Modifications etc. (not altering text)
C1Pt. 13 Ch. 2 restricted (with effect in accordance with s. 105(1) of the affecting Act) by Finance Act 1996 (c. 8), Sch. 13 para. 3(2) (with Sch. 13 para. 16)
C2Pt. 13 Ch. 2 applied (with modifications) (6.4.1999) by The Individual Savings Account Regulations 1998 (S.I. 1998/1870), regs. 35(7), 36(3)-(7) (as amended by The Individual Savings Account (Amendment) Regulations 1998 (S.I. 1998/3174), reg. 12)
C3Pt. 13 Ch. 2 applied (with modifications) (6.4.1999 with effect in accordance with reg. 1 of the affecting S.I.) by The Personal Portfolio Bonds (Tax) Regulations 1999 (S.I. 1999/1029), reg. 6(2)-(8) (as amended (6.4.2002) by The Personal Portfolio Bonds (Tax) (Amendment) Regulations 2002 (S.I. 2002/455), regs. 1, 2)
C4Amendment to earlier amending provision S.I. 1999/1029, reg. 6(2)-(8) (with effect in accordance with reg. 1 of the amending Regulation) by The Personal Portfolio Bonds (Tax) (Amendment) Regulations 2002 (S.I. 2002/455) reg. 2
(1)M1Where under section 541, 543 or 545 a gain is to be treated as arising in connection with any policy or contract—
(a)if, immediately before the happening of the chargeable event in question, the rights conferred by the policy or contract were vested in an individual as beneficial owner, or were held on trusts created by an individual F1. . . or as security for a debt owed by an individual, the amount of the gain shall be deemed to form part of that individual’s total income for the year in which the event happened;
[F2(b)if, immediately before the happening of that event, those rights were in the beneficial ownership of a company, or were held on trusts created, or as security for a debt owed, by a company, the amount of the gain shall be deemed to form part of the company’s income (chargeable under Case VI of Schedule D) for the accounting period in which the event happened;]
(c)if, immediately before the happening of that event, those rights were vested in personal representatives, within the meaning of Part XVI, the amount of the gain [F3(so far as it is not otherwise comprised in that income)] shall be deemed for the purposes of that Part to be part of the aggregate income of the estate of the deceased;
[F4(d)if, immediately before the happening of that event,—
(i)those rights were held on trusts, and the person who created the trusts was not resident in the United Kingdom or had died or (in the case of a company or foreign institution) had been dissolved or wound up or had otherwise come to an end, or
(ii)those rights were held as security for a debt owed by trustees,
subsection (9) or (10) below (as the case may be) shall apply in relation to the amount of the gain;
(e)if, immediately before the happening of that event, those rights—
(i)were in the beneficial ownership of a foreign institution, or
(ii)were held as security for a debt owed by a foreign institution,
subsection (11) below shall apply in relation to the amount of the gain.]
(2)Nothing in subsection (1) above shall apply to any amount which is chargeable to tax apart from that subsection.
(3)F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)References in [F6subsection (1) above] to the rights conferred by a policy or contract are, in the case of an assignment of a share only in any rights, references to that share.
(5)M2Subject to subsections (6) and (7) below and section 550, where by virtue of [F7subsection (1)(a)] above, a sum is included in an individual’s total income—
(a)F8. . . he shall be treated as having paid income tax at the basic rate on that sum or, if his total income is reduced by any deductions, on so much of that sum as is part of his total income as so reduced;
(b)no repayment shall be made of the income tax treated by virtue of paragraph (a) above as having been paid; and
(c)the sum so included shall be treated [F9as income which is not chargeable at the lower rate and] for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
[F10(5AA)If, in a case falling within subsection (1)(d) above, a sum forms part of the income of trustees by virtue of subsection (9)(a) below, subsection (5) above shall (subject to subsections (6) and (7) below and section 553(6)) apply in relation to the trustees and that sum—
(a)as it applies in relation to an individual and a sum included in his total income by virtue of subsection (1)(a) above, but
(b)with the omission from paragraph (a) of the words from “or" to the end of that paragraph.]
