Questions of Cash: Ombudsman offers hope for mis-sell claim

I read your advice to JB, Folkestone (see top related link) on a mis-sold endowment policy.

Q. I read your advice to JB, Folkestone (see top related link) on a mis-sold endowment policy. I had a similar claim over a Royal & SunAlliance endowment policy - I was not told it was share-based and risky. RSA says there is a 15-year limit on claims and, as my policy was taken out in June 1988, any claim for mis-selling expired in June 2003. But I only became aware of the likely shortfall when the policy was reviewed last year. What is this 15-year rule?
NH, Sussex.

A. RSA is relying on an interpretation of the statute of limitations, which provides a 15-year limit on legal action from the date of a contract. RSA started applying the 15-year rule in May last year. "We must be fair to all our policyholders and ensure that we do not pay out compensation where legally we are not obliged to do so because this would diminish the fund available to benefit other policyholders," says RSA's spokesman, Rob Skinner. The Financial Ombudsman Service (FOS) does not accept this view of the law and says it can determine cases referred to it pre-dating the 15 years. The FOS applies time limits of six years from the date of contract, or three years from the date a person became aware or should have been aware of the consequences - on which basis you are in time.

The RSA spokesman says: "We recognise the limitations issue is a point of contention and are in discussions with the Financial Services Authority (FSA) and FOS about it." But David Creswell, a spokesman for FOS, says: "We don't think we are in discussion. We make decisions. Our rules do not have a 15-year longstop. The FSA has confirmed this and the 15-year longstop cannot be used by firms not to consider cases. This is a legislative underpin." So, you should definitely appeal to the FSO. However, you should also be aware that endowments sold in June 1988 were subject to less specific controls on selling practices than are more recent transactions and this could damage your chances of success.

Q. I have a Tessa with the Co-operative Bank maturing in March and want advice on how to reinvest the money. Co-op is offering a Tessa-Only Isa, but is this my best option? I don't want to invest directly in shares.
PS, Nottingham.

A. Stephen Humphreys, the head of financial services at the accountant Moore Stephens, says that Toisas - Tessa-Only Isas - have a huge benefit over Tessas because they do not require a fixed-term commitment, but still provide a tax-free investment. "Most investors should make use of a Toisa even if they subsequently decide to cash some or all of the funds soon after," he says. The best Toisa rates, according to the website MoneyFacts, are 5.75 per cent with West Bromwich Building Society, fixed until 31 March 2009, for a minimum balance of £1,000. The best rate for instant access and smaller balances is Intelligent Finance, at 4.6 per cent. You should check penalty terms for early encashment.

Q. I have read the Inland Revenue's booklets about resident and non-domicile status, but I'm confused. I understand that any money other than pure capital brought into the country is taxable, but is it taxed at a graduated rate; can individuals who are resident/non-domiciled deduct personal allowance; can a husband and wife be allowed the resident/non-domicile status individually or separately?
JM, London.

A. Mike Warburton, of the accountant Grant Thornton, says: "If you are non-domiciled, but resident in the UK, you are taxable on the remittance basis for overseas earnings, income and gains. You are subject to tax in the normal way for UK source earnings, income and gains. If you remit overseas income or gains to the UK, it is added into your overall income and, therefore, taxed at a graduated rate according to the tax rate that then applies: typically 20 per cent or 40 per cent. If you are remitting pure capital, this is not taxable if that capital is from an account which has not received income or gains realised since you became UK resident.

Individuals who are resident, but not domiciled in the UK can take off their normal personal allowances against overseas income as for UK income. If the overseas income has suffered tax in that country there may be relief available against double tax under the applicable double tax treaty. Spouses are not treated in the same way for tax purposes and are judged on their own merits. Since 1973 a wife does not automatically assume the domicile of her husband, but is judged on her domicile under the same criteria as her husband: essentially the domicile of her father (a domicile of origin), or a domicile of choice if that has subsequently changed. The rules on domicile and residence are being reviewed by the Inland Revenue and we expect them to change."