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Breaking the bonds

17 April 2012 / Rob Durrant-Walker
Issue: 4349 / Categories: Comment & Analysis , Companies
ROB DURRANT-WALKER explains the corporation tax treatment of life assurance investment bonds


  • Just what is an investment life insurance contract?
  • Top-slicing relief and 5% withdrawals relief do not apply to companies.
  • The impact of differing accounting treatment.
  • Worked examples of amounts chargeable and the consequent tax liabilities.
  • How is relief given for the underlying tax liability?

Most of us are familiar with ‘investment life insurance contracts’ as ‘5%’ single premium investment bonds. Are they a good idea for companies and how do they work for corporation tax purposes?

Their treatment depends largely upon the accounting standard and in some cases can lead to excess tax being paid. The rules described are as from 1 April 2008.

Such bonds are common investments for individuals. They are also useful as a tax deferral tool for higher-rate taxpayers.

If the total of...

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