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Version Superseded: 06/04/2013
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(1)To calculate an individual's relieved liability for the purposes of section 535(1) for a tax year for which the individual is only liable for tax on a gain from one chargeable event—
Step 1
Find the annual equivalent of the amount of that gain (“the annual equivalent”) by dividing that amount by the number of complete years for which the policy or contract has run before the chargeable event (“N”).
See subsections (2) to (8) for further provisions about calculating N.
Step 2
Find the relieved liability on the annual equivalent by—
(a) calculating the individual's liability (if any) to income tax on the annual equivalent, on the basis that—
(i) the gain from the chargeable event is limited to the amount of the annual equivalent, and
(ii) the highest part assumptions apply, and
(b) subtracting the amount of income tax at the [F1basic rate] on the annual equivalent which the individual is treated as having paid under section 530(1).
Step 3
Multiply the relieved liability on the annual equivalent by N.
(2)In the case of a calculation event that is not the first calculation event in relation to the policy or contract, for steps 1 and 3 in subsection (1) N is the number of complete years since the previous such event (but see subsection (6)).
(3)For the purposes of subsection (2), part surrender or assignment events are taken to occur at the end of the insurance year in which the surrender or assignment occurs.
(4)If, in a case where subsection (2) does not apply, the gain is from a policy of life insurance which is a new policy in relation to another policy, for steps 1 and 3 N is calculated from—
(a)the issue of the other policy, or
(b)if it also was a new policy in relation to an earlier policy, the issue of the earlier policy,
and so on.
(5)In subsection (4) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.
(6)Subsection (2) does not apply if the gain is from a foreign policy of life insurance or a foreign capital redemption policy.
(7)If the gain is from such a policy, for steps 1 and 3 in subsection (1) N is reduced by the number of complete years during which the policy holder was non-UK resident.
(8)If subsections (4) and (7) both apply, subsection (7) applies to N as calculated under subsection (4).
Textual Amendments
F1Words in s. 536(1) substituted (with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 56
Modifications etc. (not altering text)
C1S. 536 (as in force immediately before its amendment by Finance Act 2013 (c. 29), Sch. 8 para. 5, so far as that section as so in force continues to have effect after the amendment) amended (with effect in accordance with Sch. 45 paras. 88(4), 153(2)) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 88(5)
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