Finance Bill

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
210

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
5
“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,
10
(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
15
will continue to be maintained for that sole purpose.”
3
At the beginning of Part 1 (qualifying conditions) insert—
“RULES FOR QUALIFYING POLICIES
Rights to be beneficially owned by individuals only
B1    (1)
Sub-paragraph (2) applies in relation to a policy issued in respect
20
of an insurance made on or after 6 April 2013.
      (2)
In order for the policy to be a qualifying policy, when it is issued
all the rights under it must be beneficially owned by (and only
by)—
(a)
one individual, or
25
(b)
two or more individuals taken together.

(This is the case notwithstanding any other provision of this
Schedule.)
      (3)
Sub-paragraph (2) does not apply if the policy is protected.
      (4)
A policy is “protected” if it is a new policy (as defined in
30
paragraph 17 below) in relation to—
(a)
a policy issued in respect of an insurance made before 21
March 2012, or
(b)
a policy which is protected (whether by virtue of
paragraph (a) or this paragraph).
35
Assignments
B2    (1)
Sub-paragraph (2) applies if any rights under a qualifying policy
are, or any share in any rights under a qualifying policy is,
assigned on or after 6 April 2013.
      (2)
The policy is not to be a qualifying policy after the assignment
40
(notwithstanding any other provision of this Schedule).
      (3)
Sub-paragraph (2) does not apply if—

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
211

(a)
the assignment is from an individual by way of security for
a debt of the individual,
(b)
the assignment is to an individual on the discharge of a
debt of the individual secured by the rights or share,
(c)
the assignment is from an individual to the individual’s
5
spouse or civil partner,
(d)
the assignment is to an individual in pursuance of an order
made by a court,
(e)
the assignment is to an individual in pursuance of a legally
enforceable obligation relating to a divorce or the
10
dissolution of a civil partnership,
(f)
the assignment is from an individual and, as a result of the
assignment, the rights assigned are, or the share assigned
is, held on trusts created by the individual,
(g)
the assignment is to an individual and, as a result of the
15
assignment, the rights assigned are, or the share assigned
is, no longer held on trusts, or
(h)
the assignment—
(i)
is to the personal representatives of a deceased
individual, or
20
(ii)
is to an individual where, as a result of the
assignment, a deceased beneficiary event (see
paragraph A6(2) above) occurs.
      (4)
Section 465(6) of ITTOIA 2005 applies for the purposes of sub-
paragraph (3)(f).
25
      (5)
See paragraphs A1 and A2 above which may apply in
consequence of an assignment falling within sub-paragraph (3).
Required statements
B3    (1)
Sub-paragraph (2) applies if any of the following events occurs—
(a)
the issue of a policy in respect of an insurance made on or
30
after 6 April 2013;
(b)
the variation of a policy on or after 6 April 2013 where
paragraph 18 below applies in relation to the variation and
as a result of the variation—
(i)
the period over which premiums are payable
35
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;
40
(c)
a premium limit event in relation to a protected policy on
or after 6 April 2013 (see paragraph A2(9) to (12) above);
(d)
an event on or after 6 April 2013 which would be a
premium limit event in relation to a protected policy but
for paragraph A2(12) above;
45
(e)
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) above;

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
212

(f)
a deceased beneficiary event (see paragraph A6(2) above)
on or after 6 April 2013;
(g)
the conditions in paragraph 24(3) below being fulfilled for
the first time in respect of a new non-resident policy
where—
5
(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).
10
      (2)
Each individual who is a beneficiary under the policy must, before
the end of the statement period, make to the issuer of the policy a
statement dealing with the prescribed matters.
      (3)
If an individual does not comply with sub-paragraph (2) the
policy is not to be a qualifying policy after the event
15
(notwithstanding any other provision of this Schedule).
      (4)
In sub-paragraph (1)(b)(ii) “relevant period” means any period of
12 months beginning at or after the time of the variation.
      (5)
Sub-paragraph (2)—
(a)
does not apply in the case of an event mentioned in sub-
20
paragraph (1)(a), (e), (f) or (g) if the policy is a pure
protection policy, and
(b)
does not apply in the case of an event mentioned in sub-
paragraph (1)(b), (c) or (d) if the policy is a pure protection
policy both before and after the event.
25

“Pure protection policy” has the meaning given by paragraph
A6(1)(c) above.
      (6)
Sub-paragraph (2) does not apply in the case of an event
mentioned in sub-paragraph (1)(e) where the assignment falls
within paragraph B2(3)(e) above and is a mortgage endowment
30
assignment.

