The Revenue aims to stop big UK insurance companies from using overseas insurers to manage their guaranteed funds and thus avoid taxes in this country.
It refuses to say whether the tax clamp-down is to be retrospective. If rates go down, savers considering either form of investment would gain from investing before the loophole is closed.
Once a contract has been agreed at a fixed rate of return, the life company has to meet it thereafter - unless the small print says otherwise.
Income bonds guarantee savers a certain amount of money over a set number of years, at the end of which they receive the original investment back. Although the capital is not protected against inflation, the relatively high income paid - up to 7 per cent over five years - has proved attractive to many thousands of elderly investors trying to eke out a living from their savings.
Guaranteed stock market bonds track the market and offer investors gains equal to or above any rise in the FT-SE 100 index over a given period. They also guarantee investors their original stake back if the market falls, by using part of their savings to buy options that protect their capital over the longer term.
The tax loophole works by reinsuring any funds invested with offshore insurance companies, which manage them on behalf of their British counterparts.
This allows British insurers to avoid paying 25 per cent tax, minus management expenses, on the underlying life fund, and so offer the potential for a better rate of return to the investor.
Given the nature of the guarantee, once the investor has received the amount specified in the contract, the life company and the offshore reinsurer split any additional profits between them.
Amanda Webster, marketing manager at Save & Prosper - which has 10 per cent of the pounds 1bn market for these bonds - said: 'In theory, it has been possible for different types of insurance company life funds to operate in the same way.
'What has happened is that the competitive nature of guaranteed stock market bonds meant that to offer the most attractive form of return to investors, the first companies to launch them used this particular strategy.' A similar picture has emerged in recent years with guaranteed income bonds.
The S & P bond offers 150 per cent of the gains achieved by the FT-SE 100 over five and a quarter years - as long as the index does not rise more than 60 per cent over that period. In practice, after various charges, the maximum gain would be about pounds 80 for every pounds 100 placed with S & P. If the taxman's bid goes ahead, the maximum that could be offered would be 110 per cent, limiting any future gains to about pounds 60 for every pounds 100 invested.