(1) A linked savings arrangement may be—
(a) a national savings arrangement, or
(b) an institutional arrangement.
(2) In this Chapter “national savings arrangement” means an arrangement which—
(a) provides for contributions to be paid to raise money under section 12 of the National Loans Act 1968 (c. 13) (power of Treasury to borrow),
(b) is governed by regulations made under section 11 of the National Debt Act 1972 (c. 65) (power of Treasury to make regulations as to raising of money under auspices of Director of Savings), and
(c) provides for the repayment of those contributions, together with interest, in accordance with those regulations.
(3) In this Chapter “institutional arrangement” means—
(a) a bank arrangement, or
(b) a building society arrangement ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) In this Chapter—
(a) “bank arrangement” means an arrangement which provides for contributions to be paid to a person within section 991(2)(b) of ITA 2007 (banks), and
(b) “provider”, in relation to such an arrangement, means that person.
(5) In this Chapter—
(a) “building society arrangement” means an arrangement which provides for contributions to be paid by way of investment in shares in a building society, and
(b) “provider”, in relation to such an arrangement, means that society.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) A linked savings arrangement is certified under this section if it is certified by the Commissioners —
(a) as a linked savings arrangement, and
(b) in the case of an institutional arrangement, as meeting such requirements as the Treasury may specify for the purposes of this Chapter.
(2) The requirements which may be specified under subsection (1)(b) are such requirements as the Commissioners consider appropriate.
(3) They may, in particular, relate to—
(a) the descriptions of individuals who may enter into contracts under an arrangement,
(b) the contributions to be paid by them, and
(c) the sums to be paid or repaid to them.
(4) Different requirements may be specified for—
(a) bank arrangements,
(b) building society arrangements, and
(c) European authorised institution arrangements.
(5) In this Chapter “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.
706 Withdrawal and variation of certifications and connected requirements
(1) The Commissioners may—
(a) withdraw the requirements specified under section 705(1)(b) for any description of arrangements and any certification made by reference to those requirements, or
(b) vary those requirements and withdraw any certification made by reference to them.
(2) The withdrawal, or variation and withdrawal, is only effective if the Commissioners —
(a) specify the date on which it is to take effect, and
(b) give notice of it ... at least 15 days before that date to the provider authorised under section 707 to enter into contracts under the arrangement concerned.
(3) The withdrawal, or variation and withdrawal, does not affect
(a) the operation of the arrangement concerned before that date,
(b) contracts made under that arrangement before that date, or
(c) where the notice so provides, contracts which are of a description specified in the notice and are made under that arrangement after that date.
(1) In the case of an institutional arrangement, section 702(1) (exemption of interest payable under certified SAYE savings arrangements) only applies if, at the time the contract under the arrangement is made, the provider is authorised by the Commissioners to enter into contracts under it.
(2) If the authorisation is conditional, the conditions must be met at that time.
(3) Authorisation may be given for arrangements generally or a particular arrangement.
(4) More than one authorisation may be given to the same provider.
(1) The Commissioners may withdraw the authorisation of a provider or vary it by imposing, varying or removing conditions.
(2) The withdrawal or variation is only effective if the Commissioners —
(a) specify the date on which it is to take effect, and
(b) except in the case of a variation removing all conditions, give notice of it ... to the provider at least 28 days before that date.
(3) The withdrawal or variation does not affect contracts made before that date.
(4) The fact that a provider has had its authorisation withdrawn or varied does not affect the later exercise by the Commissioners of their powers under section 707 or this section as respects the provider.
(1) No liability to income tax arises in respect of a venture capital trust dividend if—
(a) conditions A and B are met, and
(b) where the dividend is paid in respect of shares acquired after 8th March 1999, condition C is met.
(2) In subsection (1) a “venture capital trust dividend” means a dividend paid in respect of ordinary shares in a company which—
(a) is a venture capital trust—
(i) at the end of the accounting period in which the profits or gains in respect of which it is paid arose or accrued, and
(ii) when the dividend is paid, and
(b) was such a trust when the person to whom it is paid acquired the shares.
(3) Condition A is that the person beneficially entitled to the dividend—
(a) is an individual of at least 18 years, and
(b) is beneficially entitled to it as the holder of the shares or as the person for whom, or for whose benefit, they are held by a nominee.
