IPTM7830 - Personal portfolio bonds (PPB): computation of PPB gain and person taxable: ITTOIA05/S522

When PPB gains arise and computation of gain

PPB gains arise on a policy on the final day of an insurance year - see IPTM3505 - except on the final insurance year, when no PPB gain can arise. The gain is taxable in the tax year in which the end of the insurance year falls. The first tax year for which a PPB gain can arise is 2000-2001.

IPTM3650 describes the method of calculation of PPB gains and IPTM3660 gives an example of the calculation.

Taxable person

PPB gains are treated as arising on a chargeable event termed a personal portfolio bond event and exactly the same rules as for chargeable events generally must be followed to determine the person liable to tax on the gain.

Thus, for instance, where a person is the beneficial owner of the rights under the policy that person will be taxable on the gain. Where the policy is held on a trust created by an individual as settlor, the individual will be chargeable. There is more on the person liable to charge in IPTM3200 to IPTM3290.

Liable persons must report gains on a PPB on the relevant tax return in the same way as they would report gains on other chargeable events. There are no special boxes on tax returns for PPB gains.

Top slicing relief, deficiency relief, income tax treated as paid and periods of non-residence

Top slicing relief, see IPTM3820 onwards, is not available to reduce the higher rate tax payable by an individual on an annual gain arising on a personal portfolio bond event.

Deficiency relief. PPB gains are deducted in the gain calculation on a final chargeable event to see if a negative amount arises, but they do not count towards determining how much of that negative amount is available for deficiency relief – see IPTM3860 onwards.

Income tax treated as paid. The general rules about whether a chargeable event gain has tax treated as paid apply in exactly the same way to PPB gains – see IPTM3810.

Periods of non-residence. Where a PPB gain arises on a policy from an overseas insurer, and the policyholder has been resident outside the UK for earlier periods during the life of the policy, the taxable gain is apportioned to reflect the periods of non-residence. This is the same as for gains on foreign policies generally – see IPTM3730.