Holiday Property Bond


(Raymond Magill) #1

Do any forum members have experience of the tax charges on the benefits derived by UK residents from an investment in a Holiday Property Bond? This is a single premium whole life policy written by an Isle of Man company, giving policyholders points that may be used for holiday weeks in a choice of , I believe, 1000 properties. More information is available at www.hpb.co.uk.

Ray Magill


(ianmckeever) #2

What tax are you talking about? If it’s a capital tax, what is it worth? Will HPB buy it back? If not is there an aftermarket?

Second-hand timeshares can be sold but it is not necessarily easy and the price achieved is likely to represent a loss unless it has been held for a very long time.

I am not able to advise on the tax consequences. Maybe HPB will know. They should because they understand the legal structure. However, in any event it is probably worth finding out what the market value really is as that might inform what you do next.

Ian McKeever

Ian McKeever & Co Consulting Actuaries


(Raymond Magill) #3

The Holiday Property Bond isn’t a time-share, it is a whole life single premium policy written by an Isle of Man company. Bondholders may take benefits in the form of cash or - and this is the valuation question - ‘Holiday Points’. These entitle the holder to ‘rent-free’ (but there is a ‘user-charge’) of, to quote the blurb, ‘over 1,000 holiday properties every year’. HPB say that counsel advised that ‘occupation benefits used through the point system would not be treated as a capital payment’. Do forum members concur?

Ray Magill


(ianmckeever) #4

I am not a lawyer but personally I would be a little concerned that the cash alternative puts a cash value on the points, particularly in the light of HMRC guidance:

https://www.aesinternational.com/hubfs/Independent-Reviews/HMRC-How-are-insurance-bonds-taxed.pdf?t=1473079248816

On page 20 this refers in the section on part surrender or part assignments to “A gain on a part surrender etc. which results in a receipt of benefits or a payment of a cash bonus or on your insurer making a loan or on a sale”

Note the reference to the “receipt of benefits”

However as a non-lawyer I like legal opinions because I am entitled to rely upon them. That way even if they are wrong, it is not my fault. It would seem to me that a taxpayer is in a similar situation. If they have legal advice upon which they can be expected to rely, to the effect that there is no tax liability and no reporting requirement, and that advice is completely wrong, at least they have clearly not been dishonest in failing to report. That should limit any penalties which might apply.

In addition there is the provision for payments of 5% of the initial premium realised in any year not to be taxable until total withdrawals exceed the initial premium. If there is a tax liability it very probably will not arise for a number of years or until the policy is surrendered or sold. Given that resale values of time-shares tend to be low, maybe not even then.

Although technically this is not a timeshare, any third party purchaser is likely to view it as such when making a cash offer.

Much would depend on how much this alternative cash benefit is in relation to the initial cost of the policy.

This situation looks very complicated and the cost resolving it is likely to be disproportionate to the tax liabilities involved and if there are indeed tax liabilities the cost determining their exact amount might also be disproportionate to the amount of tax involved particularly as it might involve looking at benefits received decades earlier.

Ian McKeever

Ian McKeever & Co Consulting Actuaries


(Raymond Magill) #5

As this is a whole-life unit-based policy there will be a payment on death, with the possibility of a chargeable gain,the amount of which will be affected by the value of any intervening benefits represented by the ‘holiday points’ used. This could be among the easily overlooked liabilities that fall foul of the ‘Requirement to Correct’, although perhaps any individual bond will result in only a modest liability.

The advertising at https://www.hpb.co.uk/ would certainly lead the policyholder to believe there are benefits to be had, representing a return on his investment. If he is right, one wonders why they should escape tax.

Ray Magill