(4) Condition B is that—
(a) in the tax year in which the shares were acquired the market value of all the shares acquired by the individual or any nominee of the individual in companies which were venture capital trusts at the time of acquisition did not exceed £200,000, or
(b) in that year that market value exceeded £200,000, but the shares are treated under section 710 as having been acquired within that limit.
(5) For the purposes of subsection (4), the market value of a share is determined as at the time of its acquisition.
(6) Condition C is that the shares were acquired for genuine commercial reasons and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, was the avoidance of tax.
(7) Shares that were not so acquired are ignored for the purposes of subsection (4) and section 710 (whether or not they were acquired after 8th March 1999).
(8) In this section and in sections 710 and 711—
“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273),
“nominee”, in relation to an individual, includes the trustees of a bare trust of which the individual is the only beneficiary, and
“ordinary shares” means shares forming part of the company's ordinary share capital.
710 Treatment of shares where annual acquisition limit exceeded
(1) This section sets out the rules for determining which shares whose market value is relevant for the limit in section 709(4) are treated as shares acquired within that limit (“exempt shares”) where that limit is exceeded in a tax year.
(2) Shares are treated as exempt shares so far as their acquisition does not cause the limit to be exceeded at the time they are acquired.
(3) Subsection (2) is subject to subsection (4).
(4) If shares of different descriptions acquired on the same day cause the limit to be exceeded on that day, shares of each description are treated as exempt shares so far as their market value does not exceed the appropriate proportion of the available value.
(5) In subsection (4)—
“the appropriate proportion”, in relation to shares of a particular description, means the proportion which their market value bears to the market value of all the shares acquired on that day, and
“available value” means the maximum value of shares which could be acquired on that day without exceeding the limit.
(1) In determining whether a disposal relates to shares in a company which were acquired when it was a venture capital trust or others, it is assumed that the others are disposed of first.
(2) In determining whether a disposal of shares in a company which were acquired when it was a venture capital trust relates to shares which meet the condition in section 709(4) (annual acquisition limit) or others (“excess shares”), assumptions A and B are to be made.
(3) Assumption A is that shares acquired on an earlier day are disposed of before those acquired on a later day.
(4) Assumption B is that where the shares were acquired on the same day, excess shares are disposed of first.
(5) For the purposes of this section, acquisitions and disposals by an individual's nominee are treated as made by the individual, and acquisitions and disposals between them are ignored.
712 Identification of shares after reorganisations etc.
(1) This section applies if shares (“the new shares”) are treated under Chapter 2 of Part 4 of TCGA 1992 (reorganisations etc.) as the same assets as other shares (“the old shares”).
(2) If all the old shares met—
(a) the condition in section 709(4) (annual acquisition limit), and
(b) if it applied to the old shares, the condition in section 709(6) (acquisition for genuine commercial reasons),
the new shares are treated as doing so.
(3) If only some of the old shares met those conditions, the corresponding proportion of the new shares are treated as meeting them and the remainder are treated as not doing so.
(4) In the tax year in which the new shares are acquired the value of the new shares is ignored in determining whether other shares acquired in the same tax year meet the condition in section 709(4).
713 Introduction: securities free of tax to residents abroad (“FOTRA securities”)
(1) This Chapter provides for exemptions from income tax in respect of FOTRA securities.
(2) In this Chapter “FOTRA security” means—
(a) a security issued with a condition about exemption from taxation authorised by section 22 of F(No.2)A 1931,
(b) a gilt-edged security which was issued before 6th April 1998 and without any such condition (other than 3½% War Loan 1952 Or After), or
(c) 3½% War Loan 1952 Or After.
(3) In this Chapter “the exemption condition” has the meaning given by subsections (4) to (6), according to the kind of FOTRA security involved.
(4) In relation to a security within subsection (2)(a), it means the condition authorised by section 22 of F(No.2)A 1931.
(5) In relation to a security within subsection (2)(b), it means a condition with which 7.25% Treasury Stock 2007 was first issued, being a condition treated by section 161(1) of FA 1998 (non-FOTRA securities)—
(a) as a condition with which the security within subsection (2)(b) was issued, and
(b) as a condition authorised in relation to its issue by section 22 of F(No.2)A 1931.
(6) In relation to 3½% War Loan 1952 Or After, it means a condition of its issue authorised by section 47 of F(No.2)A 1915.
(1) No liability to income tax arises in respect of profits from a FOTRA security if conditions A and B are met.
