PART A1Premium limit for qualifying policies

Premium limit for qualifying policies to apply from 6 April 2013

A1

1

Sub-paragraph (2) applies if—

a

an event falling within sub-paragraph (3) occurs,

b

apart from sub-paragraph (2), the policy to which the event relates would be a qualifying policy after the event, and

c

an individual who is a beneficiary under that policy is in breach of the premium limit for qualifying policies.

2

That policy is not to be a qualifying policy after the event.

3

The events falling within this sub-paragraph are—

a

the issue of a policy in respect of an insurance made on or after 6 April 2013;

b

the variation of a policy on or after 6 April 2013 where as a result of the variation—

i

the period over which premiums are payable under the policy is or could be lengthened, or

ii

the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both;

c

the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

d

a deceased beneficiary event on or after 6 April 2013;

e

the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where—

i

the conditions are fulfilled for the first time on or after 6 April 2013, and

ii

but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2).

4

An event does not fall within sub-paragraph (3) if—

a

the policy to which the event relates is—

i

a protected policy,

ii

a restricted relief qualifying policy, or

iii

a pure protection policy,

b

the event is the issue of a policy which is a new policy in relation to an earlier policy where—

i

the new policy is issued in substitution for the earlier policy (and not on its maturity), and

ii

the life assured under the new policy is different to the life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run,

c

paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

d

the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

e

the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

5

In sub-paragraph (3)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation.

6

A variation is to be ignored for the purposes of sub-paragraph (3)(b) if its effect is nullified before the end of the period of 3 months after the day on which the variation occurs.

7

Sub-paragraph (4)(a)(i) does not apply in the case of an event mentioned in sub-paragraph (3)(e).

8

Sub-paragraph (4)(a)(ii) does not apply in the case of—

a

an event mentioned in sub-paragraph (3)(c) or (d) occurring in relation to a restricted relief qualifying policy (“the assigned policy”),

b

any subsequent event relating to the assigned policy, or

c

any event relating to—

i

a later policy which is a new policy in relation to the assigned policy, or

ii

any policy which is a new policy in relation to the later policy,

and so on.

9

In the case of an event mentioned in sub-paragraph (3)(b), sub-paragraph (4)(a)(iii) applies only if the policy is a pure protection policy both before and after the variation.

10

This paragraph is to be applied after all other provisions of this Schedule relevant to the question of whether a policy is a qualifying policy after an event have been applied.

Restricted relief qualifying policies

A2

1

Sub-paragraph (2) applies if—

a

an event falling within sub-paragraph (3) occurs,

b

the policy to which the event relates is a qualifying policy after the event, and

c

an individual who is a beneficiary under that policy is in breach of the premium limit for qualifying policies.

2

That policy is to be a restricted relief qualifying policy after the event.

3

The events falling within this sub-paragraph are—

a

a premium limit event in relation to a protected policy on or after 21 March 2012;

b

the issue of a policy as mentioned in paragraph A4(2)(b) below if, assuming that the substitution of the protected policy were instead a variation of that policy, there would be a premium limit event in relation to that policy;

c

the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a protected policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

d

a deceased beneficiary event on or after 6 April 2013 where the policy in question is a protected policy;

e

the issue of a policy in respect of an insurance made on or after 21 March 2012 but before 6 April 2013 otherwise than as mentioned in paragraph A4(2)(b) below;

f

the variation of a policy, other than a protected policy, on or after 21 March 2012 but before 6 April 2013 where as a result of the variation—

i

the period over which premiums are payable under the policy is or could be lengthened, or

ii

the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both;

g

the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 below being fulfilled for the first time in respect of a new non-resident policy where—

i

the conditions are fulfilled for the first time on or after 21 March 2012 but before 6 April 2013, and

ii

but for the conditions being fulfilled, the policy could not be a qualifying policy because of sub-paragraph (2) of paragraph 24.

4

An event does not fall within sub-paragraph (3) if—

a

the policy to which the event relates is a pure protection policy,

b

the event is the issue of a policy which is a new policy in relation to an earlier policy where—

i

the new policy is issued in substitution for the earlier policy (and not on its maturity), and

ii

the life assured under the new policy is different to the life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run,

c

paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

d

the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

e

the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

5

In sub-paragraph (3)(f)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation.

