(1) The property selection conditions are—
(a) the general selection condition (see subsection (2)), and
(b) the class selection condition (see subsection (3)).
(2) Property meets the general selection condition if, at the time when it may be selected, the opportunity to select property falling within the same category is available to—
(a) all policy holders of the insurance company, or
(b) persons acting on behalf of those policy holders.
(3) Property meets the class selection condition if, at the time when it may be selected, the opportunity to select property falling within the same category is available to—
(a) a particular class or classes of policy holders of the insurance company, or
(b) persons acting on behalf of the members of that class or those classes.
(4) A group of policy holders to whom the opportunity to select property falling within a particular category is available is a “class” for the purposes of subsection (3) if—
(a) neither membership of the class nor the opportunity are limited to connected persons,
(b) the question whether a policy holder is a member of a class, or has the opportunity, is determined solely by the insurance company, and
(c) the opportunity is clearly identified in marketing or other promotional material published by the insurance company to members of the public, or members of the public who are intending investors, as available generally to any person falling within its terms.
(5) In this section—
“holder” has the meaning given by section 516(5), and
“policy holder” includes a holder of a life annuity contract.
522 Method for making annual calculations under section 515
(1) This section deals with the calculation required to be made in relation to a policy or contract as at the end of an insurance year under section 515 to determine—
(a) whether a gain has arisen in relation to that year, and
(b) if so, the amount of the gain.
(2) There is a gain if, as at the end of the insurance year, the sum of PP and TPE exceeds TSG.
(3) In subsection (2)—
PP is the total amount of premiums paid up to the end of the insurance year,
TPE is the total amount of personal portfolio bond excesses (see section 523), and
TSG is the total amount of part surrender gains (see section 524).
(4) The gain is equal to 15% of the excess.
523 The total amount of personal portfolio bond excesses
(1) To calculate the total amount of personal portfolio bond excesses—
Step 1
Apply the calculation in section 522 in relation to the policy or contract as at the end of each previous insurance year during its existence in succession starting with the first such year.
Step 2
Determine whether in each case the calculation produces a gain and, if so, its amount.
Step 3
Add together all the amounts produced by step 2.
(2) But if there is no previous insurance year during the existence of the policy or contract, the total amount of personal portfolio bond excesses is nil.
(1) To calculate the total amount of part surrender gains—
Step 1
Apply the provisions of this Chapter mentioned in subsection (3) as modified by subsections (4) and (5) in relation to the policy or contract as at the end of each previous insurance year during its existence.
Step 2
Determine whether in each case those provisions produce a gain and, if so, its amount.
Step 3
Add together all of the amounts produced by step 2.
(2) But if there is no previous insurance year during the existence of the policy or contract, the total amount of part surrender gains is nil.
(3) The provisions of this Chapter which apply for the purposes of the calculation in subsection (1) are—
(a) subsections (2) to (6) of section 507 (method for making periodic calculations), and
(b) subsections (1) to (3) and (5) of section 508 (the value of rights partially surrendered).
(4) The provisions of section 507 mentioned in subsection (3) apply for the purposes of this section with the omission of all references in that section—
(a) to the assignment of any part of or share in the rights under the policy or contract, or
(b) to the value of any part of or share in the rights under the policy or contract so assigned.
(5) In the application of step 3 in subsection (4) of section 507 for the purposes of this section, the reference in that step to previous calculation events does not include a reference to an excess event consisting of the assignment of a part of or share in the rights under the policy or contract.
525 Chargeable events where annual calculations show gains
(1) This section applies if the calculation in section 522 shows that a gain has arisen in relation to an insurance year.
(2) The gain is treated as arising at the end of the insurance year on the occurrence of a chargeable event at that time.
526 Power to make regulations about personal portfolio bonds
(1) The Treasury may by regulations make provision about the administration of the charge to tax on personal portfolio bonds.
(2) The regulations may modify—
(a) any provision of this Chapter, or
(b) any provision of Chapter 2 of Part 13 of ICTA.
(3) The regulations may—
(a) make different provision for different cases, different circumstances or different periods, and
(b) make incidental, supplemental, consequential or transitional provision or savings.
(4) In this section “modify” includes amend or repeal.
527 Reduction for sums taken into account otherwise than under Chapter 9
(1) This section applies if the whole or part of any receipt or other credit item is taken into account in calculating both—
(a) the amount of a gain treated as arising under this Chapter, and
(b) an amount on which income tax is charged otherwise than under this Chapter or on which corporation tax is charged.
(2) The amount of the gain on which tax is charged under this Chapter is reduced by so much of the amount of that receipt or other credit item as is taken into account in both those calculations.
528 Reduction in amount charged on basis of non-UK residence where individual liable for tax
(1) Subsection (2) applies if—
(a) an individual is liable for tax charged on a gain from a policy of life insurance or a capital redemption policy, and
(b) there are one or more days in the material interest period that are foreign days.
