Irish Tax Ruling on UK Endowment Policy

[eboland]

Hi there,

I worked in the UK from 1987 to 2000. We bought our main home over there and took out an endownment mortgage. We sold our home and returned to Ireland in 2000 and have been living here since. We have kept the endownment policy in place in the UK and have topped it up annually from our taxed Irish income. On returning to Ireland it was not advisable to cash in the endownment.

Question ...

What is the Irish tax liability when the endownment matures in 2013 and we bring that income into Ireland?

Jack B

 

[jpd]

This is a very complicated problem. I lived in UK from 1976 until 1983 when I moved to France and am now back in Ireland since 2003. I had 3 of these policies taken out between 1976 and 1981 (mortgage endowment and 2 savings) and I have been told that all gains since March 2001 are taxed at 40%. I have since encashed the policies and re-invested in local funds, taxable at 23%

But it is difficult to get a definite answer from the revenue - the rules on these type of policies were changed in 1991 and again in 2001 to closes loopholes in Irish residents investing in foreign policies but in closing the loopholes the position of people who had bought these policies whilst living abroad and who subsequently moved to Ireland was completely overlooked - hence the punitive 40% tax.

I'm sure that it is contrary to the EU rules but ...

 

[eboland]

Hi Thanks for the response.

I had thought that it is 40% but that does not seem to be fair as the original objective of the policy was to pay off a mortgage on one's own home.
Does anybody know if these policies could be assigned against one's own home mortgage in Ireland? Perhaps this might be a fairer workaround.

As I was a tax resident in the UK up to 2002, surely I would not be liable to Irish tax on gains on the policy up to the time I moved to Ireland and would only be liable for Irish tax @ 40% on gains accrued since I became resident for tax purposes in Ireland?

Anybody ideas ???