[F11(5A)Where a gain is to be treated under section 543 as arising in connection with a contract for a life annuity made—
(a)after 26th March 1974, and
(b)unless the contract falls, or has at any time fallen, to be regarded as not forming part of any insurance company or friendly society’s basic life assurance and general annuity business the income and gains of which are subject to corporation tax, in an accounting period of the insurance company or friendly society beginning before 1st January 1992,
subsection (6) below shall apply in relation to the gain unless [F12subsection (6A) or (7)] below applies in relation to it.]
(6)[F13M3Where this subsection applies in relation to such a gain as is mentioned in subsection (5A) above]—
(a)this section shall have effect, in relation to the gain, as if subsection (5) were omitted; and
(b)the gain shall be chargeable to tax under Case VI of Schedule D; but
(c)any relief under section 550 shall be computed as if this subsection had not been enacted.
[F14(6A)Subsection (6) above shall not apply in relation to a gain treated as arising in connection with a contract for a life annuity in any case where the Board are satisfied, on a claim made for the purpose—
(a)that the company liable to make payments under the contract (“the grantor”) has not, at any time (“a relevant time”) between the date on which it entered into the contract and the date on which the gain is treated as arising, been resident in the United Kingdom;
(b)that at all relevant times the grantor has—
(i)as a body deriving its status as a company from the laws of a territory outside the United Kingdom,
(ii)as a company with its place of management in such a territory, or
(iii)as a company falling, under the laws of such a territory, to be regarded, for any other reason, as resident or domiciled in that territory,
been within a charge to tax under the laws of that territory;
(c)that that territory is a territory within the European Economic Area when the gain is treated as arising;
(d)that the charge to tax mentioned in paragraph (b) above has at all relevant times been such a charge made otherwise than by reference to profits as (by disallowing their deduction in computing the amount chargeable) to require sums payable and other liabilities arising under contracts of the same class as the contract in question to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the grantor;
(e)that the rate of tax fixed for the purposes of that charge in relation to the amounts subject to tax in the hands of the grantor (not being amounts arising or accruing in respect of investments that are of a particular description for which a special relief or exemption is generally available) has at all relevant times been at least 20 per cent.; and
(f)that none of the grantor’s obligations under the contract in question to pay any sum or to meet any other liability arising under that contract is or has been the subject, in whole or in part, of any reinsurance contract relating to anything other than the risk that the annuitant will die or will suffer any sickness or accident;
and subsection (6) above shall also not apply where the case would fall within paragraphs (a) to (f) above if references to a relevant time did not include references to any time when the contract fell to be regarded as forming part of so much of any basic life assurance and general annuity business the income and gains of which were subject to corporation tax as was being carried on through a branch or agency in the United Kingdom.]
(7)M4Where under section 541 or 543 a gain is to be treated as arising in connection with a policy issued by a friendly society in the course of tax exempt life or endowment business, this section shall have effect in relation to the gain as if subsection (5) were omitted, but any relief under section 550 shall be computed as if this subsection had not been enacted.
[F15(7A)Where, in the case of any gain—
(a)this section has effect by virtue of subsection (5A) or (7) above with the omission of subsection (5) above, and
(b)the rights conferred by the contract or policy were vested immediately before the happening of the chargeable event in question in personal representatives within the meaning of Part XVI,
the gain shall be deemed for the purposes of income tax to be income of the personal representatives as such.]
[F16(8)Subsection (1)(b) above shall not have effect as respects—
(a)a policy of life insurance issued in respect of an insurance made before 14th March 1989,
(b)a contract for a life annuity made before that date, or
(c)a capital redemption policy issued in respect of an insurance made before that date, or issued by a company resident in the United Kingdom in respect of an insurance made on or after that date.]
[F17(9)If, in a case falling within subsection (1)(d) above, the trustees were resident in the United Kingdom immediately before the happening of the chargeable event in question, the amount of the gain—
(a)shall be deemed to form part of the income of the trustees for the year of assessment in which the chargeable event happened; and
(b)shall be chargeable to income tax at the rate applicable to trusts for that year.