(1A) Foreign days” are—
(a) days falling within any tax year for which the individual is not UK resident, and
(b) days falling within the overseas part of any tax year that is a split year as respects the individual.
(2) In determining the individual's liability for tax, the gain on which the tax is charged in the case of the individual is to be reduced by the appropriate fraction.
(3) The appropriate fraction is—
A B
where—
A is the number of days in the material interest period which are foreign days, and
B is the number of days in the material interest period.
(4) In subsection (2) the reference to the gain is to be read in accordance with section 463A(4), 463D(4) or 463E(3) (which relates to restricted relief qualifying policies etc) if applicable.
(5) In this section “the material interest period” means so much of the policy period as during which the individual meets condition A, B or C in section 465 in relation to the policy (subject to subsection (7)).
(6) Subsections (7) and (8) apply if, before the chargeable event, there is an assignment falling within section 487(c) in relation to the policy where the individual is the assignee.
(7) There is to be added to the material interest period any part of the policy period falling before the assignment—
(a) during which the assignor meets condition A, B or C in section 465 in relation to the policy, and
(b) which is not included in the material interest period under subsection (5).
(8) In relation to any period added to the material interest period under subsection (7), in subsection (1A)(a) and (b) the reference to the individual is to be read as a reference to the assignor.
(9) For the purposes of subsections (5) and (7), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights.
(10) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs.
(11) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (10) the new policy is to be taken to have run—
(a) from the issue of the other policy, or
(b) if it also was a new policy in relation to an earlier policy, from the issue of the earlier policy,
and so on; and in subsections (5) to (9) references to the policy are to be read accordingly as including any relevant earlier policy.
(12) In subsection (11) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.
528A Reduction in amount charged on basis of non-UK residence of deceased person
(1) Subsection (3) applies if—
(a) personal representatives are liable for tax charged on a gain from a policy of life insurance or a capital redemption policy under section 466, and
(b) there were one or more days in the material interest period that were foreign days.
(2) Subsection (3) also applies if—
(a) trustees are liable for tax charged on a gain from a policy of life insurance or a capital redemption policy under section 467 where—
(i) of conditions A to D in that section, only condition B is met, and
(ii) the absent settlor condition which is met is the one in subsection (4)(b) of that section (deceased settlor),
(b) there were one or more days in the material interest period that were foreign days, and
(c) the deceased died—
(i) in a tax year for which the deceased was UK resident but not one that was a split year as respects the deceased, or
(ii) in the UK part of a tax year that was a split year as respects the deceased.
(2A) Foreign days” are—
(a) days falling within any tax year for which the deceased was not UK resident, and
(b) days falling within the overseas part of any tax year that was a split year as respects the deceased.
(3) In determining the liability for tax of the personal representatives or trustees, the gain on which the tax is charged in the case of the personal representatives or trustees is to be reduced by the appropriate fraction.
(4) The appropriate fraction is—
A B
where—
A is the number of days in the material interest period which were foreign days, and
B is the number of days in the material interest period.
(5) In subsection (3) the reference to the gain is to be read in accordance with section 463C(8) (which relates to restricted relief qualifying policies) if applicable.
(6) In this section “the material interest period” means so much of the policy period falling before the deceased's death as during which the deceased met condition A, B or C in section 465 in relation to the policy (subject to subsection (8)).
(7) Subsections (8) and (9) apply if, before the deceased's death, there was an assignment falling within section 487(c) in relation to the policy where the deceased was the assignee.
(8) There is to be added to the material interest period any part of the policy period falling before the assignment—
(a) during which the assignor met condition A, B or C in section 465 in relation to the policy, and
(b) which is not included in the material interest period under subsection (6).
(9) In relation to any period added to the material interest period under subsection (8), in subsection (2A)(a) and (b) the reference to the deceased is to be read as a reference to the assignor.
(10) For the purposes of subsections (6) and (8), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights.
(11) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs.
(12) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (11) the new policy is to be taken to have run—
(a) from the issue of the other policy, or
(b) if it also was a new policy in relation to an earlier policy, from the issue of the earlier policy,
and so on; and in subsections (6) to (10) references to the policy are to be read accordingly as including any relevant earlier policy.
(13) In subsection (12) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.
(1) An individual or trustees who are liable for tax on an amount under this Chapter are treated as having paid income tax at the savings basic rate on that amount.
(2) The income tax treated as paid under subsection (1) is not repayable.
(3) The amount on which an individual is treated under subsection (1) as having paid income tax is reduced if subsection (4) applies.
(4) This subsection applies if the individual's total income is reduced by any deductions which fall to be made at Step 2 or 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability) from the part of the income charged to tax under this Chapter.
