C Shanthiratnam v HMRC

In C Shanthiratnam v HMRC (TC01215 – 13 July) an individual (S) paid £150 000 in March 2006 to purchase 50 overseas life insurance policies.

In March 2007 he surrendered approximately one-third of the rights under the policies and withdrew £50 000.

HMRC issued an assessment charging tax under ITTOIA 2005 s 461 et seq treating £42 000 of the amount withdrawn as taxable income.

The First-tier Tribunal upheld the assessment and dismissed S’s appeal.

Judge Nowlan observed that S ‘had not entirely understood the tax implications of making the partial surrenders’ and that there would have been no charge to income tax if S had made total surrenders of 16 or 17 of the policies rather than partial surrenders of all 50.

Why it matters: The Tribunal upheld HMRC’s interpretation of ITTOIA 2005 s 461 et seq...