(1)This section deals with calculating—
(a)whether a gain has arisen on a chargeable event within section 484(1)(a)(i) to (iii) or (b) to (e) (surrender or assignment of all rights, final participation in profits, death, maturity, or taking a capital sum as a complete alternative to annuity payments), and
(b)if so, the amount of the gain.
(2)There is a gain if TB exceeds the sum of TD and PG where—
TB is the total benefit value of the policy or contract (see section 492),
TD is the total allowable deductions for the policy or contract (see section 494), and
PG is the total amount of gains treated as arising on calculation events occurring in relation to the policy or contract before the chargeable event in question.
(3)The gain is equal to the excess.
(4)In this Chapter—
“calculation event” means an excess event, a part surrender or assignment event or a personal portfolio bond event,
“excess event” means a chargeable event within section 509(1),
“part surrender or assignment event” means a chargeable event within section 514(1), and
“personal portfolio bond event” means a chargeable event within section 525(2).
(5)The reference to the policy in the definition of “PG” in subsection (2) includes any related policy.
(6)For the purposes of this Chapter, a policy (“policy A”) is a related policy as respects another (“policy B”) if—
(a)policy B is a new policy (as defined in paragraph 17 of Schedule 15 to ICTA (substitutions and variations)) in relation to policy A, or
(b)policy B is a new policy (as so defined) in relation to another policy (“policy C”) and policy C is a new policy (as so defined) in relation to policy A,
and so on.
(7)See section 539 (relief for deficiencies) if there is no gain under subsection (2), but a gain arose on a calculation event occurring in relation to the policy or contract before the chargeable event in question.
(8)For the rules about calculating gains on calculation events, see—
section 507 (method for making periodic calculations under section 498),
section 511 (method for making transaction-related calculations under section 510), and
section 522 (method for making annual calculations under section 515).