(1) A person who converts an interest-bearing corporate security into corporate strips of the security is treated as having acquired each corporate strip by the payment of an amount equal to—
A×BC
where—
A is the acquisition cost of the converted corporate security;
B is the market value of the corporate strip;
C is the total of the market values of all the separate assets resulting from the conversion.
(2) If the converted corporate security is a deeply discounted security—
(a) its conversion into corporate strips is to be treated for the purposes of this Chapter as a transfer of the security, but
(b) the amount payable on the transfer is taken to be an amount equal to the acquisition cost of the converted corporate security.
(3) For the purposes of this Chapter—
(a) the consolidation of a corporate strip with other corporate strips into a single security is a disposal of the corporate strip by the person consolidating it (whether or not it would be apart from this subsection), and
(b) an amount equal to the market value of the corporate strip at the consolidation is treated as payable on the disposal.
(4) Section 438 (timing of transfers and acquisitions) does not apply to a conversion within subsection (1) or a consolidation within subsection (3).
(5) Subsections (1) to (3) apply instead of sections 440(4) (market value on general conversions of deeply discounted securities) and 441 (market value acquisitions).
(6) For the purposes of this section, the acquisition cost of the converted corporate security is the amount paid in respect of his acquisition of the security by the person who has it immediately before the conversion (no account being taken of any costs incurred in connection with that acquisition).
(7) References in this section to the market value of a security given or received in exchange for, or otherwise converted into, another are references to its market value at the time of the exchange or conversion.
452G Corporate strips: manipulation of acquisition, transfer or redemption payments
(1) This section applies if—
(a) as a result of any scheme or arrangement, an amount referred to in subsection (2)(a), (b) or (c) differs from the market value of the corporate strip in a way specified in that subsection, and
(b) the obtaining of a tax advantage by any person is the main benefit, or one of the main benefits, that might have been expected to accrue from, or from any provision of, the scheme or arrangement.
(2) The ways are that—
(a) the amount paid by a person in respect of the acquisition of the corporate strip is or was more than the market value of the corporate strip at the time of that acquisition,
(b) the amount payable to a person on transferring the corporate strip is less than the market value at the time of the transfer, or
(c) on redemption of the corporate strip the amount payable to a person, as the person holding the corporate strip, is less than the market value on the day before redemption.
(3) In a case within subsection (2)(a), for the purposes of section 439(1) on transferring the corporate strip the person is treated as if the person had paid to acquire the corporate strip an amount equal to the market value of the corporate strip at the time of the acquisition.
(4) In a case falling within subsection (2)(b), for those purposes the person is treated as if the amount payable to the person on the transfer were an amount equal to the market value of the corporate strip at the time of the transfer.
(5) In a case falling within subsection (2)(c), for those purposes the person is treated as if the amount payable to the person on redemption were an amount equal to the market value of the corporate strip on the day before redemption.
(6) The market value of a corporate strip at any time is to be determined for the purposes of this section without regard to any increase or diminution in the value of the corporate strip as a result of the scheme or arrangement mentioned in subsection (1).
(7) For the purposes of this section, no account is to be taken of any incidental expenses incurred in connection with any disposal or acquisition of a corporate strip.
(1) In the case of a disposal of a deeply discounted security that meets conditions A and B, the rules in sections 454 to 456 apply for—
(a) providing for relief for losses on the disposal, and
(b) calculating the amount of profits chargeable under this Chapter on the disposal or the losses for which such relief may be given.
(2) Condition A is that the person making the disposal has held the security continuously since a time before 27th March 2003.
(3) Condition B is that the security was listed on a recognised stock exchange at any time before 27th March 2003.
454 Listed securities held since 26th March 2003: relief for losses
(1) A person may claim relief from income tax under this section for a loss the person has made on disposing of deeply discounted securities.
(2) For this purpose a person makes such a loss only if A exceeds B, where—
A is the amount the person paid for the securities, excluding any incidental expenses incurred in connection with the acquisition, and
B is the amount payable on the disposal, excluding any incidental expenses incurred in connection with the disposal.
(3) For the calculation of the amount of the loss, see section 455(2) to (4) (under which those expenses are taken into account).
(4) If a claim under this section is made by a person other than a trustee, the relief is given by deducting the loss in calculating the person's net income for the tax year in which the disposal occurs (see Step 2 of the calculation in section 23 of ITA 2007).
(5) If such a claim is made by a trustee, the amount of profits arising in the tax year in which the disposal occurs that is charged under this Chapter is reduced by the amount of the loss.
(6) A claim under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the disposal occurs.
(7) This section is subject to section 458(2) (securities held by non-UK resident trustees).
455 Listed securities held since 26th March 2003: calculating the profit or loss on disposals
(1) A person's profit on a disposal, as calculated under section 439, is reduced by any incidental expenses incurred before 6 April 2015 by that person in connection with the disposal or the acquisition of the security that have not been deducted under section 439(4).
(2) A person's loss on a disposal for the purposes of section 454 (relief for losses) is the amount by which the deductible costs exceed the amount payable on the disposal.
(3) In this section the “deductible costs” means—
(a) the amount paid by the person to acquire the security, and
(b) the incidental expenses incurred before 6 April 2015 by that person in connection with the disposal or the acquisition.