(5) The reduction under subsection (3) is equal to the amount of those deductions.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) This section is subject to section 531.
(1) Section 530 does not apply to gains from the kinds of policies and contracts specified in subsection (3), except for the purposes of calculating relief under section 535 (top slicing relief).
(2) Subsection (1) is subject to—
section 532 (relief for policies and contracts with European Economic Area insurers), and
section 534 (regulations providing for relief in other cases where foreign tax chargeable).
(3) The policies and contracts are—
(a) a policy of life insurance issued or a contract for a life annuity made by a friendly society in the course of exempt BLAGAB or eligible PHI business ,
(b) a foreign policy of life insurance that does not meet conditions A and B,
(c) a contract for a life annuity (other than one within paragraph (a)) which has at any time not formed part of any insurance company's or friendly society's basic life assurance and general annuity business the income and gains of which are subject to corporation tax, and
(d) a foreign capital redemption policy.
(4) In this section and section 532—
“basic life assurance and general annuity business” has the same meaning as in Part 2 of FA 2012 (see sections 57 and 67(5)) , and
“exempt BLAGAB or eligible PHI business” has the same meaning as in Part 3 of FA 2012 (see sections 154 and 155).
(5) Condition A is that the policy falls within paragraph (a) of the definition of “foreign policy of life insurance” in section 476(3) (policy issued by a non-UK resident company).
(6) Condition B is that the conditions in paragraph 24(3) of Schedule 15 to ICTA (conditions that are required to be met for certain policies issued by non-UK resident companies to be qualifying policies) are met throughout the period between—
(a) the date on which the policy was issued, and
(b) the date on which the gain arises.
532 Relief for policies and contracts with European Economic Area insurers
(1) Section 530 applies to a gain from a foreign policy of life insurance or a foreign capital redemption policy or to a gain from a contract for a life annuity (and accordingly section 531 and paragraph 109(2) of Schedule 2 do not apply) if a claim is made that conditions A to C have been met throughout the policy period.
(2) Condition A is that the company liable to make payments under the policy or contract (“the insurer”) has not been UK resident.
(3) Condition B is that a comparable EEA tax charge has applied to the insurer (see section 533).
(4) Condition C is that no excluded reinsurance contract has been made in relation to the policy or contract.
(5) In this section—
“excluded reinsurance contract”, in relation to a policy or contract, means any reinsurance contract—
wholly or partly covering any of the insurer's obligations to pay any sum or to meet any other liability arising under the policy or contract, and
relating to risk other than that the individual whose life is insured by the policy or the annuitant will die or suffer any sickness or accident,
“policy period”—
in relation to a policy, means the period between—
the making of the insurance or contract, and
the date on which the gain arises,
but excluding any period when the conditions in paragraph 24(3) of Schedule 15 to ICTA are met (conditions that are required to be met for certain policies issued by non-UK resident companies to be qualifying policies), and
in relation to a contract for a life annuity, means the period between—
the date the insurer entered into the contract, and
the date on which the gain arises,
but excluding any period when the contract fell to be regarded as forming part of a basic life assurance and general annuity business the income and gains of which were subject to corporation tax.
(1) In section 532 “comparable EEA tax charge” in relation to the company liable to make payments under the policy or contract under which the gain has arisen (“the insurer”) means a charge that meets conditions A to F.
(2) Condition A is that the charge is imposed on the insurer under the laws of a territory outside the United Kingdom that is within the European Economic Area when the gain arises.
(3) Condition B is that the charge has applied to the insurer—
(a) as a body deriving its status as a company from those laws,
(b) as a company with its place of management there, or
(c) as a company falling under those laws to be regarded for any other reason as resident or domiciled there.
(4) Condition C is that the charge applies at a rate of at least 22% in relation to the amounts subject to tax in the insurer's hands, other than amounts arising or accruing in respect of investments of a description for which a special relief or exemption is generally available.
(5) Condition D is that the charge is made otherwise than by reference to the insurer's profits.
(6) Condition E is that the charge requires sums payable and other liabilities arising under policies or contracts of the same class as the policy or contract in question to be treated as falling to be met out of amounts subject to tax in the insurer's hands.
(7) Condition F is that the charge so requires them by disallowing their deduction in calculating the amount chargeable.
534 Regulations providing for relief in other cases where foreign tax chargeable
(1) This section applies if—
(a) apart from this section, as a result of section 531 or paragraph 109(2) of Schedule 2, section 530 would not apply to gains from a policy or contract (except for the purposes of section 535 (top slicing relief)), and
(b) the Board of Inland Revenue consider it appropriate to disapply section 531 and paragraph 109(2) of Schedule 2 in relation to such gains by reference to tax chargeable under the laws of a territory outside the United Kingdom in cases other than those where they are disapplied as a result of section 532.
