time later and assumed he would have to pay CGT.

In fact he ended up paying pretty much exactly what he actually got for the shares in income tax. He was lucky - their value could in theory have plunged to nil leaving him with significant tax to pay from other resources.

It would be good to think HMRC might exercise their general power of care and management and reach some agreement with the appellant above rather than ruining him. Maybe he should have paid for advice - easy for all of us to say that with the benefit of hindsight.

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By ACDWebb
04th Mar 2013 19:02

Indeed

perhaps he should have taken proper advice as to the import of the four options to get monies out, one might even have hoped the insurance company might have said "are you sure / do you realise that ..." but then I suppose it's not down to them, but him. No doubt he foolishly thought that no legislation could come up with such a mad end result. How wrong he was.

The judge clearly felt there was a particularly bad smell to the whole affair and tried every which way to find a way through to a more equitable result, but could not.

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06th Mar 2013 09:28

Not the life company

I have read the judgement. He should go after HSBC Private Banking who arranged the bond not the life company.

 

Under advice he:

a) borrowed to invest

b) the loan was advanced by HSBC (on what criteria!!!!)

c) did they take commission on the gross

b) invested the totality of his funds (actually times 2 inc the loan)

c) The funds were the proceeds of a house sale and he had no other accomodation

d) he had no other assets and was advised to invest the whole in a longterm investment

I could go on but.....

this is actually getting rather boring. This case should never have been written in the first place and when I signed off compliance work would have been chucked out a first base and the adviser severely carpetted.

His lawyers should pick up the 'phone now and give HSBC's compliance director a very unpleasant start to his day. They should also get an expert witness in the area of FSA compliance requirements; this case stinks.

Sorry, end of rant

 

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By ACDWebb
06th Mar 2013 09:49

No. No connection, or knowledge as to how it might proceed.

I read the case and it seemed a useful reminder of how the absence of understanding of how the tax law works can lead to something going so spectacularly wrong.

Not sure if the caps lock ref was to my headline, but in the circumstances a capitalised / shouty ouch seemed not so unreasonable.

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06th Mar 2013 17:06

I'm not a Dutchman but...

Mr Lobler is so I don't know how common a name it is in the Netherlands

Thought I'd Google the name plus HSBC to see if a national had picked it up. e.g 'poor foreigner doen by the system etc etc. Nothing. except

The only Joost Lobler that did come up is a longterm senior executive  in hedgefund services management; from a hedgefund confernce site 'He has 20 years of experience from various senior roles in investment banking and global fund services in Holland, the UK, the Caribbean and Hong Kong'.

Despite my earlier post ther was something fishy about that HSBC Private Banking arranging a loan to a client with SO (ironic) little. More to this than meets the eye. Could of course be someone completely different.

Doesn't change the CE result of course.

To much entertainment; back to work now.

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By ACDWebb
30th Mar 2015 12:01

In a resurrection of a long dormant thread

... it would seem that Mr Lobler has been luckier with the Upper Tribunal, and that there are quite a few appeals waiting on the result of this as well:

www.bailii.org/uk/cases/UKUT/TCC/2015/152.html

 

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