Income Tax (Trading and Other Income) Act 2005

491 Calculating gains: general rules U.K.

(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 [F1 but only in so far as those gains have been, or fall to be, taken into account in calculating the total income of a person as a result of this Chapter or Chapter 2 of Part 13 of ITA 2007 ] .

(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).

Textual Amendments

F1 Words in s. 491(2) inserted (with effect in accordance with s. 11(4)-(6) of the amending Act) by Finance Act 2012 (c. 14), s. 11(2)