(2) The Board of Inland Revenue may by regulations provide for section 530 to apply to those gains (and accordingly section 531 and paragraph 109(2) of Schedule 2 not to apply to them) if a claim is made that the conditions specified in the regulations are met in relation to any time.
(3) That time may be a time before the regulations are made or a later time.
(1) An individual is entitled to relief under this section for a tax year if—
(a) the individual's liability for the tax year, as calculated under subsection (3), exceeds
(b) the individual's relieved liability for the tax year, as calculated under—
section 536 (top slicing relieved liability: one chargeable event), or
section 537 (top slicing relieved liability: two or more chargeable events).
(2) The relief is given by a reduction in or repayment of income tax equal to the excess.
(2A) If the relief is given by a reduction in income tax, it is given effect at Step 6 of the calculation in section 23 of ITA 2007.
(3) An individual's liability for a tax year for the purposes of subsection (1)(a) equals TL — SBRL, where—
TL is the amount of the individual's total liability to income tax on income charged to tax under this Chapter for the tax year, calculated on the basis that no relief is available under this section and the highest part assumptions apply, and
SBRL is the amount of income tax at the savings basic rate that the individual is treated as having paid under section 530(1) for the tax year.
(4) For the purposes of subsection (3) and sections 536 and 537, the highest part assumptions, in calculating liability to income tax on an amount, are that—
(a) the amount is the highest part of the individual's total income for the tax year, and
(b) any provision directing any other amount to be treated as the highest part is ignored.
(5) For the purposes of this section and sections 536 and 537, an individual's total income is treated as not including any amount which—
(a) is charged to tax under Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.) as the profits of a UK property business, or
(b) counts as employment income under section 403 of ITEPA 2003 (payments and benefits on termination of employment etc.).
(6) For the purposes of this section and sections 536 and 537—
(a) any chargeable event under section 525(2) (chargeable events where annual personal portfolio bond calculations show gains),
(b) any gain treated as arising on the occurrence of such an event, and
(c) the amount of any liability to income tax arising on such a gain,
are ignored.
(7) For the purposes of the calculations mentioned in subsection (1) any relief under Chapter 2 or 3 of Part 8 of ITA 2007 (which relate to gift aid and other gifts to charities) is ignored.
(8) For the purposes of the calculations mentioned in subsection (1)—
(a) section 25(2) of ITA 2007 (deductions of reliefs and allowances in most beneficial way for taxpayer) does not apply, and
(b) reliefs and allowances are available for deduction from an amount that, for the purposes of those calculations, is the highest part of the individual’s total income for the tax year only so far as they cannot be deducted from other amounts.
536 Top slicing relieved liability: one chargeable event
(1) To calculate an individual's relieved liability for the purposes of section 535(1) for a tax year for which the individual is only liable for tax on a gain from one chargeable event—
Step 1
Find the annual equivalent of the amount of that gain (“the annual equivalent”) by dividing that amount by the number of complete years for which the policy or contract has run before the chargeable event (“N”).
See subsections (2) to (8) for further provisions about calculating N.
Step 2
Find the relieved liability on the annual equivalent by—
(a) calculating the individual's liability (if any) to income tax on the annual equivalent, on the basis that—
(i) the gain from the chargeable event is limited to the amount of the annual equivalent, ...
(ii) the highest part assumptions apply, and
(iii) in determining the amount of the individual’s personal allowance under section 35 of ITA 2007 (but not the amount of any other relief or allowance), it is assumed that the gain from the chargeable event is equal to the amount of the annual equivalent, and
(b) subtracting the amount of income tax at the savings basic rate on the annual equivalent which the individual is treated as having paid under section 530(1).
Step 3
Multiply the relieved liability on the annual equivalent by N.
(2) In the case of a calculation event that is not the first calculation event in relation to the policy or contract, for steps 1 and 3 in subsection (1) N is the number of complete years since the previous such event (but see subsection (6)).
(3) For the purposes of subsection (2), part surrender or assignment events are taken to occur at the end of the insurance year in which the surrender or assignment occurs.
(4) If, in a case where subsection (2) does not apply, the gain is from a policy of life insurance which is a new policy in relation to another policy, for steps 1 and 3 N is calculated from—
(a) the issue of the other policy, or
(b) if it also was a new policy in relation to an earlier policy, the issue of the earlier policy,
and so on.
(5) In subsection (4) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.
(6) Subsection (2) does not apply if the gain is reduced under section 528 in the case of the individual.
(7) If in the case of the individual the gain is reduced under section 528—
(a) divide the number of foreign days in the material interest period (as determined in accordance with that section, including subsections (7) and (8)) by 365,
(b) if the result is not a whole number, round it down to the nearest whole number, and
(c) reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).
(8) If subsections (4) and (7) both apply, subsection (7) applies to N as calculated under subsection (4).