(4) Where a person re-acquires a security, any previous acquisition of it is ignored in determining the person's incidental expenses within subsection (1) or deductible costs on a subsequent disposal.
(5) For the purposes of this section, no incidental expenses are treated as incurred in connection with transfers and reacquisitions within section 445(2) and (3) (transfer and immediate reacquisition of strips on 5th April).
456 Securities issued to connected persons etc. at excessive price: subsequent transfers to connected persons
(1) No loss is taken to occur for the purposes of section 454 on a transfer of a deeply discounted security to a person connected with the transferor if conditions A and B and either condition C or conditions D and E are met.
(2) Condition A is that the transferor acquired the security on its issue.
(3) Condition B is that the amount paid by the transferor to acquire the security exceeded the market value of the security at the time of its issue.
(4) Condition C is that at that time the transferor was connected with the issuer.
(5) Condition D is that at that time the issuer was a close company.
(6) Condition E is that at that time the transferor controlled that company with other persons to whom securities of the same kind were also issued.
(7) Chapter 2 of Part 10 of CTA 2010 (meaning of “close company”) applies for the purposes of this section but with the omission of section 442(a) (exclusion of non-UK resident companies).
(8) In this section “control” has the meaning given by sections 450 and 451 of CTA 2010.
(1) This section applies if profits are taken to arise on a disposal of a deeply discounted security by trustees.
(2) For the purposes of Chapter 5 of Part 5 (settlements: amounts treated as income of settlor), the profits are to be taken to be income arising under the settlement from the security.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) If the trustees are trustees of a scheme in relation to which section 504 of ITA 2007 applies, subsection (2) does not apply to profits which are shown in the scheme's accounts as income available for payment to unit holders or for investment.
(1) Tax is not charged under this Chapter if the disposal is made by the trustees of a settlement and they are non-UK resident.
(2) The following provisions do not apply if the disposal falls within subsection (1)—
section 446 (strips of government securities: relief for losses), and
section 454 (listed securities held since 26th March 2003: relief for losses).
(3) In this section “settlement” has the same meaning as in Chapter 5 of Part 5 (see section 620).
(1) This section applies if profits are taken to arise on the disposal of a deeply discounted security by a person resident ... outside the United Kingdom (“A”).
(2) For the purpose of determining whether a UK resident individual is liable for income tax in respect of the profits, Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) has effect as if the profits, when arising, constituted income becoming payable to A.
(3) For this purpose it does not matter if A is not liable to income tax under this Chapter because of section 458 (non-UK resident trustees).
(1) In this Chapter “share”, in the case of a share in a company, means any share under which an entitlement to receive distributions may arise, but does not include a share in a building society.
(2) In this Chapter “tax advantage” has the meaning given by section 1139 of CTA 2010.
(3) In this Chapter “market value” has the same meaning as in TCGA 1992 (see sections 272 to 274 of that Act), except as provided in section 450 . . . (market value of strips etc.).
(1) Income tax is charged on gains treated as arising from policies and contracts to which this Chapter applies.
(2) For the policies and contracts to which this Chapter applies, see sections 473 to 483.
(3) See also sections 530 to 538 (provisions relating to tax treated as paid on gains and to reliefs).
(4) For exemptions, see in particular Chapter 3 of Part 6 (income from individual investment plans).
(5) For the application of this Chapter where corresponding provision for corporation tax purposes is also relevant, see section 544 (application of Chapter to policies and contracts in which companies interested).
(1) For the purposes of this Chapter, a gain from a policy or contract arises when a chargeable event occurs in relation to the policy or contract (see section 484).
(2) But certain chargeable events are only treated as occurring because a calculation required to be made as at a particular time shows that the gain has arisen.
(3) See, in particular—
(a) section 509(1) (under which a chargeable event is treated as occurring where a periodic calculation following a part surrender or assignment shows a gain),
(b) section 514(1) (under which a part surrender or assignment is treated as a chargeable event where a calculation related to it shows a gain), and
(c) section 525(2) (under which a chargeable event is treated as occurring where an annual personal portfolio bond calculation shows a gain).
(1) Tax is charged under this Chapter on the amount of the gains arising in the tax year.
(2) Subsection (1) is subject to section 514(4) (under which certain gains are charged for a later tax year).
(3) See section 469(3) for the apportionment of gains where two or more persons are interested in a policy or contract.
(4) See sections 491 to 497, 507, 508, 511 to 513, 522 to 524 and 527 to 529 for the rules as to how the gains are calculated.
463A Restricted relief qualifying policies: disapplication of section 485 etc
(1) This section applies for the purpose of determining if an individual is liable for tax charged under this Chapter.
(2) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy (“policy X”) which is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).
(3) If an individual is liable for tax charged under this Chapter as a result of subsection (2), the gain on which the tax is charged in the case of the individual is reduced by the following amount—
G × TAP TP
where—
G is the amount of the gain (apart from this subsection),
TAP is the total amount of premiums payable under policy X during the policy X period so far as they are allowable premiums as determined in accordance with section 463B, and
TP is the total amount of premiums payable under policy X during the policy X period.
