Any gain which arose under Chapter 2 of Part 13 of ICTA (life policies etc) as a result of the deemed surrender (“the deemed gain”) is to be brought into account by the relevant company as a non-trading credit for the accounting period in which there is a related transaction (so far as not previously brought into account under this section).

But if the relevant company is still a party to the old contract immediately after the related transaction, only the relevant fraction of the deemed gain which would otherwise be brought into account under subsection (1) is to be so brought into account.

“The relevant fraction” is—

$\frac{P}{\mathrm{SAR}}$

where—

P is the amount payable as a result of the related transaction, and

SAR is the amount which would have been payable on a surrender of all the rights under the old contract immediately before the related transaction.