The Isle of Man Government is changing the way that it taxes investment bonds for residents.
Under current treatment, income tax is charged on any regular withdrawals.
Under new proposals set out in August in an Isle of Man Treasury consultation document, the taxable amount will be calculated using “income yield factor”, based on the Bank of England’s base rate, to judge how much the fund has grown since the first day of the policy year.
The income yield factor will be calculated by the Island’s Treasury using a formula, part of which will reduce the base rate by 40 per cent to take into account the capital element of the bond.
The factor will be limited to a minimum of 2 per cent and a maximum of 8 per cent. An exemption on charges after six years is expected to be included in the bill.
MBL Financial deputy chief executive Simon Pickering says: “This is an incredibly complicated way of working out a tax liability.
“It will confuse clients and advisers and there is a good chance people will make mistakes in paying their tax bec-ause of it.”