(4) If section 528 also applies in the case of the individual in relation to the gain, subsection (3) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (3).
(5) The following subsections apply for the purposes of this section (except subsection (2)) and section 463B.
(6) “The policy X period” means the period for which policy X has run before the chargeable event occurs.
(7) Subsections (8) and (9) apply if policy X is a new policy in relation to another policy.
(8) For the purposes of subsection (6) policy X is to be taken to have run—
(a) from the issue of the other policy, or
(b) if the other policy was also a new policy in relation to an earlier policy, from the issue of the earlier policy,
and so on.
(9) References to premiums payable under policy X are to be read as including references to premiums payable under any earlier policy taken into account under subsection (8).
(10) The following are to be left out of account in determining the premiums payable under a policy—
(a) so much of a premium as is charged on the grounds that an exceptional risk of death or disability is involved;
(b) subject to subsection (11), so much of the first premium payable the liability for the payment of which—
(i) is discharged in accordance with paragraph 15(2) of Schedule 15 to ICTA, or
(ii) in the case of a policy in relation to which paragraph 3 of that Schedule applies, is discharged under a provision of the policy falling within paragraph 3(4)(c) of that Schedule.
(11) The maximum amount that may be left out of account under subsection (10)(b) in the case of a policy is—
£ 3,600 × N
where N is the number of complete years for which ran—
the other policy involved, or
if there is more than one other policy involved, the policy which ran for the most number of complete years.
(12) In determining the premiums payable under a policy any provision for the waiver of premiums by reason of a person's disability is to be ignored.
(13) “New policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.
463B Restricted relief qualifying policies: allowable premiums
(1) This section sets out how to determine the extent to which premiums payable under policy X during the policy X period are allowable premiums for the purposes of section 463A(3).
(2) A premium payable under policy X is allowable if it is payable before the restricted relief date.
(3) In this section “the restricted relief date” means—
(a) 6 April 2013, or
(b) if later, the date on which policy X became a restricted relief qualifying policy.
(4) Premiums payable under policy X in a relevant premium period are allowable so far as they do not exceed in total the premium limit for the period.
(5) In subsection (4) “relevant premium period” means—
(a) any period of one year which—
(i) begins with a relevant date, and
(ii) ends in the policy X period, and
(b) if it is not covered by paragraph (a), the period which—
(i) begins with the last relevant date to fall within the policy X period, and
(ii) ends at the end of the policy X period.
(6) In subsection (5) “relevant date” means—
(a) the restricted relief date, or
(b) any anniversary of the restricted relief date.
(7) For the purposes of subsection (4) “the premium limit” for a relevant premium period is determined in accordance with subsections (8) to (10).
(8) Determine the premiums payable in the relevant premium period under policies related to policy X.
(9) If the total of those premiums is £3,600 or more, the premium limit is nil (and, accordingly, no premiums payable under policy X in the relevant premium period are allowable).
(10) If the total of those premiums is less than £3,600, the premium limit is the difference between that total and £3,600.
(11) Subsection (4) does not apply if, at the time policy X became a restricted relief qualifying policy, any policy related to policy X was itself a restricted relief qualifying policy.
(12) For the purposes of this section a policy is “related” to policy X if it met the following requirements at the time policy X became a restricted relief qualifying policy—
(a) the policy is a qualifying policy under which the individual is a beneficiary (as determined in accordance with paragraph A5 of Schedule 15 to ICTA);
(b) the policy is neither a protected policy nor a pure protection policy.
(13) In subsection (12)(b)—
“protected policy” is to be read in accordance with paragraph A4 of Schedule 15 to ICTA, and
“pure protection policy” has the meaning given by paragraph A6(1)(c) of that Schedule.
(14) A policy which is a new policy in relation to a policy “related” to policy X (whether by virtue of subsection (12) or this subsection) is also “related” to policy X if it meets the requirements of subsection (12)(a) and (b) when issued.
(15) A policy ceases to be “related” to policy X if it ceases to meet those requirements.
(16) If policy X is a restricted relief qualifying policy as provided for by paragraph A2(14) of Schedule 15 to ICTA, references in this section to policy X becoming a restricted relief qualifying policy are to be read as references to the policy determined under subsection (17) becoming a restricted relief qualifying policy.
(17) The policy is—
(a) the policy (“policy Y”) in relation to which policy X was the new policy, or
(b) if policy Y was also a restricted relief qualifying policy as provided for by paragraph A2(14) of Schedule 15 to ICTA, the policy in relation to which policy Y was the new policy,
and so on.
(18) The following subsections apply for the purposes of this section if—
(a) a premium (“premium A”) is payable under policy X on a day (“day A”) which is on or after 21 March 2012 but before 6 April 2013, and
(b) the next premium payable under policy X is payable on a day (“day B”) which is—
(i) on or after 6 April 2013, and
(ii) more than one month after day A.
(19) Premium A is to be treated as if, instead of being one premium payable on day A, it were a series of premiums payable at monthly intervals with the first premium in the series payable on day A.
(20) The number of premiums in the series is equal to the number of complete months falling within the period beginning with day A and ending with day B.