6

A premium limit event or a variation is to be ignored for the purposes of sub-paragraph (3)(a) or (f) if its effect is nullified before 6 July 2013.

7

In the case of a premium limit event which occurs on or after 6 April 2013, in sub-paragraph (6) the reference to 6 July 2013 is to be read as a reference to the end of the period of 3 months after the day on which the premium limit event occurs.

8

In the case of an event mentioned in sub-paragraph (3)(a) or (f), sub-paragraph (4)(a) applies only if the policy is a pure protection policy both before and after the premium limit event or variation.

9

A “premium limit event” occurs in relation to a protected policy if—

a

the policy is varied or a relevant option is exercised so as to change the terms of the policy, and

b

as a result of the variation or exercise of the relevant option—

i

the period over which premiums are payable under the policy is or could be lengthened, or

ii

the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both.

10

A “premium limit event” also occurs in relation to a protected policy if on or after 6 April 2013—

a

the policy is varied or a relevant option is exercised so as to change the terms of the policy, and

b

as a result of the variation or exercise of the relevant option—

i

the period over which premiums are payable under the policy is or could be shortened, or

ii

the total amount of the premiums payable under the policy in any relevant period is or could be decreased,

or both.

11

In sub-paragraphs (9)(b)(ii) and (10)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation or exercise of the relevant option.

12

The variation of, or exercise of a relevant option under, a protected policy is not a premium limit event in relation to the policy if—

a

the policy secures a capital sum payable either—

i

on survival for a specified term, or

ii

on earlier death or on earlier death or disability,

b

the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and

c

the policy is varied, or the relevant option is exercised, for that sole purpose.

13

In sub-paragraph (3)(g) references to paragraph 24 below are to that paragraph as it has effect before the appointed date for the purposes of section 55 of the Finance Act 1995.

14

A qualifying policy which is a new policy in relation to an earlier policy is a restricted relief qualifying policy if the earlier policy is a restricted relief qualifying policy.

15

A policy which is a restricted relief qualifying policy remains a restricted relief qualifying policy so long as it is a qualifying policy.

16

Paragraph A1 above is to be ignored in determining for the purposes of sub-paragraph (14) or (15) if a policy is a qualifying policy. This is subject to paragraph A1(8).

17

For further provision about restricted relief qualifying policies, see sections 463A to 463D of ITTOIA 2005.

The premium limit for qualifying policies

A3

1

For the purposes of paragraphs A1(1)(c) and A2(1)(c) above an individual is in breach of the premium limit for qualifying policies if the total amount of the premiums payable under relevant policies in any relevant period—

a

exceeds £3,600, or

b

could exceed £3,600 as a result of—

i

the exercise of any one or more relevant options conferred by one or more relevant policies, or

ii

so far as not covered by sub-paragraph (i), the application of one or more terms of one or more relevant policies relating to increases in premiums.

2

For the purposes of sub-paragraph (1)—

a

so much of a premium payable under a relevant policy as is charged on the grounds that an exceptional risk of death or disability is involved is to be left out of account in determining the premiums payable under the policy,

b

so much of the first premium payable under a relevant policy the liability for the payment of which—

i

is discharged in accordance with paragraph 15(2) below, or

ii

in the case of a policy in relation to which paragraph 3 below applies, is discharged under a provision of the policy falling within paragraph 3(4)(c),

is to be left out of account in determining the premiums payable under the policy (subject to sub-paragraph (3) below),

c

in determining the premiums payable under a relevant policy any provision for the waiver of premiums by reason of a person's disability is to be ignored, and

d

“relevant period” means any period of 12 months beginning at or after the time when the event falling within paragraph A1(3) or A2(3) above (“the relevant event”) occurs.

3

The maximum amount that may be left out of account under sub-paragraph (2)(b) in the case of a relevant policy is—

$\text{£}\mathrm{3,600}\times N$

where N is the number of complete years for which ran—

1. a

   the other policy involved, or

2. b

   if there is more than one other policy involved, the policy which ran for the most number of complete years.

