Plans for the review were announced at Budget 2016 and relate to the property categories at section 520 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).

HMRC introduced the personal portfolio bond rules in 1999 in order to deter the holding of personal assets within a life insurance policy, which it argued allowed individuals to defer any tax charges on the income or gains arising from that property.

To prevent the rules applying too widely, a life insurance policy is not a personal portfolio bond merely because its terms permit property selection if all of the property which may be selected falls within certain categories.

These currently include:

• property in an insurers internal linked fund;
• units in an authorised unit trust; shares in an investment trust; shares in an open-ended investment company;
• cash;
• life insurance policies; and
• an interest in certain non-UK collective investment schemes.

In its consultation, HMRC states that the property categories at section 520 ITTOIA 2005 have not materially changed since 1999, despite the investment landscape having evolved considerably over that period.

It is proposing to add three types of investment vehicle to the section 520 ITTOIA 2005 permitted property categories : real estate investment trusts (both UK and foreign equivalents); overseas equivalents of UK approved investment trusts; and UK authorised contractual schemes.

HMRC is asking for feedback on whether these three options should be included in the permitted list and what the impact would be. It is also seeking views on whether there are any other categories of investment which should be considered, whether some of the existing property categories should be narrowed or revised, and how the overseas equivalent of a UK investment trust could be defined. 

The consultation closes on 3 October.

The HMRC Personal Portfolio Bonds - Reviewing the Property Categories consultation is here: