Personalised Portfolio Bonds

Why are some offshore bonds referred to as Personalised Portfolio Bonds and why are they widely recommended for QROPS and investments?

Personal Portfolio Bonds

Is it true they are really inappropriate for a UK expat returning to the UK and require additional planning to avoid additional tax?

I will try to provide the answers to these key questions .

Personalised Portfolio Bonds – The returning expat and a tax problem

What is the issue? How can the right investment wrapper outside of the UK become a tax nightmare in the UK. What changes when the expat returns?

The answer: Personalised Portfolio Bonds come under anti-avoidance legislation in the UK!

Note: I covered some of the issues  related to offshore bonds in a previous blog and referred to Personalised Portfolio Bonds, and mentioned how Personalised Portfolio Bonds may be appropriate and perhaps inappropriate.

HMRC and anti-avoidance legislation

It cannot get worse than this because HMRC can assume a deemed gain even if there is no gain at all, and charge tax on it. It is known often as the 15/15/15 rule and it leads to taxation even where the bond is losing money!

This situation only applies to investments within the Personalised Portfolio Bonds, selected by the policyholder, where the policyholder is a UK tax resident.

The Income Tax, Trading and other Income Act (ITTOIA) 2005  Sections 515 to 526 provided  the legislation for this.

How is the gain calculated ?

People simply do not believe that tax is not based on the actual gains made by the overall fund. It would seem that most offshore  advisers have never heard of this important tax rule and  it ends up being  extremely costly. The reason being that  the rules assume an annual gain of 15% of both the premium and the cumulative actual gains from the date the bond was established.

The tax payable is at the policyholder’s highest rate. Even worse, the supposed tax efficiency of investment bonds does not work as top slicing relief (which normally lessens the blow and is often the cited reason for these bonds when sold to non-UK investors) does not apply to Personalised Portfolio Bonds.

Why is there a difference between  normal offshore bonds and  Personalised Portfolio Bonds?

The answer is in the holdings and this will be covered in a future blog.

Return to the UK –  what can an expat do?

If the expat returns without taking any action they will be subject to tax . Is there something an expat, that wants to keep hold of the bond, can do BEFORE returning to the UK?

Yes- a returning expat should contact a suitably qualified adviser, perhaps a firm such as ours, to receive advice about how to change the terms of Personalised Portfolio Bonds. If arranged correctly, the Personalised Portfolio Bond charge will no longer apply to a UK resident.

Therefore, prior to returning to the UK, your adviser needs to assess whether you –

  1. Do nothing and wait for the inevitable tax bill from HMRC
  2. Encash the bond and gains made while non-UK resident ( taking into account paying any local tax and any hefty early surrender penalties )
  3. Talk to an adviser firm who will speak with the relevant insurance company on your behalf to take action that may avoid the additional tax charges.



 Expats that plan to return to the UK with an offshore bond  need to speak to an adviser to ensure they understand whether their insurance bond will come a cropper with the Income Tax, Trading and other Income Act (ITTOIA) 2005 – We recommend that action is taken prior to return and by speaking with a regulated UK firm who understands HMRC rules.


The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was published on 8th March 2017


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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