8 year tax on profit in Investment policy

jos_kel

Got a letter in the post re:Investment policy and told that revenue will tax profits since policy started 8 years ago.
1. I was surprised, thought tax was only charged on exit/encashment of policy.
2. How can tax be charged on what is effectively a paper and unrealized profit?
3. If tax is deducted on paper profit now, will it be repaid now and/or deducted at encashment time?

Browney7

jos_kel wrote: »

Got a letter in the post re:Investment policy and told that revenue will tax profits since policy started 8 years ago.
1. I was surprised, thought tax was only charged on exit/encashment of policy.
2. How can tax be charged on what is effectively a paper and unrealized profit?
3. If tax is deducted on paper profit now, will it be repaid now and/or deducted at encashment time?

1) nope every 8 years from the policy start date. Basically its so Revenue don't have to wait 20 years to get tax on your policy.
2) they look at the policy value less the amount paid in taking account of any part encashments.
3) yeah on cessation of policy tax liability will be calculated and if the policy is worth less than at the 8 year point you'll get a refund of the difference.

jos_kel

Browney7 wrote: »

1) nope every 8 years from the policy start date. Basically its so Revenue don't have to wait 20 years to get tax on your policy.
2) they look at the policy value less the amount paid in taking account of any part encashments.
3) yeah on cessation of policy tax liability will be calculated and if the policy is worth less than at the 8 year point you'll get a refund of the difference.

Ok but isn't this "early" taxing actually negatively affecting the potential of the policy to perform into the future.

jos_kel

Browney7 wrote: »

1) nope every 8 years from the policy start date. Basically its so Revenue don't have to wait 20 years to get tax on your policy.
2) they look at the policy value less the amount paid in taking account of any part encashments.
3) yeah on cessation of policy tax liability will be calculated and if the policy is worth less than at the 8 year point you'll get a refund of the difference.

Hi,
as specified before revenue have taken a 5k tax from my policy as per the 8 year rule.
In one way, I don't mind as this won't have to be paid when I eventually exit the policy.
However, will they also reimburse me for what that 5k might have grown to if it we're let in.
If not, this seems like very draconian legislation.

tomfoolery60

jos_kel wrote: »

Hi,
as specified before revenue have taken a 5k tax from my policy as per the 8 year rule.
In one way, I don't mind as this won't have to be paid when I eventually exit the policy.
However, will they also reimburse me for what that 5k might have grown to if it we're let in.
If not, this seems like very draconian legislation.

That's tax I'm afraid - of course they won't reimburse you. It's one of many of our taxes that penalise investors - no indexation and scandalously high rates also come to mind.

jos_kel

tomfoolery60 wrote: »

That's tax I'm afraid - of course they won't reimburse you. It's one of many of our taxes that penalise investors - no indexation and scandalously high rates also come to mind.

I'm wondering is there any real point in investing. This is so unfair. It's one thing taking the tax early but also impacting the overall investment potential. That's unforgivable. Has the government not screwed us enough with USC etc?