(10)If, in a case falling within subsection (1)(d) above, the trustees were not resident in the United Kingdom immediately before the happening of the chargeable event in question, then, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of the amount of the gain, section 740 shall apply as if—
(a)the amount of the gain constituted income becoming payable to the trustees; and
(b)that income were income arising to the trustees in the year of assessment in which the chargeable event happened.
(11)In a case falling within subsection (1)(e) above, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of the amount of the gain, section 740 shall apply as if—
(a)the amount of the gain constituted income becoming payable to the foreign institution; and
(b)that income were income arising to the foreign institution in the year of assessment in which the chargeable event happened.
(12)For the purposes of this section, property held for the purposes of a foreign institution shall be regarded as in the beneficial ownership of the foreign institution.]
[F18(13)]In this section—
“basic life assurance and general annuity business” has the same meaning as in Chapter I of Part XII;
[F19“foreign institution” means a person which is a company or other institution resident or domiciled outside the United Kingdom.]
[F20(14)Any reference in this section to trusts created by an individual includes a reference to trusts arising under—
(a)section 11 of the M5Married Women’s Property Act 1882;
(b)section 2 of the M6Married Women’s Policies of Assurance (Scotland) Act 1880; or
(c)section 4 of the M7Law Reform (Husband and Wife) Act Northern Ireland) 1964;
and references to the settlor or to the person creating the trusts shall be construed accordingly.]
Textual Amendments
F1Words in s. 547(1)(a) repealed (with effect in accordance with Sch. 14 para. 7(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(2), Sch. 27 Pt. 3(19), Note
F2S. 547(1)(b) substituted (with effect in accordance with Sch. 9 para. 8 of the amending Act) by Finance Act 1989 (c. 26 ), Sch. 9 para. 5(3)
F3Words in s. 547(1)(c) inserted (with effect in accordance with s. 76(6) of the amending Act) by Finance Act 1995 (c. 4), s. 76(2)(a)
F4S. 547(1)(d)(e) inserted (with effect in accordance with Sch. 14 para. 7(1)(2)(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(3)
F5S. 547(3) repealed (with effect in accordance with Sch. 14 para. 7(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(4), Sch. 27 Pt. 3(19), Note
F6Words in s. 547(4) substituted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(5)
F7Words in s. 547(5) substituted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(6)
F8Words in s. 547(5)(a) repealed (with effect in accordance with s. 128(8) of the repealing Act) by Finance Act 1996 (c. 8), s. 122(7)(a), Sch. 41 Pt. 5(6), Note 3
F9Words in s. 547(5)(c) inserted (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 19(4)(7)
F10S. 547(5AA) inserted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(7)
F12Words in s. 547(5A) substituted (with effect in accordance with s. 56(4) of the amending Act) by Finance Act 1995 (c. 4), s. 56(1)
F13Words in s. 547(6) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 9(2)
F14S. 547(6A) inserted (with effect in accordance with s. 56(4) of the amending Act) by Finance Act 1995 (c. 4), s. 56(1)
F15S. 547(7A) inserted (with effect in accordance with s. 76(6) of the amending Act) by Finance Act 1995 (c. 4), s. 76(2)(b)
F16S. 547(8) inserted (with effect in accordance with Sch. 9 para. 8 of the amending Act) by Finance Act 1989 (c. 26), Sch. 9 para. 5(3)
F17S. 547(9)-(12) inserted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(8)
F18S. 547(9) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 9(3)
F19S. 547(13): definition of "foreign institution" inserted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(9)
F20S. 547(14) inserted (with effect in accordance with Sch. 14 para. 7(5) of the amending Act) by Finance Act 1998 (c. 36), Sch. 14 para. 1(10)
Modifications etc. (not altering text)
C5S. 547: power to modify conferred (with effect in accordance with s. 56(4) of the affecting Act) by Finance Act 1995 (c. 4), s. 56(3)
Marginal Citations
M1Source-1970 s.399(1); 1972 Sch.24 24
M2Source-1970 s.399(4); 1971 Sch.6 42
M3Source-1975 Sch.2 17
M4Source-1985 s.41(9); 1987 s.30(8)