Paragraph 102: Certain pre-26th June 1982 policies and contracts excluded from Chapter 9 of Part 4
3599.Before FA 1983, gains on “second hand” life insurance policies and life annuity contracts (that is, where all the rights had previously been assigned for money or money’s worth) were subject to capital gains tax rather than income tax. The gain was computed under capital gains tax rules.
3600.This paragraph preserves that treatment so long as none of the events set out in sub-paragraphs (3) to (5) occurs after 23 August 1982. Should such an event occur, the policy or contract comes again within the scope of Chapter 9 of Part 4 of this Act. The paragraph is based on sections 540, 542 and 544 of ICTA.
3601.Sub-paragraphs (5) to (9) provide that certain loans made by, or by arrangement with, the issuer of the policy or contract to, or at the direction of, an individual bring the assigned policy or contract back into the scope of Chapter 9 of Part 4 of this Act. They ensure that the treatment of such loans corresponds with the rules (including exceptions) in section 501.
3602.Sub-paragraph (6) ensures that the individual mentioned in sub-paragraph (5) is within the scope of that provision even where the rights under the policy or contract are held under a charitable trust that individual created (although a gain would not be attributed to that individual under section 465 in such circumstances).
3603.Sub-paragraph (9) ensures that the loan bringing the policy back within the scope of Chapter 9 of Part 4 of this Act is treated as a part surrender by virtue of section 500.