(2) Subsection (1) is subject to subsection (5).
(3) Condition A is that the profits are stated in the exemption condition to be exempt from income tax.
(4) Condition B is that any requirements for obtaining the exemption imposed by the security's conditions of issue are met.
(5) Whatever the exemption condition provides, amounts charged under the provisions specified in subsection (6) are not exempted by subsection (1).
(6) The provisions are—
Chapter 5 of Part 5 (settlements: amounts treated as income of settlor) so far as it applies to income within section 619(1)(a) or (b), and
Chapter 2 of Part 13 of ITA 2007(anti-avoidance provisions: transfer of assets abroad).
(7) This section does not affect the need to claim repayment of tax within the time limit applicable for a claim.
(1) This section applies if—
(a) a FOTRA security is held on trust, and
(b) apart from this section, interest payable on the security would not be exempt from income tax under section 714 because of the security not being in the beneficial ownership of a non-UK resident person.
(2) For the purposes of determining whether the interest is exempt under section 714 it is to be assumed that the security is in the beneficial ownership of a non-UK resident person if none of the beneficiaries of the trust is UK resident for the tax year in which the interest arises.
(3) In subsection (2) “beneficiaries of the trust” includes any person known to the trustees as a person—
(a) who is, or will or may become, entitled under the terms of the trust to receive income under the trust, or
(b) to whom or for whose benefit such income may be paid or applied.
(4) In subsection (3) “income under the trust” includes any property held on the terms of the trust and falling to be treated as capital so far as it is or represents amounts received by the trustees as income.
716 Restriction on deductions etc. relating to FOTRA securities
(1) A person who meets conditions A and B may not bring into account for income tax purposes—
(a) any amount relating to changes in the value of a FOTRA security, or
(b) expenses related to holding it or to any transaction concerning it.
(2) Condition A is that the person is the beneficial owner of the security.
(3) Condition B is that the person is a person who would be exempt from tax on the security under this Chapter.
717 Exemption for part of purchased life annuity payments
(1) No liability to income tax arises under Chapter 7 of Part 4 in respect of so much of an annuity payment made under a purchased life annuity as is within this subsection in accordance with section 719 (extent of exemption).
(2) Subsection (1) is subject to section 718.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) In this Chapter “purchased life annuity” has the same meaning as in Chapter 7 of Part 4 (see section 423).
(1) The exemption in section 717(1) does not apply to payments made under the annuities specified in subsection (2).
(2) The annuities are—
(a) an annuity the whole or part of the consideration for which consisted of sums satisfying the conditions for relief under section 266 of ICTA (life assurance premiums),
(b) an annuity purchased following a direction in a will, and
(c) an annuity purchased to provide for an annuity payable as a result of a will or settlement out of income of property disposed of by the will or settlement.
(3) For the purposes of subsection (2)(c), it does not matter whether or not capital could also be used to pay the annuity.
(1) This section sets out the rules for determining the extent to which an annuity payment is within the exemption in section 717(1).
(2) The rules depend on—
(a) whether or not the amount of the annuity payments under the annuity depends solely on the duration of a human life or lives (see subsections (3) to (5)), and
(b) whether or not the annuity's term depends solely on the duration of a human life or lives (see subsections (6) to (8)).
(3) If the amount of the annuity payments depends solely on the duration of a human life or lives, the same proportion of each payment (“the exempt proportion”) is exempt.
(4) But if the amount of the annuity payments also depends on another contingency, each payment is exempt so far as it does not exceed a fixed sum (“the exempt sum”).
(5) If an annuity payment within subsection (4) is less than the exempt sum, the shortfall is added to the exempt sum for the next payment (and so on).
(6) The ways to determine the exempt proportion and the exempt sum differ according to whether or not the annuity's term depends solely on the duration of a human life or lives.
(7) If the annuity's term depends solely on the duration of a human life or lives—
(a) the exempt proportion is determined as set out in section 720, and
(b) the exempt sum is determined as set out in section 721.
(8) If the annuity's term also depends on another contingency—
(a) the exempt proportion is the proportion which is just and reasonable, having regard to the contingencies affecting the annuity and to section 720, and
(b) the exempt sum is the amount which is just and reasonable, having regard to the contingencies affecting the annuity and to section 721.
