Finance Act 1975

16 (1) Where—

(a) under section 399, a gain arising in connection with a policy or contract would be treated as forming part of an individual's total income ; and

(b) the policy was issued in respect of an insurance made after 26th March 1974 or the contract was made after that date and;

(c) any sum is at any time after the making of the insurance or contract lent to or at the direction of that individual by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;

then, subject to sub-paragraph (3) below, the same results shall follow under sections 7 to 9 of this Act, this Schedule and sections 394 to 402, as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy or contract and the sum had been paid as consideration for the surrender (and if the policy is one falling within subsection (2) of section 394, those results shall follow under section 8 of this Act, whether or not a gain would be treated as arising on the surrender).

(2) If the whole or any part of the sum is repaid the repayment shall be treated, for the purpose of computing any gain arising on the happening, at the end of the final year, of a chargeable event, as a payment of a premium or lump sum consideration.

(3) The preceding provisions of this paragraph do not apply in relation to a policy if—

(a) it is a qualifying policy within the meaning of Schedule 1 ; and

(b) either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence.

(4) In this paragraph "final year" has the same meaning as in paragraph 9 above.