“Mortgage endowment assignment” is to be read in accordance
with paragraph A6(3) above.
      (7)
In sub-paragraph (2)—
(a)
the reference to an individual who is a beneficiary under
35
the policy is to be read in accordance with paragraph A5
above,
(b)
“the statement period” means—
(i)
the period of 3 months after the day on which the
event occurs, or
40
(ii)
if the event occurs before the day on which the
Finance Act 2013 is passed, the period of 3 months
after that day,

or such longer period as an officer of Revenue and
Customs may allow, and
45
(c)
“prescribed” means prescribed by regulations made by the
Commissioners for Her Majesty’s Revenue and Customs.

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
213

      (8)
An officer of Revenue and Customs may allow a longer period for
the purposes of sub-paragraph (7)(b) only if—
(a)
the individual in question has made a request in writing to
an officer of Revenue and Customs for a longer period to
be allowed, and
5
(b)
such an officer is satisfied—
(i)
that there is a reasonable excuse for the required
statement not having been made within the period
mentioned in sub-paragraph (7)(b)(i) or (ii), and
(ii)
that the request under paragraph (a) was made
10
without unreasonable delay after the reasonable
excuse ceased.
      (9)
Regulations under sub-paragraph (7)(c) may—
(a)
make different provision for different cases or
circumstances, and
15
(b)
contain incidental, supplementary, consequential,
transitional, transitory or saving provision.”
4     (1)
Paragraph 17 (substitutions) is amended as follows.
      (2)
In sub-paragraph (2) before paragraph (a) insert—
“(za)
the new policy cannot be a qualifying policy if the old
20
policy was not a qualifying policy by virtue of—
(i)
paragraph A1(2), B1(2), B2(2) or B3(3) above, or
(ii)
sub-paragraph (i) above or this sub-paragraph;”.
      (3)
In sub-paragraph (2)(a) after the first “not” insert “and paragraph (za) above
does not apply”.
25
      (4)
In sub-paragraph (4) for “(2)” substitute “(2)(a) to (c)”.
      (5)
After sub-paragraph (4) insert—
    “(5)
In determining under sub-paragraph (2)(a) to (c) above whether
the new policy would apart from this paragraph be a qualifying
policy, paragraph A1 above is not to be applied in relation to the
30
issue of the new policy; but this does not stop that paragraph
being applied in relation to the issue of the new policy after this
paragraph has been applied.”
5
In paragraph 25 (application of paragraph 17 in cases involving new non-
resident policies) after sub-paragraph (2) insert—
35
   “(2A)
In determining for the purposes of sub-paragraph (2)(a) above
whether a policy would, apart from paragraph 24, have been a
qualifying policy, paragraphs A1 and B1 to B3 above are to be
ignored.

(But this does not affect the application of any of those paragraphs
40
in relation to the new policy.)”.
6     (1)
In section 55 of FA 1995 (qualifying life insurance policies: disapplication of
paragraph 21 of Schedule 15 to ICTA from appointed date) in subsection (3)
after “subject” insert “to paragraphs A1(2), B2(2) and B3(3) of that Schedule
and”.
45

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 2 — Restricted relief qualifying policies
214