537 Top slicing relieved liability: two or more chargeable events
To calculate an individual's relieved liability for the purposes of section 535(1) for a tax year for which the individual is liable for tax on gains from two or more chargeable events—
Step 1
Calculate the total annual equivalent by adding together the annual equivalents for each of the chargeable events, found as specified in step 1 in section 536(1).
Step 2
Find the total relieved liability on the total annual equivalent by—
calculating the individual's liability to income tax (if any) on the total annual equivalent, on the basis that—
(i) the total gains from the chargeable events are limited to the amount of the total annual equivalent, ...
(ii) the highest part assumptions apply, and
(iii) in determining the amount of the individual’s personal allowance under section 35 of ITA 2007 (but not the amount of any other relief or allowance), it is assumed that the total gains from the chargeable events are equal to the amount of the total annual equivalent, and
subtracting the amount of income tax at the savings basic rate on the total annual equivalent which the individual is treated as having paid under section 530(1).
Step 3
Multiply the total relieved liability on the total annual equivalent by the total gains charged to tax under this Chapter for the tax year in respect of all the events.
Step 4
Divide the result of step 3 by the total annual equivalent.
(1) This section applies if—
(a) immediately before a chargeable event the rights under the policy or contract, or the part of or share in them in question, were held on non-charitable trusts,
(b) an individual is liable for tax under this Chapter for the tax year on the gain from the event, and
(c) the income tax for which the individual is liable for the tax year, after any relief available in respect of the gain under section 535 (top slicing relief), exceeds that for which the individual would have been liable apart from the event.
(2) The individual is entitled to recover that excess from the trustees, subject to the restriction specified in subsection (3).
(3) The amount recovered must not exceed the total of—
(a) any sums received by the trustees because of the chargeable event, and
(b) the value of any benefits so received.
(4) If the individual's relief under section 535 for the tax year does not relate only to the gain from the event in question, for the purposes of subsection (1)(c) a proportionate part of that relief is taken to be relief in respect of that gain.
(5) An individual may require the Inland Revenue to certify an amount recoverable by the individual under this section.
(6) Such a certificate is conclusive evidence of the amount.
(7) Subsection (8) applies where—
(a) an individual has recovered an amount from trustees under this section, and
(b) subsequently the individual's liability to tax under this Chapter has been reduced (or removed) as a result of a recalculation under section 507A or 512A.
(8) The individual must repay to the trustees the amount (if any) by which the recovered amount exceeds the individual's revised entitlement.
(9) In subsection (8) the individual's revised entitlement is the amount to which the individual is entitled under this section calculated by reference to the individual's liability to tax under this Chapter as reduced (or removed) as a result of the recalculation under section 507A or 512A.
(1) An individual is entitled to a tax reduction for a tax year in which a deficiency arises from a policy or contract on a chargeable event if—
(a) the condition in subsection (2) is met,
(b) the individual would (apart from this section) be liable to income tax at one or more relevant rates for the tax year, and
(c) the individual makes a claim.
(2) The condition is that, if a gain had arisen instead on the chargeable event—
(a) the individual would have been liable to income tax on the gain for the year, or
(b) the individual would have been so liable apart from the requirement in section 465(1) that the individual must be UK resident in the tax year in which the gain arises.
(3) The tax reduction is given effect at Step 6 of the calculation in section 23 of ITA 2007.
(4) See section 540 for the cases in which a deficiency is treated as arising from a policy or contract on a chargeable event, section 541 for how the deficiency is calculated and section 469(5) for the apportionment of deficiencies in cases where two or more persons are interested in a policy or contract.
(5) The amount of the tax reduction is calculated as follows.
Step 1
Determine the amount of the individual’s income for the tax year that is liable at each relevant rate.
Step 2
Attribute the amount or amounts determined at Step 1 to the deficiency, so far as possible.
Step 3
Calculate the amount of the individual’s preliminary income tax liability for the tax year (see subsection (6)).
Step 4
Calculate the amount of the individual’s preliminary income tax liability for the tax year again, on the assumption that each amount determined under Step 1, so far as attributed to the deficiency at Step 2, is liable at the appropriate lower rate.
Step 5
Deduct the amount found at Step 4 from the amount found at Step 3. The result is the amount of the tax reduction.
(6) The individual's preliminary income tax liability is the amount found by calculating the individual's income tax liability in accordance with section 23 of ITA 2007, ignoring Steps 6 and 7 of that calculation.
(7) In this section—
(a) “relevant rate” means a rate mentioned in the first column of the Table;
(b) “the appropriate lower rate”, in relation to an amount of the individual’s income for the tax year that is liable at a relevant rate, means the rate mentioned in the second column of the Table in the same row as that relevant rate.
