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Widows&#39 clients face windfall tax

IFAs have hit out at a Scottish Widows&#39 admin bungle which could see up to

a fifth of their clients potentially exposed to capital gains tax on


They say up to 20 per cent of their clients have not received letters

advising them of their options either to take the windfall as a cash

payment or a “loan note”.

By taking a loan note, members can potentially avoid any capital gains tax

liability, as it allows them to encash their windfall over a period of up

to seven years, avoiding the one-off tax hit.

Loan notes would be particularly attractive to policyholders receiving

payouts of more than this year&#39s current CGT allowance of £7,200.

By default, if Widows does not receive notification of how a policyholder

wants to receive their windfall, a cheque is automatically sent, triggering

the potential CGT liability.

IFA Bruce & Partners Harpenden says it realised nearly 20 per cent of its

500 Widows&#39 clients had not received the crucial letter.

Bruce & Partners director Adam Bell says: “We had to ask our policyholders

to contact Widows directly. At least two of our clients would have had to

pay capital gains tax if we had not picked up on the fact that the letters

had not been sent out. I am concerned that many IFAs are unaware ofthis


Kettering-based Adams Tingle Financial Services spokeswoman Ann Garner

says: “We had at least three people who had not received letters.

Obviously there could be others.”

Scottish Widows spokesman Glen McGill says: “We did have this sort of

enq-uiry last week. We checked and showed less than 5,000 policyholders

were identified who may not have received their letter.

“The whole approach has been externally audited and gives us the

impression thatit is very robust.”


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