(21) The amount of each premium in the series is the amount of premium A divided by the number of premiums in the series.
463C Restricted relief qualifying policies: personal representatives and trustees with deceased settlors
(1) This section applies for the purpose of determining if personal representatives are liable for tax charged under this Chapter as provided for by section 466.
(2) This section also applies for the purpose of determining if trustees are liable for tax charged under this Chapter as provided for by section 467 where—
(a) condition B in that section is met, and
(b) the person who created the trusts has died.
(3) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy if the policy is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).
(4) If any personal representatives or trustees are liable for tax charged under this Chapter as a result of subsection (3), section 463A(3) is to apply in the case of the personal representatives or the trustees—
(a) as if the reference to the individual were to the personal representatives or to the trustees, and
(b) as if the restricted relief qualifying policy were policy X.
(5) For this purpose—
(a) in section 463B(12)(a) the reference to the individual is to be read as a reference to the deceased, and
(b) a policy—
(i) which would otherwise have ceased to be “related” to policy X for the purposes of section 463B on the deceased's death, but
(ii) which continues to run after the deceased's death,
is to be treated as “related” to policy X after the deceased's death.
(6) A policy which is a new policy (as defined in paragraph 17 of Schedule 15 to ICTA) in relation to a policy treated as “related” to policy X under subsection (5)(b) or this subsection is also to be treated as “related” to policy X if, apart from the deceased's death, it would meet the requirements of section 463B(12)(a) and (b) on its issue.
(7) A policy treated as “related” to policy X under subsection (5)(b) or (6) ceases to be so treated if, apart from the deceased's death, it would cease to meet the requirements of section 463B(12)(a) and (b).
(8) If section 528A also applies in the case of the personal representatives or the trustees in relation to the gain, section 463A(3) is to be applied to the gain before section 528A and, accordingly, the reduction to be made under section 528A is to be determined by reference to the gain as reduced by section 463A(3).
463D Restricted relief qualifying policies: assignments and events following assignments etc
(1) This section applies if—
(a) paragraph A1 of Schedule 15 to ICTA applies in relation to a policy by virtue of paragraph A1(8) in consequence of an event relating to the policy (“the relevant event”),
(b) after the relevant event, the policy is not a qualifying policy by virtue of paragraph A1(2), and
(c) in relation to an event occurring after the relevant event—
(i) an individual is liable for tax charged under this Chapter on a gain from the policy, and
(ii) but for the application of paragraph A1 in relation to the policy, section 463A(3) would have applied in the case of the individual so as to reduce the gain.
(2) Section 463A(3) is to apply in the case of the individual in relation to the gain as if the policy were policy X.
(3) But, for this purpose, section 463B(5) has effect as if the references to the policy X period were to the part of that period falling before the relevant event.
(4) If section 528 also applies in the case of the individual in relation to the gain, section 463A(3) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by section 463A(3).
463E Transitional protection for policies issued in respect of insurances made on or after 21 March 2012 but before 6 April 2013
(1) This section applies if—
(a) a policy (“policy Z”) is issued,
(b) the issue of policy Z is an event falling within paragraph A2(3) of Schedule 15 to ICTA by virtue of paragraph (e),
(c) after its issue, policy Z is a qualifying policy but not a restricted relief qualifying policy,
(d) policy Z is varied on or after 6 April 2013 and the variation is an event falling within paragraph A1(3) of Schedule 15,
(e) after the variation, policy Z is not a qualifying policy by virtue of paragraph A1(2) of that Schedule,
(f) in relation to an event occurring after the variation, an individual is liable for tax charged under this Chapter on a gain from policy Z, and
(g) but for the application of paragraph A1 of Schedule 15 in relation to policy Z, the individual would not have been liable because of section 485.
(2) The gain on which the tax is charged in the case of the individual is reduced by the following amount—
G × TPV TP
where—
G is the amount of the gain (apart from this subsection),
TPV is the total amount of premiums payable under policy Z before the variation, and
TP is the total amount of premiums payable under policy Z before the chargeable event.
(3) If section 528 also applies in the case of the individual in relation to the gain, subsection (2) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (2).
(4) Section 463A(10) to (12) applies for the purposes of subsection (2).
(1) The person liable for any tax charged under this Chapter is the person indicated by—
section 465 (person liable: individuals),
section 466 (person liable: personal representatives), and
section 467 (person liable: UK resident trustees),
according to how the rights under the policy or contract are owned or held immediately before the chargeable event in question occurs.
(2) References in those sections to the ownership or holding of those rights are references to their ownership or holding at that time.
(3) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references in this section and those sections to the rights are references to that part or share.
(4) For cases where such surrenders or assignments are taken to occur, see—
section 500 (events treated as part surrenders), and
section 505 (assignments etc. involving co-ownership).
(5) This section and sections 470 to 472 are subject to section 469(4) (application of this section and those sections where two or more persons are interested in the policy or contract in question).
(6) See also—
section 468 (non-UK resident trustees and foreign institutions),
section 471 (determination of shares etc.), and
section 472 (trusts created by two or more persons).
(1) An individual is liable for tax under this Chapter if the individual is UK resident for the tax year in which the gain arises and condition A, B or C is met.
