This amendment deals with the potential anomaly in the income tax rates attaching to investments in foreign life policies and offshore funds. The issue has arisen as a result of the reduction, with effect from 1 January 2015, of the higher income tax rate to 40% while the income tax rate for both domestic and offshore funds and for domestic and foreign life policies remains at 41%.

This amendment will ensure that where tax liabilities in respect of investments in foreign life policies and offshore funds are paid under the self-assessment system, an individual who submits an incorrect return will not be liable to tax at a rate lower than will apply to a compliant taxpayer. In the absence of this amendment, a correct return would attract a tax rate of 41% while an incorrect return would, rather worryingly, be taxed at the marginal rate of 40%. This would incentivise people to make incorrect returns.

The amendment also ensures that there will be tax symmetry between the rates of tax applicable under the self-assessment system in respect of investments in personal portfolio life policies and personal portfolio investment undertakings, in circumstances where either a correct or an incorrect return is submitted.