Income and Corporation Taxes Act 1988

542 Life annuity contracts: chargeable events. U.K.

(1) M1 Subject to subsections (2) and (3) below, in this Chapter “chargeable event” means, in relation to any contract for a life annuity—

(a) the surrender in whole of the rights conferred by the contract, or

(b) the assignment for money or money’s worth of those rights, or

(c) [F1 subject to section 546B(3)(a),] 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.

(2) Where the terms of a contract provide for the payment of a capital sum as an alternative, in whole or in part, to payments by way of annuity, the taking of the capital sum shall be treated for the purposes of this section and section 543 as a surrender in whole or in part of the rights conferred by the contract, and where the terms of the contract provide for the payment of a capital sum on death and the contract was made on or after 10th December 1974, the death shall be treated for those purposes as a surrender in whole of the rights conferred by the contract.

(3) M2 Except as provided by section 544, an event referred to in subsection (1) above [F2 or section 546C(7)(a)] is not a chargeable event in relation to any contract made before 26th June 1982 if the rights conferred by the contract 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) Subsection (4) of section 540 shall, with any necessary modifications, apply for the purposes of this section as it applies for the purposes of that section.

Textual Amendments

F1 Words in s. 542(1)(c) inserted (with effect in accordance with s. 83(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 28 para. 5(2)

F2 Words in s. 542(3) inserted (with effect in accordance with s. 83(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 28 para. 5(3)

Marginal Citations

M1 Source-1970 s.396(1); 396(1); 1975 Sch.2 9(3), 12

M2 Source-1970 s.396(2), (3); 1983 s.18(2); 1975 Sch.2 12