(1A) But if the tax year is a split year as respects the individual, the individual is not liable for tax under this Chapter in respect of gains arising in the overseas part of that year (subject to section 465B).
(2) Condition A is that the individual beneficially owns the rights under the policy or contract in question.
(3) Condition B is that those rights are held on non-charitable trusts which the individual created.
(4) Condition C is that those rights are held as security for the individual's debt.
(5) For the purposes of calculating the total income of an individual liable for tax under this Chapter, the amount charged is treated as income.
(6) References in this Chapter to trusts which an individual created include references to trusts arising under any of the following provisions (and references to a settlor or to a person creating trusts are to be read accordingly)—
(a) section 11 of the Married Women's Property Act 1882 (c. 75),
(b) section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880 (c. 26), and
(c) section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964 (c. 23 (N.I.)).
(7) For the right of an individual to recover certain amounts from the trustees of non-charitable trusts, see section 538 (recovery of tax from trustees).
465A Amounts for which individuals liable to be treated as highest part of total income
(1) This section applies if—
(a) an individual is liable for tax under this Chapter in respect of an amount, and
(b) the individual is treated by section 530 as having paid income tax at the savings basic rate on the amount.
(2) The amount is treated as the highest part of the individual's total income.
(3) Subsection (2) has effect for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief).
(4) See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—
(a) the rule in subsection (2), and
(b) other rules requiring particular income to be treated as the highest part of a person's total income.
(1) This section applies if an individual is temporarily non-resident.
(2) The individual is liable for tax under this Chapter for the year of return in respect of any gain that meets the conditions in subsection (3).
(3) The conditions are—
(a) the gain arose in the temporary period of non-residence,
(b) it arose from a policy issued in respect of an insurance made, or from a contract made, before the start of that period,
(c) the chargeable event giving rise to it was neither a death nor a chargeable event treated as occurring under section 525(2),
(d) no-one is liable under section 466 or 467 in respect of the gain,
(e) no-one is liable by virtue of section 468 for either the year of return or an earlier tax year as a result of the gain, and
(f) the individual would have been liable under section 465 in respect of the gain, applying the assumptions in subsection (4).
(4) The assumptions are—
(a) the individual was UK resident for the tax year in which the gain arose, and
(b) that tax year was not a split year as respects the individual.
(5) If the individual is liable by virtue of subsection (2) in respect of a gain—
(a) the amount of the gain in respect of which he or she is liable is the amount on which tax would have been charged under this Chapter applying the assumptions in subsection (4), but
(b) in determining that amount, section 528 must be applied ignoring those assumptions.
(6) That amount is treated as income of the individual for the year of return.
(7) If the gain arises from a policy or contract treated under section 473A as a single policy or contract, the date, for the purposes of subsection (3)(b), on which the insurance or contract is made is the date on which the first insurance is made in respect of which the connected policies were issued or, as the case may be, the date on which the first of the connected contracts is made.
(8) This section does not apply to a gain if—
(a) in relation to the policy or contract from which the gain arises, a terminal event occurs in the temporary period of non-residence or in the period of return,
(b) the chargeable event giving rise to the gain occurred before that terminal event,
(c) the chargeable event giving rise to the gain is one that is treated as occurring under section 509(1) as a result of the application of section 498(1)(a),
(d) section 498(1)(a) applies other than by virtue of section 500, and
(e) a person (whether or not the individual) is liable for tax under this Chapter (including by virtue of this section) in respect of any gain resulting from the terminal event.
(9) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being liable for tax under this Chapter in respect of any gain in respect of which the individual is liable for tax by virtue of subsection (2) (or as preventing a charge to tax on that gain from arising under this Chapter).
(10) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(11) In this section—
terminal event” means an event mentioned in section 499(3);
“year of return” means the tax year that consists of or includes the period of return.
(1) Personal representatives are liable for tax under this Chapter if the rights under the policy or contract are held by them and the condition in subsection (2) is met (and accordingly the gain is treated for income tax purposes as income of the personal representatives in that capacity).
(2) The condition is that if an individual were liable for tax on a gain in respect of the policy or contract, section 530(1) (individual treated as having paid tax at the savings basic rate) would be disapplied as a result of—
(a) section 531(1) (exceptions from section 530 for policies and contracts specified in section 531(3)), or
(b) paragraph 109(2) of Schedule 2 (contracts in accounting periods beginning before 1st January 1992).
(3) For cases where the condition in subsection (2) is not met, see section 664 of this Act and section 947 of CTA 2009 (under which the gain is treated as part of the aggregate income of the estate for the purposes of Chapter 6 of Part 5 of this Act and Chapter 3 of Part 10 of CTA 2009 respectively).
(1) Trustees are liable for tax under this Chapter if immediately before the chargeable event in question occurs they are UK resident and condition A, B, C or D is met.
(1A) If trustees are liable for tax under this Chapter, the gain is treated for income tax purposes as income of the trustees.
(2) Condition A is that the rights under the policy or contract are held by the trustees on charitable trusts.
(3) Condition B is that—
(a) those rights are held by the trustees on non-charitable trusts, and
(b) one or more of the absent settlor conditions is met.
