Income and Corporation Taxes Act 1988

540 Life policies: chargeable events. U.K.

(1) M1 Subject to the provisions of this section, in this Chapter “chargeable event” means, in relation to a policy of life insurance—

(a) if it is not a qualifying policy, any of the following—

(i) any death giving rise to benefits under the policy;

(ii) the maturity of the policy;

(iii) the surrender in whole of the rights conferred by the policy;

(iv) the assignment for money or money’s worth of those rights; and

(v) an excess of the reckonable aggregate value mentioned in subsection (2) of section 546 over the allowable aggregate amount mentioned in subsection (3) of that section, being an excess occurring at the end of any year (as defined in subsection (4) of that section) except, if it ends with another chargeable event, the final year; and

(b) if it is a qualifying policy (whether or not the premiums thereunder are eligible for relief under section 266), any of the above events, but—

(i) in the case of death or maturity, only if the policy is converted into a paid-up policy before the expiry of ten years from the making of the insurance, or, if sooner, of three-quarters of the term for which the policy is to run if not ended by death or disability;

(ii) in the case of a surrender or assignment or such an excess as is mentioned in paragraph (a)(v) above, only if it is effected or occurs within that time, or the policy has been converted into a paid-up policy within that time.

(2) M2 The maturity of a policy is not a chargeable event in relation thereto if—

(a) a new policy is issued in consequence of the exercise of an option conferred by the maturing policy, and

(b) the whole of the sums becoming payable under the maturing policy are retained by the company with whom the insurance was made and applied in the payment of one or more premiums under the new policy,

unless the circumstances are such that the person making the insurance in respect of which the new policy is issued was an infant when the former policy was issued, and the former policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining 25 or on the anniversary of the policy immediately following his attainment of that age.

(3) M3 Except as provided by section 544, no event is a chargeable event in relation to a policy issued in respect of an insurance made before 26th June 1982 if the rights conferred by the policy have at any time before that date and before the event been assigned for money or money’s worth and are not at the time of the event held by the original beneficial owner.

(4) M4 No account shall be taken for the purposes of [F1 subsections (1) and (3) above] of any assignment effected by way of security for a debt, or on the discharge of a debt secured by the rights or share concerned, or of any assignment between spouses living together.

(5) Where subsection (1)(b) applies to a policy which has been varied so as to increase the premiums payable thereunder, it shall so apply as if the references in subsection (1)(b)(i) to the making of the insurance and the term of the policy were references respectively to the taking effect of the variation and the term of the policy as from the variation.

[F2 (5A) Sub-paragraphs (i) and (ii) of subsection (1)(b) above shall not apply inrelation to a policy issued in respect of an insurance made on or after 14th March 1989 if, immediately before the happening of the event, the rights conferred by the policy were in the beneficial ownership of a company, or were held on trusts created, or as security for a debt owed, by a company.]

(6) M5 This section has effect subject to paragraph 20 of Schedule 15.

Textual Amendments

F1 Words in s. 540(4) substituted (with effect in accordance with Sch. 9 para. 8 of the amending Act) by Finance Act 1989 (c. 26), Sch. 9 para. 3(2)

F2 S. 540(5A) inserted (with effect in accordance with Sch. 9 para. 8 of the amending Act) by Finance Act 1989 (c. 26), Sch. 9 para. 3(3)

Marginal Citations

M1 Source-1970 s.394(1), (2); 1975 Sch.2 9(1), (2)

M2 Source-1970 s.394(3); 1984 s.75(1)

M3 Source-1970 s.394(4); 1983 s.18(1) 1975 Sch.2 10

M4 Source-1970 s.394(5), (6); 1975 Sch.2 10

M5 Source-1982 s.34