IPTM7815 - Personal portfolio bonds (PPB): policies made before 17 March 1998: transitional period: policyholder returns to UK after 17 March 1998

Where the policyholder is an individual who takes up residence in the UK after 17 March 1998, the time limit described in IPTM7810 for varying the policy so that it is not a PPB is extended to take account of the later arrival in the UK.

As in cases where the policyholder is resident in the UK on 17 March 1998, the transitional provision can only apply if no policy benefits have actually been determined since 5 April 1994 by reference to property other than in the permitted categories.

Time limit for making the variation

The variation to the policy to limit the property and indices that may be selected must be made by the end of the first insurance year that begins on or after the later of:

  • the day after the date on which the policyholder first became resident in the UK for tax purposes, and
  • the actual date of arrival, but only where the individual has arrived in the UK to take up permanent residence or stay for at least two years.

The extension to the time limit given in the second bullet recognises that there is no provision for splitting tax years into periods of residence and non-residence. An individual who becomes resident during a tax year is treated as being UK resident from 6 April prior to arrival.

If the variation is made within this transitional period, the policy is treated as not giving rise to PPB gains both from date of variation, and the earlier tax years for which the individual was UK resident. So, even if an insurance year comes to an end after the policyholder has become UK resident but before the variation is made, no PPB gain will arise at the end of that year, provided the necessary variation is made by the end of the transitional period.

Example: policyholder returning to UK

  • Joseph holds a policy taken out on 27 May 1997 that allows the policyholder to select a wide range of assets to determine the policy benefits.
  • Joseph returned to the UK on 1 September 2018 and was treated as being UK resident for tax purposes from 6 April 2018, namely the start of the tax year 2018-19.
Time limit for varying the policy to prevent it being a PPB
  • The first insurance year to begin after 6 April 2018 ends on 26 May 2019 so this is the ordinary time limit for varying the terms of the policy to limit the property and indices that may be selected without causing the policy to become a PPB.
  • If the policyholder had returned to take up residence for at least two years, the time limit for making the necessary variation is instead 26 May 2020, namely the end of the first insurance year to begin on or after 1 September 2018. Provided this is done, no PPB gains would arise for tax years 2018-19 onwards.