(4) The absent settlor conditions are that the person who created the trusts—
(a) is non-UK resident,
(aa) is UK resident but the gain arises in the overseas part of a tax year that is, as respects the person who created the trusts, a split year,
(b) has died, or
(c) in the case of a company or foreign institution (see section 468(5)), has been dissolved or wound up or has otherwise come to an end.
(5) Condition C is that—
(a) the rights under the policy or contract are held by the trustees on non-charitable trusts,
(b) condition B does not apply, and
(c) neither section 465 nor section 466 applies.
(6) Condition D is that the rights under the policy or contract are held as security for a debt owed by the trustees.
(7) If trustees are liable for tax under this Chapter, it is charged at the savings basic rate if—
(a) condition A is met, or
(b) condition D is met and the trustees are trustees of a charitable trust.
468 Non-UK resident trustees and foreign institutions
(1) This section applies if a gain is treated as arising under this Chapter and either—
(a) trustees who are non-UK resident would be liable for tax in respect of the gain as a result of section 467 if the trustees were UK resident immediately before the chargeable event in question occurs, or
(b) immediately before that event occurs—
(i) a foreign institution beneficially owns a share in the rights,
(ii) the rights are held for the purposes of a foreign institution, or
(iii) a share in them is held as security for a foreign institution's debt.
(2) Chapter 2 of Part 13 of ITA 2007 (which prevents avoidance of tax where a UK resident individual benefits from a transfer of assets) applies with the modifications specified in subsection (3) or (4).
(3) In a case within subsection (1)(a), Chapter 2 of Part 13 of ITA 2007 applies as if—
(a) the gain were income becoming payable to the trustees, and
(b) that income arose to the trustees in the tax year in which the gain arises.
(4) In a case within subsection (1)(b), Chapter 2 of Part 13 of ITA 2007 applies as if—
(a) the gain were income becoming payable to the institution, and
(b) that income arose to the institution in the tax year in which the gain arises.
(5) In this Chapter “foreign institution” means a company or other institution resident or domiciled outside the United Kingdom.
(6) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references in this section to those rights are references to that part or share.
(7) This section does not apply if someone is liable under section 465B in respect of the gain.
469 Two or more persons interested in policy or contract
(1) This section applies if immediately before a chargeable event two or more persons have material interests in the rights under the policy or contract.
(2) Section 470 sets out the circumstances in which persons have such interests for the purposes of this section (which correspond to the circumstances referred to in sections 465 to 468 ...).
(3) Section 463 (income charged) applies in the case of any of the persons with such interests as if the amount of the gain arising when the event occurs were such part of it as is proportionate to the share of the rights to which the person's interest relates.
(4) Sections 464 to 468 (persons liable for tax etc.) apply in relation to each of those persons as if that person were the only person with such an interest at that time.
(5) Section 539(1) (relief for deficiencies) applies in relation to each of those persons as if the amount of deficiency arising when that event occurs were such part of it as is proportionate to the share of the rights to which that person's interest relates.
(6) If a person (“A”) has two or more material interests in the rights under a policy or contract, this section applies in the same way as where two or more persons have separate such interests, unless A—
(a) is the only person with such interests, and
(b) has all those interests in the same capacity.
(7) If there has been a surrender or assignment of only a part of or share in rights under the policy or contract, the references to those rights in this section and sections 470 to 472 are references to that part or share.
470 Interests in rights under a policy or contract for section 469
(1) This section sets out the circumstances in which a person has a material interest in the rights under a policy or contract for the purposes of section 469.
(2) An individual has such an interest if—
(a) the individual beneficially owns a share in the rights,
(b) a share in them is held on non-charitable trusts which the individual created, or
(c) a share in them is held as security for the individual's debt.
(3) A company has such an interest if—
(a) the company beneficially owns a share in the rights,
(b) a share in them is held on non-charitable trusts which the company created, or
(c) a share in them is held as security for the company's debt.
(4) Personal representatives have such an interest if they hold a share in the rights.
(5) Trustees of a charitable trust have such an interest if a share in the rights—
(a) is held by them, or
(b) is held as security for a debt owed by them.
(6) Trustees of a non-charitable trust have such an interest if—
(a) a share in the rights is held by the trustees and one of the absent settlor conditions specified in section 467(4) is met,
(b) a share in the rights is held by them, none of those conditions is met and no individual, company or personal representatives have an interest in the share, or
(c) a share in them is held as security for a debt owed by the trustees.
(7) A foreign institution has such an interest if—
(a) the institution beneficially owns a share in the rights,
(b) the rights are held for the institution's purposes, or
(c) a share in them is held as security for the institution's debt.
(1) For the purposes of this Chapter—
(a) rights under a policy or contract which are beneficially owned by two or more persons jointly, and
(b) an interest in such rights which is so owned,
are treated as if they were beneficially owned by those persons in equal shares.
(2) Subsections (3) and (4) apply if immediately before a chargeable event the rights under the policy or contract are, or a share in those rights is, held as security for one or more debts owed by two or more persons.
(3) Each of those persons is treated for the purposes of this Chapter as the sole debtor for a separate debt.