720 Exempt proportion: term dependent solely on duration of life
(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt proportion is —
AP
×
PP
AV
where—
AP is the annuity payment,
PP is the purchase price of the annuity, and
AV is the actuarial value of the annuity payments.
(2) The purchase price of the annuity is the total amount or value of the consideration given for the annuity.
(3) The actuarial value of the annuity payments is their value at the date when the first of the payments starts to accrue.
(4) That value is determined—
(a) by reference to tables of mortality prescribed under section 724,
(b) taking the age at that date of a person during whose life the annuity is payable as that person's age in whole years on that date, and
(c) without discounting any payment for the time to elapse before it is payable.
(5) But if it is not possible to determine that actuarial value by reference to the tables mentioned in subsection (4)(a), it is such amount as may be certified by the Government Actuary or the Deputy Government Actuary.
721 Exempt sum: term dependent solely on duration of life
(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt sum is —
PP
×
1
TY
×
PM
12
where—
PP is the purchase price of the annuity,
TY is the expected term of the annuity in years (and any odd fraction of a year), and
PM is the period in months (and any odd fraction of a month) in respect of which the annuity payment is made.
(2) The purchase price of the annuity is the total amount or value of the consideration given for the annuity.
(3) The expected term of the annuity is the period from the date when the first annuity payment starts to accrue to the date when it is expected that the last payment will become payable.
(4) The expected term of the annuity is determined—
(a) as at the date when the first annuity payment starts to accrue,
(b) by reference to tables of mortality prescribed under section 724, and
(c) taking the age at that date of a person during whose life the annuity is payable as that person's age in whole years on that date.
(5) But if it is not possible to determine that term by reference to the tables mentioned in subsection (4)(b), it is such period as may be certified by the Government Actuary or the Deputy Government Actuary.
(1) This section applies if the amount or value given for an annuity is to be determined for the purposes of sections 720(2) or 721(2) and either—
(a) consideration is not given solely for the annuity, or
(b) it appears that the amount or value of the consideration nominally given for it affected, or was affected by, the consideration given for something else.
(2) For the purposes of subsection (1), consideration given for a right to a return of premiums or of other consideration for an annuity is treated as given solely for the annuity.
(3) If subsection (1)(a) applies, the consideration is to be apportioned in such way as is just and reasonable.
(4) If subsection (1)(b) applies, the total amount or value of the considerations given is to be apportioned in such way as is just and reasonable.
(1) the Commissioners for Her Majesty’s Revenue and Customs may by regulations—
(a) prescribe the procedure to be used in giving effect to sections 717 to 722 and this section where no provision is made in those provisions,
(b) apply any provision of the Income Tax Acts, with or without modifications, for the purposes of those provisions or the regulations,
(c) prescribe tables of mortality for the purposes of sections 720(4) and 721(4).
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
725 Annual payments under immediate needs annuities
(1) No liability to income tax arises under Chapter 7 of Part 4 in respect of so much of an annual payment made under an immediate needs annuity as is made—
(a) for the benefit of the person protected under that annuity, and
(b) to a care provider or a local authority in respect of the provision of care for that person.
(2) In this section “immediate needs annuity” means a contract for a purchased life annuity—
(a) the purpose or one of the purposes of which is to protect a person against the consequences of the person being unable, at the time the contract is made, to live independently without assistance because of a condition to which subsection (3) applies, and
(b) under which benefits are payable in respect of the provision of care for the person protected.
(3) This subsection applies to—
(a) mental or physical impairment, or
(b) injury, sickness or other infirmity,
which is expected to be permanent.
(4) In this section and section 726 “care” means accommodation, goods or services which it is necessary or desirable to provide to a person because of a condition to which subsection (3) applies.
(5) In this section—
“care provider” has the meaning given in section 726, and
“purchased life annuity” has the same meaning as in Chapter 7 of Part 4 (see section 423).
(6) The Treasury may by order amend—
(a) subsection (2), and
(b) subsection (3), so far as it applies for the purposes of subsection (2).
(1) In section 725 “care provider” means a person who—
(a) carries on a trade, profession or vocation which consists of or includes the provision of care, and
(b) meets the care registration requirement.
(2) A person meets the care registration requirement in relation to care provided in England if the person is registered under Part 2 of the Care Standards Act 2000 or Chapter 2 of Part 1 of the Health and Social Care Act 2008 in respect of the provision of care.
