Finance Act 2013

Section 24

SCHEDULE 8 U.K. Gains from contracts for life insurance etc

1 U.K. Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc) is amended as follows.

2 U.K. In section 476 (special rules: foreign policies) in subsection (2)—

(a) after the entry relating to section 474(3) to (5) insert “ and ”,

(b) omit the entry relating to section 528,

(c) omit the “and” after the entry relating to sections 531 to 534, and

(d) omit the entry relating to section 536(6).

3 U.K. For section 528 substitute—

“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 on which the individual is not UK resident.

(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—

where—

A is the number of days in the material interest period which are days falling within subsection (1)(b), 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 (1)(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 on which the deceased was not UK resident.

(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 on which the deceased was not UK resident, and

(c) the deceased was UK resident when the deceased died.

(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—

where—

A is the number of days in the material interest period which are days falling within subsection (1)(b) or (2)(b) (as the case may be), 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 (1)(b) or (2)(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.”

4 U.K. Omit section 529 (exceptions to section 528).

5 (1) Section 536 (top slicing relieved liability: one chargeable event) is amended as follows. U.K.

(2) In subsection (6) for the words from “from” to the end substitute “ reduced under section 528 in the case of the individual. ”

(3) For subsection (7) substitute—

“(7) If in the case of the individual the gain is reduced under section 528, for steps 1 and 3 in subsection (1) N is reduced by the number of complete years consisting wholly of days falling within section 528(1)(b) (including days falling within section 528(1)(b) by virtue of section 528(8)).”

6 U.K. In section 552 of ICTA (information: duty of insurers) after subsection (13) insert—

“(14) For the purposes of this section no account is to be taken of the effect of sections 528 and 528A of ITTOIA 2005.”

7 (1) The amendments made by this Schedule have effect in relation to— U.K.

(a) any policy of life insurance issued in respect of an insurance made on or after 6 April 2013, or

(b) any contract constituting a capital redemption policy made on or after that date.

(2) The amendment made by paragraph 3 above has effect in relation to any insurance or contract made before 6 April 2013 if on or after that date—

(a) the policy or contract is varied with the result that there is an increase in the benefits secured,

(b) there is or was an assignment (or assignation) of rights, or a share of the rights, conferred by the policy or contract (whether or not for money's worth) to the individual or deceased, or

(c) some or all of the rights conferred by the policy or contract become or became held as a security for a debt of the individual or deceased,

and the other amendments made by this Schedule have effect in relation to the insurance or contract accordingly.

(3) For the purposes of sub-paragraph (2)(a) an exercise of rights conferred by a policy or contract is to count as a variation of the policy or contract.

(4) In the case of a policy or contract treated under section 473A of ITTOIA 2005 as a single policy or contract, for the purposes of sub-paragraphs (1) and (2) the date on which the insurance or contract is made is the date on which, as the case may be—

(a) the first insurance is made in respect of which the connected policies are issued, or

(b) the first of the connected contracts is made.