(4) The appropriate share of the security for the actual debt or debts, so far as it consists of the rights under the policy or contract or a share in them, is treated for the purposes of this Chapter as the security for each separate debt.
(5) In subsection (4) “the appropriate share” means—
(a) if there is only one actual debt for which the person is liable as between the debtors, a share proportionate to the share of that debt for which the person is so liable, and
(b) if there are two or more such actual debts, a share proportionate to the share of the total such debts for which the person is so liable.
(6) For the purposes of this section, property held for the purposes of a foreign institution is treated as being beneficially owned by the institution.
(7) An interest in some or all of the rights under a policy or contract which is not a share in all those rights is treated for the purposes of this Chapter as such a share in those rights as may, on a just and reasonable apportionment, be regarded as representing the interest.
(1) For the purposes of this Chapter, if immediately before a chargeable event—
(a) the rights under a policy or contract are held on non-charitable trusts created by two or more persons, or
(b) a share in those rights is so held,
each of the persons is treated as the sole settlor of a separate share of the rights or share held on trusts.
(2) Each settlor's separate share is proportionate to the share originating from that settlor of the whole of the property subject to the trusts immediately before the event.
(3) If immediately before a chargeable event non-charitable trusts apply to property originating from different persons (for example, where property is added by different persons to an existing settlement)—
(a) as respects that event the trusts are taken to have been created by them all, and
(b) accordingly, each of them is treated as a sole settlor under subsection (1).
(4) Property originates from a person for the purposes of subsections (2) and (3) if—
(a) it is property provided by the person for the purposes of the trusts,
(b) it is property representing such property, or
(c) in a case where property represents both property within paragraph (a) and other property, it is so much of that property as, on a just and reasonable apportionment, is to be taken to represent the property within paragraph (a).
(5) References in subsection (4) to property representing other property include property representing accumulated income from other property.
(6) For the purposes of this section, property is treated as provided by a person (“A”) if—
(a) it is provided by A directly or indirectly, or
(b) it is provided directly or indirectly by another person under reciprocal arrangements with A.
(7) Property is not treated as provided by A if it is provided by A directly or indirectly under reciprocal arrangements with another person.
473 Policies and contracts to which Chapter 9 applies: general
(1) This Chapter applies to—
(a) policies of life insurance,
(b) contracts for life annuities, and
(c) capital redemption policies.
(2) In this Chapter—
“capital redemption policy” means a contract made in the course of a capital redemption business, within the meaning given by section 56(3) of FA 2012 , and
“life annuity” means—
an annuity that—
is a purchased life annuity for the purposes of Chapter 7 of this Part (see section 423), and
is not specified in section 718 (annuities excluded from the exemption for part of purchased life annuity payments under section 717), or
...
(3) Subsection (1) is subject to—
section 478 (exclusion of mortgage repayment policies),
section 479 (exclusion of pension policies),
section 480 (exclusion of excepted group life policies), and
section 483 (exclusion of credit union group life policies).
473A Connected policies or contracts treated as single policy or contract
(1) Policies or contracts which are connected with each other are treated as a single policy or contract for the purposes of this Chapter.
(2) A policy or contract is “connected” with another policy or contract if—
(a) they meet the condition in subsection (3) in relation to each other, and
(b) the terms on which either of them is issued are significantly more or less favourable than would reasonably be expected if the other were ignored or any policy or contract meeting the condition in that subsection in relation to either of them were ignored.
(3) A policy or contract meets the condition in this subsection in relation to another policy or contract if—
(a) they are at any time simultaneously in force, and
(b) either of them is issued with reference to the other or with a view to enabling the other to be issued on particular terms or facilitating its being issued on those terms.
(4) If—
(a) there is a policy or contract (“A”) with which two or more other policies or contracts are connected as a result of subsection (2), but
(b) the other policies or contracts are not connected with each other as a result of that subsection,
A and the other policies or contracts are (as a result of this subsection) to be regarded as “connected” with each other.
(1) In the application of this Chapter to policies of insurance that are qualifying policies for the purposes of Chapter 1 of Part 7 of ICTA (policies within the conditions in Schedule 15 to that Act that qualify for special tax treatment) special rules apply.
(2) See, in particular—
section 485 (disregard of certain events in relation to qualifying policies),
section 503 (exception from section 501 for certain loans under qualifying policies),
section 542 (replacement of qualifying policies), and
section 543 (issue time of qualifying policy replacing foreign policy).
(3) Policies within the definition of “foreign policy of life insurance” in section 476(3) that would otherwise be qualifying policies are treated for the purposes of this Chapter as not being qualifying policies in the cases specified in subsections (4) and (5).
(4) Policies within paragraph (a) of that definition are so treated once the conditions in paragraph 24(3) of Schedule 15 to ICTA have ceased to be met with respect to them (conditions that are required to be met for certain policies issued by non-UK resident companies to be qualifying policies).
(5) Policies within paragraph (b) of that definition immediately before an event do not count as qualifying policies in relation to that event.
(1) In the application of this Chapter to personal portfolio bonds, certain special rules apply.
(2) See, in particular—
section 515 (requirement for annual calculations in relation to personal portfolio bonds), and
sections 522 to 525 (method for making calculations and chargeable events where calculations show gains).