(2A) A person meets the care registration requirement in relation to care provided in Wales if the person is registered under—
(a) Part 2 of the Care Standards Act 2000, or
(b) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016 (anaw 2),
in respect of the provision of the care.
(3) A person meets the care registration requirement in relation to care provided in Scotland if the person provides care as, or as part of, a service which is registered under—
(a) Chapter3 of Part 5 of the Public Services Reform (Scotland) Act 2010 (asp 8), or
(b) section 10Q of the National Health Service (Scotland) Act 1978 (c. 29).
(4) A person meets the care registration requirement in relation to care provided in Northern Ireland if the person is registered in respect of the provision of care under—
(a) Part 2 or 3 of the Registered Homes (Northern Ireland) Order 1992 (S.I. 1992/3204 (N.I. 20)), or
(b) Part 3 of the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003 (S.I. 2003/431 (N.I. 9)).
(5) A person meets the care registration requirement in relation to care provided in a territory outside the United Kingdom if the person meets requirements under the law of that territory relating to the provision of care that are comparable to those mentioned in subsections (2) to (4).
(6) The Treasury may by order amend this section.
(1) No liability to income tax arises under Part 5 in respect of an annual payment if it—
(a) is made by an individual, and
(b) arises in the United Kingdom.
(2) Subsection (1) is subject to—
section 728 (commercial payments), and
section 729 (payments for non-taxable consideration).
(3) Subsection (1) also applies to a payment made by an individual's personal representatives if—
(a) the individual would have been liable to make it, and
(b) that subsection would have applied if the individual had made it.
(4) For the purposes of subsection (1) and section 728, “individual” includes a Scottish partnership if at least one partner is an individual.
A payment by an individual is not exempt from income tax under section 727(1) if it is made for commercial reasons in connection with the individual's trade, profession or vocation.
(1) A payment that meets condition A is only exempt from income tax under section 727(1) if condition B or C is met.
(2) Condition A is that—
(a) the payment is made under a liability incurred at any time for consideration in money or money's worth, and
(b) some or all of the consideration is not required to be brought into account in calculating the payer's income for income tax purposes.
(3) Condition B is that the payment is income within section 627(1) (payments on dissolution or separation) in the recipient's hands.
(4) Condition C is that the payment is made to an individual under a liability incurred at any time in consideration of the individual surrendering, assigning or releasing an interest in settled property to or in favour of a person with a subsequent interest.
(5) In the application of subsection (4) to Scotland, the reference to settled property is to be read as a reference to property held in trust.
(1) No liability to income tax arises under Part 5 in respect of an annual payment if—
(a) it is a maintenance payment,
(b) it arises outside the United Kingdom, and
(c) had it arisen in the United Kingdom it would be exempt from income tax under section 727 (certain annual payments by individuals).
(2) In subsection (1) “maintenance payment” means a periodical payment which meets conditions A and B.
(3) Condition A is that the payment is made under a court order or a written or oral agreement.
(4) Condition B is that the payment is made by a person—
(a) as one of the parties to a marriage or civil partnership to, or for the benefit of, and for the maintenance of, the other party,
(b) to any person under 21 for that person's own benefit, maintenance or education, or
(c) to any person for the benefit, maintenance or education of a person under 21.
(5) In subsection (4) “marriage” includes a marriage that has been dissolved or annulled , and “civil partnership” includes a civil partnership that has been dissolved or annulled .
(6) Subsection (1) also applies to a payment made by an individual's personal representatives if—
(a) the individual would have been liable to make it, and
(b) that subsection would have applied if the individual had made it.
731 Periodical payments of personal injury damages
(1) No liability to income tax arises for the persons specified in section 733 in respect of periodical payments to which subsection (2) applies or annuity payments to which subsection (3) applies.
(2) This subsection applies to periodical payments made pursuant to—
(a) an order of the court, so far as it is made in reliance on section 2 of the Damages Act 1996 (c. 48) (periodical payments) (including an order as varied),
(b) an order of a court outside the United Kingdom which is similar to an order made in reliance on that section (including an order as varied),
(c) an agreement, so far as it settles a claim or action for damages in respect of personal injury (including an agreement as varied),
(d) an agreement, so far as it relates to making payments on account of damages that may be awarded in such a claim or action (including an agreement as varied), or
(e) a Motor Insurers' Bureau undertaking in relation to a claim or action in respect of personal injury (including an undertaking as varied).
