SolvedIPTM7795 | Personal portfolio bonds (PPB): policies made before 17 March 1998: general rules
From HM Revenue & Customs · Insurance Policyholder Taxation Manual
The PPB legislation applies different rules to policies and contracts that were taken out before 17 March 1998. The category of permitted property that may be selected without making the policy a PPB is rather wider than for policies and contracts made on or after 17 March 1998. There are also transitional rules to allow time for the terms of pre-17 March 1998 policies to be varied to meet the conditions to avoid being a PPB.
Variations on or after 16 July 1998
Where, however, a policy has been varied on or after 16 July 1998 so as to increase the benefits under the policy or increase its term, it is treated for the purpose of the PPB legislation as if it was made on or after 17 March 1998. Then the normal PPB rules described in IPTM7705 to IPTM7790 apply. An exercise of rights under an option in the policy is treated for this purpose as a variation.
IPTM7080 and IPTM7085 explain more about what is meant by ‘increasing the benefits’ and ‘extending the term’ generally. IPTM7825 explains more about variations and substitutions in the context of PPBs.
Permitted property and indices
Where the policy or contract was made before 17 March 1998, and not varied on or after 16 July 1998 as described above, the terms of the policy may permit the selection by the policyholder of the following property and indices to determine the benefits without its being a PPB:
shares or securities that are listed on a recognised stock exchange, and
shares or securities of a company dealt on the Unlisted Securities Market or Alternative Investment Market, subject to the limitations on maximum percentages of holdings described in IPTM7805.
This is subject to either of the following conditions being satisfied:
it has at no time since 6 April 1994 been possible under the terms of the policy or contract to select property or an index other than from the permitted categories listed above, or
if it has been possible since 6 April 1994 to select property or an index other than from a permitted category then
- no such forbidden property or index has actually been selected, and
- the terms of the policy have been varied within the transitional period described in IPTM7825 to restrict selection of property and indices to the permitted categories.
Provided the various conditions are met, there is therefore some property, such as FTSE listed shares, holders of a pre-17 March 1998 policy may continue to select to determine the benefits that would not be permitted if the policy had been taken out on or after 17 March 1998.