(3) For the meaning of “personal portfolio bond” see section 516.
(1) In the application of this Chapter to foreign policies of life insurance and foreign capital redemption policies, certain special rules apply.
(2) See, in particular—
section 474(3) to (5) (certain foreign policies treated as not being qualifying policies), and
...
sections 531 to 534 (under which foreign policies are excepted from section 530 (income tax treated as paid etc.) subject to certain reliefs), ...
...
(3) In this Chapter—
“foreign policy of life insurance” means—
a policy of life insurance issued by a non-UK resident company, and
a policy of life insurance which forms part of the overseas life assurance business of an insurance company or friendly society ...,
“foreign capital redemption policy” means—
a capital redemption policy issued by a non-UK resident company, and
a capital redemption policy which forms part of the overseas life assurance business of an insurance company ..., and
“overseas life assurance business” has the meaning given by section 61 of FA 2012.
477 Special rules: certain older policies and contracts
(1) In the case of—
(a) certain contracts made before particular dates, and
(b) certain policies issued, or issued in respect of insurances made, before particular dates,
this Chapter applies subject to Parts 6 and 7 of Schedule 2 (special provisions for older policies and contracts).
(2) See the table in section 546 for the provisions affected.
(1) This Chapter does not apply to a mortgage repayment policy.
(2) In this section “mortgage repayment policy” means a policy of life insurance with the sole object of providing, on an individual's death or disability, a sum substantially the same as any amount then outstanding under a repayment mortgage—
(a) of the individual's residence, or
(b) of any premises occupied by the individual for the purposes of a business.
(3) In this section “repayment mortgage” means a mortgage securing a principal amount which is repayable by instalments payable annually or at shorter regular intervals.
This Chapter does not apply to a policy of insurance which—
(a) constitutes a registered pension scheme, or
(b) is issued or held in connection with such a scheme.
(1) This Chapter does not apply to an excepted group life policy.
(2) In this Chapter “group life policy” means a policy of life insurance whose terms provide—
(a) for the payment of benefits on the death of more than one individual, and
(b) for those benefits to be paid on the death of each of those individuals.
(3) In this section “excepted group life policy” means a group life policy with respect to which the conditions specified in the following sections are met—
(a) section 481 (conditions about benefits), and
(b) section 482 (conditions about persons intended to benefit).
481 Excepted group life policies: conditions about benefits
(1) Conditions A to D are the conditions referred to in section 480(3)(a) (definition of “excepted group life policy”).
(2) Condition A is that under the terms of the policy a sum or other benefit of a capital nature is payable or arises—
(a) on the death in any circumstances of each of the individuals insured under the policy who dies under an age specified in the policy that does not exceed 75, or
(b) on the death, except in the same specified circumstances, of each of those individuals who dies under such an age.
(3) Condition B is that under the terms of the policy—
(a) the same method is to be used for calculating the sums or other benefits of a capital nature payable or arising on each death, and
(b) any limitation on those sums or other benefits is the same in the case of any death.
(4) Condition C is that the policy does not have, and is not capable of having, on any day—
(a) a surrender value that exceeds the proportion of the amount of premiums paid which, on a time apportionment, is referable to the unexpired paid-up period beginning with the day, or
(b) if there is no such period, any surrender value.
(5) In subsection (4) “the unexpired paid-up period”, in relation to a period beginning with a day, means the period beginning then and ending with the earliest subsequent day on which a payment of premium falls due under the policy or the term of the policy ends.
(6) Condition D is that no sums or other benefits may be paid or conferred under the policy, except as mentioned in condition A or C.
482 Excepted group life policies: conditions about persons intended to benefit
(1) Conditions A to C are the conditions referred to in section 480(3)(b) (definition of “excepted group life policy”).
(2) Condition A is that any sums payable or other benefits arising under the policy must (whether directly or indirectly) be paid to or for, or conferred on, or applied at the direction of—
(a) an individual or charity beneficially entitled to them, or
(b) a trustee or other person acting in a fiduciary capacity who will secure that the sums or other benefits are paid to or for, or conferred on, or applied in favour of, an individual or charity beneficially.
(3) Condition B is that no person who is, or is connected with, an individual whose life is insured under the policy may, as a result of a group membership right relating to that individual, receive (directly or indirectly) any death benefit in respect of another individual whose life is so insured.
(4) In subsection (3)—
“death benefit in respect of an individual” means any sums or other benefits payable or arising under the policy on the individual's death or anything representing any such sums or benefits, and
“group membership right”, in relation to an individual insured by a group life policy, means any right (including the right of any person to be considered by trustees in their exercise of a discretion) that is referable to that individual being one of the individuals whose lives are insured by the policy.
(5) Condition C is that a tax avoidance purpose is not the main purpose, or one of the main purposes, for which a person is at any time—
(a) the holder, or one of the holders, of the policy, or
(b) the person, or one of the persons, beneficially entitled under the policy.
(6) In subsection (5)—
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“tax avoidance purpose” means any purpose that consists in securing a tax advantage (whether for the holder of the policy or any other person).
(7) In this section “tax advantage” has the meaning given by section 1139 of CTA 2010.