UK Endowments
TEPS and tax
When an investor disposes of a TEP either as a result of
a death claim, the policy maturing or the investor deciding
to surrender or re-sell the policy via the TEP market, tax
becomes payable. The rules determining the status of the policy
will be the same as they would be for the original policyholder.
The tax position at the maturity of a traded endowment policy,
for those resident in the United Kingdom for tax purposes,
will depend on whether the policy is a qualifying or a non
qualifying one. Under the Income and Corporation Taxes Acts,
the specifics of the policy determine whether it is approved
as a 'qualifying' policy by the Inland Revenue.
Qualifying policies do not attract income tax upon disposal.
However, under the Taxation of Chargeable Gains Act 1992 the
receipt of benefit by the investor in the event of death,
maturity, surrender or subsequent sale will give rise to a
disposal for capital gains tax purposes. The proceeds from
the disposal of a non-qualifying policy are subject to both
income tax and capital gains tax.
The tax laws surrounding these products are quite complicated
and there are various ways that they can be used as part of
a broader tax and financial planning strategy. However, this
is beyond the remit of this site and is a subject which is
best approached with the assistance of a specialist financial
or tax adviser. Once you get a quote using the system on the
next page, you will be contacted by a fully qualified IFA,
who will be able to assist you in this matter.
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