Part 4Savings and investment income
C1C2C3Chapter 9Gains from contracts for life insurance etc.
Pt. 4 Ch. 9 applied (with modifications) by The Child Trust Funds Regulations 2004 (S.I. 2004/1450), reg. 38 (as amended (6.4.2010) by S.I. 2010/582, regs. 1, 18)
Pt. 4 Ch. 9: power to exclude conferred (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 61(4) (with s. 147, Sch. 17)
Income tax treated as paid and reliefs
536C4Top slicing relieved liability: one chargeable event
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 F2reduced under section 528 in the case of the individual.
F37
If in the case of the individual the gain is reduced under section 528—
a
divide the number of foreign days in the material interest period (as determined in accordance with that section, including subsections (7) and (8)) by 365,
b
if the result is not a whole number, round it down to the nearest whole number, and
c
reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).
8
If subsections (4) and (7) both apply, subsection (7) applies to N as calculated under subsection (4).
Pt. 4 Ch. 9 applied (with modifications) by The Individual Savings Account Regulations 1998 (S.I. 1998/1870), reg. 36 (as added by S.I. 1998/3174, reg. 12 and as amended (6.4.2008) by S.I. 2008/704, regs. 1, 17(4))