Income Tax (Trading and Other Income) Act 2005

Part 7 U.K. Savings and investment income: gains from contracts for life insurance etc. (personal portfolio bonds)

Pre-17th March 1998 contract or policy: conditions to be met for contract or policy not to be a personal portfolio bond U.K.

119 U.K. For the purposes of Chapter 9 of Part 4, a policy or contract is not a personal portfolio bond if—

(a) it meets the date condition (see paragraph 120),

(b) it meets the non-variation condition (see paragraph 121), and

(c) it meets either the first selection condition (see paragraph 122) or the second selection condition (see paragraph 123).

The date condition U.K.

120 (1) A policy meets the date condition if it is a policy issued in respect of an insurance made before 17th March 1998. U.K.

(2) A contract meets the date condition if it was made before that date.

The non-variation condition U.K.

121 (1) A policy or contract meets the non-variation condition if it has not been varied on or after 16th July 1998 so as— U.K.

(a) to increase the benefits secured, or

(b) to extend the term of the policy or contract.

(2) Any exercise of rights conferred by a policy or contract counts as its variation for the purposes of this paragraph.

The first selection condition U.K.

122 U.K. A policy or contract meets the first selection condition at any time if for the whole of the period beginning with 6th April 1994 and ending with that time it has not been possible to determine the whole or any part of the benefits under the policy or contract by reference to—

(a) an index other than a permitted index (see paragraph 126), or

(b) property other than permitted property (see paragraph 127).

The second selection condition U.K.

123 (1) A policy or contract meets the second selection condition at any time if it meets conditions A to C. U.K.

(2) Condition A is that for some or all of the period beginning with 6th April 1994 and ending with that time it has been possible to determine the whole or any part of the benefits under the policy or contract by reference to—

(a) an index other than a permitted index, or

(b) property other than permitted property.

(3) Condition B is that at no time during that period have the benefits under the policy or contract actually been determined by reference to such property or such an index.

(4) Condition C is that the terms of the policy or contract were varied before the end of the first insurance year in relation to the policy or contract which began on or after 6th April 1999 so that, since that variation,—

(a) the only index which it has been possible to select as mentioned in section 516(4) is a permitted index, and

(b) the only property which it has been possible to select as mentioned in section 516(4) is permitted property.

(5) Condition C is subject to paragraphs 124 and 125 (which modify it in cases where any holder of the policy or contract was not UK resident on 17th March 1998 and has become UK resident since that date).

Policy holders becoming UK resident after 17th March 1998 U.K.

124 (1) This paragraph applies to a policy or contract if— U.K.

(a) any holder of the policy or contract on 17th March 1998 was not UK resident on that date,

(b) such a holder has become UK resident since that date, and

(c) the holder did not intend, on the date of the holder's arrival in the United Kingdom by virtue of which the holder became UK resident—

(i) to become permanently UK resident, or

(ii) to stay in the United Kingdom for at least two years.

(2) The policy or contract meets condition C in the second selection condition if it has been varied as described in that condition before the later of—

(a) the end of the first insurance year in relation to the policy or contract beginning on or after 6th April 1999, and

(b) the end of the first insurance year in relation to the policy or contract beginning after the date since 17th March 1998 on which the holder of the policy or contract first became UK resident.

(3) No gain is treated as arising from the policy or contract under section 525 (chargeable events where annual personal portfolio calculations show gains) in relation to any insurance year which ends—

(a) on or after the date since 17th March 1998 on which the holder of the policy or contract first became UK resident, and

(b) before the insurance year in which the variation was made.

Policy holders becoming permanently UK resident after 17th March 1998 U.K.

125 (1) This paragraph applies to a policy or contract if— U.K.

(a) any holder of the policy or contract on 17th March 1998 was a non-UK resident individual on that date,

(b) such a holder has become UK resident since that date, and

(c) the holder intended, on the date of the holder's arrival in the United Kingdom by virtue of which the holder became UK resident,—

(i) to become permanently UK resident, or

(ii) to stay in the United Kingdom for at least two years.

(2) The policy or contract meets condition C in the second selection condition if it has been varied as described in that condition before the later of—

(a) the end of the first insurance year in relation to the policy or contract beginning on or after 6th April 1999, and

(b) the end of the first insurance year in relation to the policy or contract beginning on or after the date mentioned in sub-paragraph (1)(c).

(3) No gain is treated as arising from the policy or contract under section 525 in relation to any insurance year which ends—

(a) on or after the date since 17th March 1998 on which the holder of the policy or contract first became UK resident, and

(b) before the insurance year in which the variation was made.

Meaning of “permitted index” U.K.

126 U.K. In this Part of this Schedule “permitted index” means an index falling within a category listed in section 518.

Meaning of “permitted property” U.K.

127 (1) In this Part of this Schedule “permitted property”, in relation to a policy or contract, means any of the following— U.K.

(a) property falling within any of the categories listed in the table in section 520(2),

(b) shares or securities listed on a recognised stock exchange, and

(c) subject to sub-paragraph (2), shares or securities of a company which are dealt in on the Unlisted Securities Market or the Alternative Investment Market.

(2) Shares or securities of a company which fall within sub-paragraph (1)(c) are not permitted property at any time at which—

(a) the whole or any part of the benefits under the policy or contract may be determined by reference to shares or securities of the company which represent more than 10% of its issued share capital, or

(b) the amount invested in shares or securities of the company under the policy or contract exceeds 10% of the total amount of premiums paid up to that time under the policy or contract.

Other definitions U.K.

128 (1) In this Part of this Schedule “security” has the same meaning as in section 132(3)(b) of TCGA 1992. U.K.

(2) Any references in this Part of this Schedule to shares or securities include a reference to any option, warrant or other right to acquire shares or securities.

(3) In sub-paragraph (3) “warrant” has the same meaning as in paragraph 14 of Schedule 2 to FISMA 2000.