Section 485: Disregard of certain events in relation to qualifying policies
1924.This section is based on section 540 of ICTA. It deals with circumstances in which qualifying policies do not give rise to chargeable events.
1925.Broadly, there is no chargeable event if:
the event is:
the death of a person whose life is insured; or
the maturity of the policy; or
the policy has run for a period measured by the earlier of:
ten years; or
three-quarters of the policy’s term;
so long as the policy has not been made “paid-up” within that same period.
1926.Subsection (6) re-starts this time calculation of how long the policy has run from the date of variation, if the policy is varied to increase the premiums payable.
1927.Subsections (2) and (3) do not rewrite the words in brackets in the opening of section 540(1)(b) of ICTA “whether or not the premiums thereunder are eligible for relief under section 266”. These words add nothing of substance.
1928.Paragraph (b) in each of subsections (2) and (3) reflects a circumstance in which the restriction of what is a chargeable event for a qualifying policy is itself disapplied. It operates where a company would, by virtue of section 547(1)(b) of ICTA, be a person liable to corporation tax on a gain treated as arising on the policy or contract. As described in the commentary on section 464, attribution of corporation tax liability to that company does not prevent other persons, such as an individual, also being attributable with income tax liability in respect of the gain. This rule operates at a level – what is a chargeable event – where there is no difference between the two tax regimes. See also section 546 (table of provisions subject to special rules for older policies and contracts).
1929.Such a disapplication of the restriction is unnecessary in subsection (5). This subsection is based on section 546B of ICTA. Section 540(5A) of ICTA (on which the restriction in subsections (2) and (3) is based) does not apply to the restriction provided for qualifying policies by section 546B(1A) of ICTA, in relation to events that are found by applying section 546B of ICTA (see section 546C(7)(a) of ICTA for when such events arise).
1930.Subsection (7) deals with the circumstance where a qualifying policy replaces another policy (which may not have been a qualifying policy). It requires certain terms in paragraph 25 of Schedule 15 to ICTA to be met. The new policy will in part have been designated a qualifying policy under Schedule 15 to ICTA because those circumstances were met. This subsection is based on section 553 of ICTA.