(8) Here is the Table referred to in subsection (7)—
Relevant rate | The appropriate lower rate
the higher rate | the basic rate
the default higher rate | the default basic rate
the property higher rate | the property basic rate
the savings higher rate | the savings basic rate
the dividend upper rate | the dividend ordinary rate
the Scottish higher rate | the Scottish basic rate
the Scottish advanced rate | the Scottish basic rate
the Welsh higher rate | the Welsh basic rate
the Welsh property higher rate | the Welsh property basic rate
(9) Where—
(a) it is possible to carry out Step 2 in subsection (5) by attributing amounts in more than one way, and
(b) the tax reductions, calculated under that subsection by carrying out that Step in those ways, are of different amounts,
Step 2 is to be carried out in the way that results in the highest tax reduction.
540 When deficiencies arise: events following calculation events
(1) A deficiency is treated as arising from a policy or contract on a chargeable event (“the later event”) if conditions A to C are met.
(2) Condition A is that the later event is an event within section 484(1)(a)(i) or (iii) or (b) to (e) (surrender of all rights, final participation in profits, death, maturity, or taking a capital sum as a complete alternative to annuity payments).
(3) Condition B is that a gain from the policy or contract has arisen on a calculation event other than a personal portfolio bond event, occurring in relation to the policy or contract in question before the later event.
(4) Condition C is that on the later event no gain is shown by the calculation in section 491(2) (calculation of gains for such events).
(1) This section sets out how the amount of a deficiency treated as arising under section 540(1) on a chargeable event (“the later event”) is calculated.
(2) If, when the calculation in section 491(2) is made for the later event, the total allowable deductions equal or exceed the total benefit value, the amount of the deficiency is equal to the total previous gains.
(3) If, when that calculation is made, the total benefit value exceeds the total allowable deductions, the amount of the deficiency is equal to the total previous gains, less that excess.
(4) In this section “the total previous gains” means the total amount of gains that—
(a) were treated as arising on calculation events (other than personal portfolio bond events) occurring in relation to the policy or contract in question before the later event, and
(b) formed part of the total income of the individual mentioned in section 539(1) for a tax year earlier than the tax year mentioned in that section or formed part of the total income of that individual by virtue of section 465B for the tax year mentioned in section 539(1).
541A Effect of rebated or reinvested commission in certain cases
(1) This section applies if—
(a) a chargeable event within section 484(1)(a)(i) to (iii), (c) or (e) occurs in respect of a policy or contract,
(b) commission in respect of the policy or contract has at any time been rebated or reinvested, and
(c) condition A or B is met.
(2) For the purposes of performing the calculation in section 494 (total allowable deductions) for the chargeable event, the total amount of premiums under the policy or contract paid in the period mentioned in section 494(1) or (2)(b) is to be reduced by the total amount of commission attributable to those premiums that has been rebated or reinvested.
(3) Condition A is that the total amount of premiums under the policy or contract paid in a relevant period exceeds £100,000.
(4) Condition B is that—
(a) at a time when the policy or contract was the taxable person's, the taxable person's policies and contracts exceeded the relevant threshold as respects a relevant period, and
(b) premiums under the policy or contract were paid in that relevant period.
(5) In subsection (4)(a) “taxable person” means the person whose policy or contract the policy or contract is, immediately before the chargeable event.
(6) For the purposes of subsection (4)(a) a person's policies and contracts “exceed the relevant threshold” as respects a relevant period if the total amount of premiums under them paid in that relevant period exceeds the sum specified in subsection (3).
(7) In this section “relevant period” means—
(a) the period beginning with the beginning of the tax year in which the chargeable event occurs and ending with the chargeable event, or
(b) any of the 3 preceding tax years.
(8) The Treasury may by order—
(a) substitute another sum for the sum for the time being specified in subsection (3);
(b) amend the definition of “relevant period”.
(1) This section supplements section 541A.
(2) “Commission”, in relation to a policy or contract, includes any passing of value to or for the benefit of an intermediary, or a person connected with an intermediary, that can reasonably be taken to represent a reward in respect of the policy or contract.
(3) Commission in respect of a policy or contract is “reinvested” if, as a result of a waiver of an entitlement to it, there is an increase in the total value of a relevant person's policies and contracts.
(4) The amount of commission reinvested is the amount of the increase.
(5) Commission in respect of a policy or contract is “rebated” if—
(a) value passes (directly or indirectly) from an intermediary, or a person connected with an intermediary, to or for the benefit of a relevant person (and the passing of value does not amount to the reinvestment of the commission), and
(b) the passing of value can reasonably be taken to be in respect of the commission.
(6) The amount of commission rebated is the amount of value passed.
(7) A policy or contract is a person's policy or contract if a gain arising in connection with it would be—
(a) a gain for which the person, or (if the person is an individual) the person's spouse or civil partner, would be liable to tax under this Chapter, or
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) Any necessary apportionment is to be made (on a just and reasonable basis) as regards—
(a) commission which is attributable to two or more premiums, and
(b) any part of such commission that has been rebated or reinvested.