4

For the purposes of this paragraph the following are “relevant policies”—

a

the policy to which the relevant event relates, and

b

any other policy—

i

which is a qualifying policy, and

ii

under which the individual is a beneficiary.

5

But neither a protected policy nor a pure protection policy is to be a relevant policy by virtue of sub-paragraph (4)(b).

6

Sub-paragraph (7) applies if this paragraph is to be applied in the case of an individual in consequence of two or more events occurring at the same time (including where one or more of the events falls within paragraph A1(3) above and one or more of the events falls within paragraph A2(3) above).

7

For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, sub-paragraph (4)(a) has effect as if the reference to the policy to which the relevant event relates were a reference to all the policies to which the events, taken together, relate.

8

But sub-paragraph (7) does not apply, and sub-paragraph (9) applies instead, if—

a

all the policies in question are policies issued by the same issuer, and

b

each of them has an unique identifier in a series of unique identifiers which the issuer gives to policies issued by it.

9

For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, an event relating to a policy (“policy A”) is treated as occurring before an event relating to another policy (“policy B”) if, in the issuer's series of unique identifiers, policy A's unique identifier comes before policy B's unique identifier.

Protected policies

A4

1

This paragraph applies for the purposes of this Part of this Schedule.

2

A policy is “protected” if—

a

it is issued in respect of an insurance made before 21 March 2012, or

b

it is issued in respect of an insurance made on or after 21 March 2012 where—

i

it is a new policy in relation to an earlier policy,

ii

it is issued in substitution for the earlier policy (and not on its maturity), and

iii

the earlier policy is a protected policy (whether by virtue of paragraph (a) or this paragraph).

3

A policy which is protected ceases to be protected if it becomes a restricted relief qualifying policy.

4

A policy issued as mentioned in sub-paragraph (2)(b) is not protected if—

a

its issue is an event falling within paragraph A2(3) above, and

b

after that event it is a restricted relief qualifying policy.

How to determine if an individual is a beneficiary under a policy

A5

1

This paragraph applies for the purposes of this Part of this Schedule in determining if an individual is a beneficiary under a policy.

2

An individual is a beneficiary under a policy if the individual beneficially owns—

a

any rights under the policy, or

b

any share in any rights under the policy.

3

An individual is a beneficiary under a policy if—

a

any rights under the policy are, or any share in any rights under the policy is, held on non-charitable trusts created by the individual, and

b

those rights are, or that share is, not beneficially owned by any individual.

4

The following provisions of ITTOIA 2005 apply for the purposes of sub-paragraph (3)(a)—

a

section 465(6), and

b

the definition of “non-charitable trust” in section 545(1).

5

An individual is a beneficiary under a policy if—

a

any rights under the policy are, or any share in any rights under the policy is, held as security for a debt of the individual, and

b

those rights are, or that share is, not beneficially owned by any individual.

Further definitions

A6

1

In this Part of this Schedule—

a

“new policy” has the meaning given in paragraph 17 below,

b

references to the variation of a policy are to a variation in relation to which paragraph 18 below applies,

c

“pure protection policy” means a policy—

i

which has no surrender value and is not capable of acquiring a surrender value, or

ii

under which the benefits payable cannot exceed the amount of the premiums paid except on death or in respect of disability, and

d

“relevant option”, in relation to a policy, means an option conferred by the policy on the person to whom it is issued to have another policy substituted for it or to have any of its terms changed.

2

For the purposes of this Part of this Schedule a “deceased beneficiary event” occurs if, in connection with the death of an individual (“D”) who was a beneficiary under a policy, an individual (“B”) becomes a beneficiary under that policy by reference (wholly or partly) to any rights, or to any share in any rights, by reference to which D was a beneficiary (wholly or partly).

For this purpose, it does not matter if B is already a beneficiary under the policy.

3

For the purposes of this Part of this Schedule an assignment is a “mortgage endowment assignment” if—

a

the policy to which the assignment relates secures a capital sum payable either—

i

on survival for a specified term, or

ii

on earlier death or on earlier death or disability,

b

the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and

c

when the assignment occurs, it is intended that the policy will continue to be maintained for that sole purpose.