(3) This subsection applies to annuity payments made under an annuity purchased or provided—
(a) by the person by whom payments to which subsection (2) applies would otherwise fall to be made, and
(b) in accordance with such an order, agreement or undertaking as is mentioned in subsection (2) or a varying order, agreement or undertaking.
(4) In this section “damages in respect of personal injury” includes damages in respect of a person's death from personal injury.
(5) In this section “personal injury” includes disease and impairment of physical or mental condition.
(6) In this section “a Motor Insurers' Bureau undertaking” means an undertaking given by —
(a) the Motor Insurers' Bureau (being the company of that name incorporated on 14th June 1946 under the Companies Act 1929 (c. 23)), or
(b) an Article 75 insurer under the Bureau's Articles of Association.
(1) No liability to income tax arises for the persons specified in section 733 in respect of annuity payments if they are made under an annuity purchased or provided under an award of compensation made under the Criminal Injuries Compensation Scheme or the Victims of Overseas Terrorism Compensation Scheme.
(2) The Treasury may by order provide for sections 731, 733 and 734 to apply, with such modifications as they consider necessary, to periodical payments by way of compensation for personal injury for which provision is made under a scheme or arrangement other than the Criminal Injuries Compensation Scheme or the Victims of Overseas Terrorism Compensation Scheme.
(3) In this section—
“the Criminal Injuries Compensation Scheme” means—
the schemes established by arrangements made under the Criminal Injuries Compensation Act 1995 (c. 53),
arrangements made by the Secretary of State for compensation for criminal injuries in operation before the commencement of those schemes, or
the scheme established under the Criminal Injuries (Northern Ireland) Order 2002 (S.I. 2002/796) (N.I.1), and
“personal injury” includes disease and impairment of physical or mental condition.
733 Persons entitled to exemptions for personal injury payments etc.
The persons entitled to the exemptions given by sections 731(1) and 732(1) for payments are—
(a) the person entitled to the damages under the order, agreement, undertaking or to the compensation under the award in question (“A”),
(b) a person who receives the payment in question on behalf of A, and
(c) a trustee who receives the payment in question on trust for the benefit of A under a trust under which A is, while alive, the only person who may benefit.
(1) No liability to income tax arises for the persons specified in subsection (2) in respect of sums paid under a lifetime trust—
(a) to the person (“A”) who is entitled to—
(i) a payment under an order, agreement or undertaking within section 731(2) or an annuity purchased or provided as mentioned in section 731(3), or
(ii) compensation under an award within section 732(1), or
(b) for the benefit of A.
(2) The persons are—
(a) A, and
(b) if subsection (1)(b) applies, a person who receives the sum on behalf of A.
(3) For the purposes of subsection (1), sums are paid under a lifetime trust if they are paid—
(a) by the trustees of a trust under which A is, while alive, the only person who may benefit, and
(b) out of payments within section 731(2) or (3) or 732(1) which are received by them on trust for A.
(1) No liability to income tax arises under this Act in respect of an annual payment under an insurance policy if—
(a) the payment is a benefit provided under so much of the policy as insures against a health or employment risk (see section 736),
(b) no part of any premiums under the policy has been deductible in calculating the income of the insured for income tax purposes, and
(c) the conditions in sections 737 and 738 and, so far as applicable, those in sections 739 and 740 are met in relation to the policy.
(2) Subsection (1)(b) is subject to section 743.
(3) For the meaning of “the insured”, see sections 742 and 743(2).
(1) For the purposes of sections 735 and 737 to 743, a policy insures against a health risk if it insures against the insured becoming, or becoming in any specified way, subject—
(a) to any physical or mental illness, disability, infirmity or defect, or
(b) to any deterioration in a condition resulting from any such illness, disability, infirmity or defect.
(2) For the purposes of sections 735 and 737 to 743, a policy insures against an employment risk if it insures against circumstances arising as a result of which the insured ceases—
(a) to be employed or hold office, or
(b) to carry on any trade, profession or vocation.
(3) For the purposes of section 735, this section and sections 737 to 743, references to insurance against a risk include insurance providing for benefits payable otherwise than by way of indemnity if the circumstances insured against occur.
(1) The condition in this section is that the only annual payments provided for by the policy which relate to the health or employment risk it insures against (“the insured risk”) are payments in respect of one or more of the following periods.