(9) Commission which is in respect of one or more policies or contracts (but is not attributable to particular premiums) is to be attributed to such premiums as is just and reasonable.
(10) In subsections (3) and (5), “relevant person” means—
(a) any of the policyholders (including any of the persons who hold the contract),
(b) a person who beneficially owns the rights under the policy or contract,
(c) if those rights are held on trust, any of the trustees, or
(d) a person connected with a person within any of paragraphs (a) to (c).
(1) A qualifying policy (“the replaced policy”) and a policy of life insurance (“the replacement policy”) which replaces the replaced policy are treated as a single policy for the purposes of sections 484 to 497 if conditions A to D are met.
(2) Condition A is that the replacement policy is also a qualifying policy under the rules in paragraph 17 of Schedule 15 to ICTA.
(3) Condition B is that the replacement results from a change in the life or lives insured.
(4) Condition C is that any sum becoming payable by the insurance company on or in connection with the termination of the replaced policy is retained by it and applied in the discharge of some or all of the liability for any premium becoming due under the replacement policy.
(5) Condition D is that no consideration in money or money's worth (other than the benefits for which provision is made by the replacement policy) is receivable by any person on or in connection with—
(a) the termination of the replaced policy, or
(b) the coming into existence of the replacement policy.
(6) The single policy is treated for the purposes of sections 484 to 497 as issued in respect of an insurance made at the time of the making of the insurance in respect of which the replaced policy was issued.
(7) So long as the replacement policy continues to be a qualifying policy, the single policy is also treated as a qualifying policy for those purposes.
(8) This section applies equally to a second or subsequent replacement policy.
(9) References in Schedule 2 (transitionals and savings) to—
(a) a policy of life insurance,
(b) the time of the making of the insurance in respect of which a policy of life insurance is issued, and
(c) a qualifying policy,
are to be read in accordance with this section.
543 Issue time of qualifying policy replacing foreign policy
(1) This section applies if—
(a) there has been a substitution of policies falling within paragraph 25(1) or (3) of Schedule 15 of ICTA (replacement of a policy issued by a non-UK resident company by a policy which is not so issued), and
(b) the new policy is a qualifying policy.
(2) The new policy is treated for the purposes of sections 484 to 497 as having been issued in respect of an insurance made on the day on which the insurance was made in respect of which the old policy was issued.
(3) References in Schedule 2 (transitionals and savings) to the time of the making of the insurance in respect of which a policy of life insurance is issued are to be read in accordance with this section.
544 Application of Chapter to policies and contracts in which companies interested
(1) This section applies where, for the purposes of determining the application of this Chapter in relation to a policy or contract at any time, it is necessary to have regard to its application at another time.
(2) It makes no difference to the application of this Chapter at that other time whether liability in respect of a gain arising at that time would have arisen or (as the case may be) would arise because of the application of this Chapter or the corporation tax provisions.
(3) In subsection (2) “the corporation tax provisions” means—
(a) Chapter 2 of Part 13 of ICTA (which makes provision for corporation tax purposes corresponding to that made by this Chapter),
(b) paragraph 20 of Schedule 15 to that Act (replacement of qualifying policies), and
(c) section 79 of FA 1997 (payments under certain life insurance policies).
(1) In this Chapter—
...
“contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544),
“friendly society” has the meaning given in the Friendly Societies Act 1992 (c. 40) and includes a society which under section 96(2) of that Act is to be treated as a registered friendly society,
“insurance company” means an undertaking carrying on the business of effecting or carrying out contracts of insurance,
“market value” has the meaning given by sections 272 and 273 of TCGA 1992,
“non-charitable trust” means a trust other than a charitable trust, and
“policy” means a policy of life insurance or a capital redemption policy.
(2) References in this Chapter to a premium include a reference to—
(a) lump sum consideration, and
(b) property other than cash transferred to the insurance company in satisfaction of a premium.
(3) References in this Chapter to the amount of premiums paid include a reference to—
(a) the amount of lump sum consideration paid by way of premium, and
(b) the market value at the date of transfer of property other than cash transferred to the insurance company in satisfaction of any premium.
546 Table of provisions subject to special rules for older policies and contracts
(1) Column 1 of the table in subsection (4) specifies provisions of this Chapter which are subject to Part 6 or 7 of Schedule 2 (transitionals and savings), and column 2 of the table specifies the provisions of that Schedule to which they are subject.
(2) See also paragraphs 85 to 91 of that Schedule.
(3) The provisions of that Schedule referred to in subsections (1) and (2) are to be read as if they were in this Chapter.
