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EU: Universal Life policies in vogue to pay less tax

04 July 2014   (0 Comments)
Posted by: Author: Simon Danaher
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Author: Simon Danaher (International Adviser)

Universal Life insurance products are growing in popularity as advisers look for ways to mitigate potential taxes for their high-net-worth clients who own UK property.

In recent years, the UK government has introduced a number of measures aimed at combating tax avoidance by wealthy individuals, particularly those who are not resident or domiciled in the UK.

Despite this, wealthy Asian and Middle Eastern investors have continued to purchase property in the UK, particularly in London, attracted by its "safe haven” status, the strong long-term performance of the market, and the relative weakness of sterling.

However, what these investors may not have taken into account, particularly if they come from a low-or-no tax environment such as the United Arab Emirates, is that they may be subject to UK taxes such as capital gains tax or inheritance tax on death.

There are traditional methods of mitigating these taxes, such as using a corporate structure, which will avoid the 40% IHT charge. However, last year, the UK Treasury introduced a 28% rate of tax on residential properties sold by corporates in order to capture some of this revenue.

At the same time, the UK government increased the top-rate level of Stamp Duty Land Tax – which is payable on the purchase of any UK residential property – to 15%.

According to Carlton Crabbe, a former adviser at Barclays Wealth Management and now a partner at AES International in Dubai, as awareness of these taxes has increased, particularly among his high-net-worth and ultra-high-net-worth client base in Dubai, so has demand for solutions such as Universal Life insurance.

The policies, sold by companies such as Manulife, Sun Life and Trans-America, offer investors insurance against taxes incurred on death, such as IHT, with the additional option of investing a portion of the premium.

This article first appeared on


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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