(2) They are—
(a) a period throughout which an illness, disability, infirmity or defect insured against by the part of the policy relating to the insured risk continues,
(b) a period throughout which, in circumstances insured against by the part of the policy relating to the insured risk, the insured is unemployed, does not hold an office or is not carrying on a trade, profession or vocation,
(c) a period throughout which, in circumstances insured against by the part of the policy relating to the insured risk, the insured's income is less than it would otherwise have been, and
(d) where a period within paragraph (a), (b) or (c) ends with the death of the insured, a period immediately following that period.
(3) For the purposes of subsection (2)(a), an illness, disability, infirmity or defect is treated as continuing during a period of convalescence or rehabilitation related to it.
(4) For the purposes of subsection (2)(c), income from the policy is ignored.
(1) The condition in this section is that throughout the period that the policy has contained provisions relating to the health or employment risk those provisions have been such that any policy of insurance which only contained those provisions would involve the possibility that the insurer would make a significant loss on the premiums.
(2) In determining whether a policy would involve that possibility, any return on the investment of the premiums is to be taken into account.
(3) For this purpose reinsurance is ignored.
739 Conditions to be met by policies also providing other benefits
(1) The conditions in this section only apply if the policy provides for the payment of benefits which do not all relate to the health or employment risk.
(2) The conditions are that so far as the policy's terms relate to the health or employment risk—
(a) they do not differ significantly from what they would have been if the only benefits had been those relating to that risk, and
(b) the way in which they are given effect does not differ significantly from the way in which they would have been given effect in that case.
(3) A difference relating only to the reduction of benefits payable to or in respect of a person because of other benefits being payable to or in respect of the person is to be ignored.
(4) For the purposes of this section, all the persons for whose benefit the policy provides insurance against the health or employment risk are to be considered.
740 Conditions to be met where policies are linked
(1) The conditions in this section only apply if—
(a) the insured is or has been the insured under one or more other policies (“connected policies”), and
(b) each of the connected policies has been in force either—
(i) at a time when the policy in question was in force, or
(ii) at the time immediately before it was entered into.
(2) The conditions are that so far as the terms of the policy relate to the health or employment risk—
(a) they do not differ significantly from what they would have been if no connected policies had been entered into, and
(b) the way in which they are given effect does not differ significantly from the way in which they would have been given effect in that case.
(3) A difference relating only to the reduction of benefits payable to or in respect of a person under the policy because of benefits being payable to or in respect of the person under any of the connected policies is to be ignored.
(4) For the purposes of this section, all the persons for whose benefit the policy provides insurance against the health or employment risk are to be considered.
741 Aggregation of policies where employment ends for health reasons
(1) This section applies if—
(a) payments are made to or in respect of a person who has left employment because of the occurrence of something insured against by an employment policy as a health risk,
(b) the payments are made under another policy (“the replacement policy”) which was entered into under, or in accordance with, provisions contained in the employment policy,
(c) the employment policy has ceased to apply to the person, and
(d) the rights in accordance with which the payments are made under the replacement policy superseded rights under the employment policy with effect from the time when that policy ceased to apply to the person.
(2) The employment policy and the replacement policy are to be treated as a single policy for the purposes of sections 735 to 738, this section and section 743.
(3) In this section—
“employment” includes an office, and “employees” and “employer” are to be read accordingly, and
“employment policy” means a policy entered into wholly or partly for the benefit of the employees of an employer against a health risk.
In sections 735 to 737 “the insured” includes—
(a) the insured's spouse or civil partner ,
(b) any child under 21 of the insured or the insured's spouse or civil partner , and
(c) any person on whom any liabilities arising from an actual or proposed transaction identified in the policy will fall jointly with the insured or the insured's spouse.
743 Policies for the benefit of others who contribute to premiums
(1) This section applies if—
(a) a policy of insurance is taken out by one person (“A”) wholly or partly for the benefit of another (“B”),
(b) B makes payments or contributions in respect of the premiums, and
(c) annual payments under the policy are wholly or partly attributable, on a just and reasonable basis, to the payments or contributions made by B.
(2) So far as those benefits are so attributable, B is to be treated as the insured in relation to that policy for the purposes of sections 735 to 742.
(3) So far as those benefits are so attributable, payments or contributions not made by B are ignored for the purposes of section 735(1)(b) (no part of the premiums to have been deductible in calculating the insured's income).