(4) This is the table—
Provisions of Chapter 9 | Provisions of Schedule 2
Section 467 | paragraph 112 (pre-17th March 1998 policies and contracts) and paragraph 114 (pre-9th April 2003 policies and contracts)
Section 473 | paragraph 96 (exclusion of pre-20th March 1968 policies and contracts) and paragraph 102 (exclusion of certain pre-26th June 1982 policies and contracts)
Section 476(3) | paragraphs 103 and 111 (certain pre-18th November 1983 and pre-17th March 1998 policies not foreign policies of life insurance) and paragraphs 104 and 113 (certain pre-23rd February 1984 and pre-23rd March 1999 policies not foreign capital redemption policies)
Section 480 | paragraph 116 (pre-9th April 2003 policies)
Section 484 | paragraph 99 (pre-10th December 1974 contracts for a life annuity: disregard of death)
Section 485(2) and (3) | paragraph 107 (pre-14th March 1989 qualifying policies)
Section 494(1) | paragraph 105(a) (pre-14th March 1984 policies: disregard of amounts deducted and repaid after tax relief by deduction from premiums abolished)
Section 500(c) | paragraph 97 (disapplication in relation to pre-27th March 1974 policies and contracts) and paragraph 102(9) (exclusion of certain pre-26th June 1982 policies and contracts)
Section 501 | paragraph 102(9) (exclusion of certain pre-26th June 1982 policies and contracts), paragraph 108 (pre-14th March 1989 policies and contracts) and paragraph 115 (pre-9th April 2003 policies and contracts: loans to trustees)
Section 507 | paragraph 100 (pre-14th March 1975 policies and contracts) and paragraph 105(b) (pre-14th March 1984 policies: disregard of amounts deducted and repaid after tax relief by deduction from premiums abolished)
Section 516 | paragraph 119 (pre-17th March 1998 policies and contracts)
Section 525 | paragraph 124(3) (pre-17th March 1998 policies and contracts) and paragraph 125(3) (pre-17th March 1998 policies and contracts)
Section 529 | paragraph 106 (disapplication of section 529(1)(a) and (b) for certain pre-20th March 1985 policies) and paragraph 110 (disapplication of section 529(1)(c) for certain pre-17th March 1998 policies)
Section 530 | paragraph 109(2) (disapplication for contracts for life annuities made in accounting periods beginning before 1st January 1992)
Section 531 | paragraph 98 (pre-27th March 1974 policies and contracts: disapplication of section 531(3)(c)) and paragraph 118 (pre-1st January 2005 contracts for immediate needs annuities: income tax treated as paid)
Section 539 | paragraph 109(4) (contracts made in accounting periods beginning before 1st January 1992)
Section 541(4) | paragraph 117 (pre-3rd March 2004 contract or policy: calculation of deficiencies)
Section 542 | paragraph 101 (disapplication in the case of pre-25th March 1982 replacement policies)
551 Charge to tax on profits from disposal of deposit rights
(1) Income tax is charged on profits and gains from the disposal of deposit rights.
(2) For the purposes of this section, the exercise of a deposit right is a disposal of it....
(1) In this Chapter “deposit rights” means—
(a) a right to receive, with or without interest, a principal amount stated in, or determined in accordance with, the current terms of issue of an eligible debt security, where in accordance with those terms the issue of uncertificated units of the eligible debt security corresponds to the issue of a certificate of deposit,
(b) a right to receive the principal amount stated in a certificate of deposit, with or without interest,
(c) an uncertificated right to receive a principal amount, with or without interest, as a result of a deposit of money,
(d) a right which—
(i) is not within paragraph (c),
(ii) is acquired in a transaction in which no certificate of deposit or security or uncertificated eligible debt security units are issued, and
(iii) is a right to receive a principal amount payable with interest by a bank or similar institution or a person regularly engaging in similar transactions, ...
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In this section—
“certificate of deposit” means a document—
relating to the deposit of money in any currency,
recognising an obligation to pay a stated principal amount to bearer or to order, with or without interest, and
by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable,
“eligible debt security” has the meaning given in regulation 3(1) of the Uncertificated Securities Regulations 2001 (S.I. 2001/3755),
“security” (except in relation to an eligible debt security) includes any loan stock or similar security, whether secured or unsecured and whether issued by—
the Government of the United Kingdom or another government,
any local or other public authority in the United Kingdom or elsewhere, or
any company,
“uncertificated”, in relation to a unit, has the meaning given in regulation 3(1) of the Uncertificated Securities Regulations 2001,
“uncertificated eligible debt security units” means uncertificated units of an eligible debt security where the issue of the units corresponds, in accordance with the current terms of issue of the eligible debt security, to the issue of a certificate of deposit,
“uncertificated right” means a right in respect of which no certificate of deposit has been issued, although the person for the time being entitled to it is entitled to call for the issue of such a certificate, and
“unit” has the meaning given in regulation 3(1) of the Uncertificated Securities Regulations 2001.