      (2)
The amendment made by this paragraph is treated as having come into force
on the appointed date (see section 55(9) of FA 1995).
Part 2
Restricted relief qualifying policies
7
Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance
5
etc) is amended as follows.
8
After section 463 insert—
“463A
Restricted relief qualifying policies: disapplication of section 485 etc
(1)
This section applies for the purpose of determining if an individual
is liable for tax charged under this Chapter.
10
(2)
In relation to an event occurring on or after 6 April 2013, section 485
(disregard of certain events in relation to qualifying policies) does
not apply in relation to a policy (“policy X”) which is a restricted
relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).
(3)
If an individual is liable for tax charged under this Chapter as a result
15
of subsection (2), the gain on which the tax is charged in the case of
the individual is reduced by the following amount—

where—
G is the amount of the gain (apart from this subsection),
TAP is the total amount of premiums payable under policy X
20
during the policy X period so far as they are allowable
premiums as determined in accordance with section 463B,
and
TP is the total amount of premiums payable under policy X
during the policy X period.
25
(4)
If section 528 also applies in the case of the individual in relation to
the gain, subsection (3) is to be applied to the gain before section 528
and, accordingly, the reduction to be made under section 528 is to be
determined by reference to the gain as reduced by subsection (3).
(5)
The following subsections apply for the purposes of this section
30
(except subsection (2)) and section 463B.
(6)
“The policy X period” means the period for which policy X has run
before the chargeable event occurs.
(7)
Subsections (8) and (9) apply if policy X is a new policy in relation to
another policy.
35
(8)
For the purposes of subsection (6) policy X is to be taken to have
run—
(a)
from the issue of the other policy, or
(b)
if the other policy was also a new policy in relation to an
earlier policy, from the issue of the earlier policy,
40

and so on.

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 2 — Restricted relief qualifying policies
215

(9)
References to premiums payable under policy X are to be read as
including references to premiums payable under any earlier policy
taken into account under subsection (8).
(10)
The following are to be left out of account in determining the
premiums payable under a policy—
5
(a)
so much of a premium as is charged on the grounds that an
exceptional risk of death or disability is involved;
(b)
subject to subsection (11), so much of the first premium
payable the liability for the payment of which—
(i)
is discharged in accordance with paragraph 15(2) of
10
Schedule 15 to ICTA, or
(ii)
in the case of a policy in relation to which paragraph
3 of that Schedule applies, is discharged under a
provision of the policy falling within paragraph
3(4)(c) of that Schedule.
15
(11)
The maximum amount that may be left out of account under
subsection (10)(b) in the case of a policy is— $equation: cross[string["\xa3 3,600"],char[N]]$

where N is the number of complete years for which ran—
(a)
the other policy involved, or
(b)
if there is more than one other policy involved, the policy
20
which ran for the most number of complete years.
(12)
In determining the premiums payable under a policy any provision
for the waiver of premiums by reason of a person’s disability is to be
ignored.
(13)
“New policy” has the meaning given in paragraph 17 of Schedule 15
25
to ICTA.
463B
Restricted relief qualifying policies: allowable premiums
(1)
This section sets out how to determine the extent to which premiums
payable under policy X during the policy X period are allowable
premiums for the purposes of section 463A(3).
30
(2)
A premium payable under policy X is allowable if it is payable before
the restricted relief date.
(3)
In this section “the restricted relief date” means—
(a)
6 April 2013, or
(b)
if later, the date on which policy X became a restricted relief
35
qualifying policy.
(4)
Premiums payable under policy X in a relevant premium period are
allowable so far as they do not exceed in total the premium limit for
the period.
(5)
In subsection (4) “relevant premium period” means—
40
(a)
any period of one year which—
(i)
begins with a relevant date, and
(ii)
ends in the policy X period, and
(b)
if it is not covered by paragraph (a), the period which—

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 2 — Restricted relief qualifying policies
216

(i)
begins with the last relevant date to fall within the
policy X period, and
(ii)
ends at the end of the policy X period.
(6)
In subsection (5) “relevant date” means—
(a)
the restricted relief date, or
5
(b)
any anniversary of the restricted relief date.
(7)
For the purposes of subsection (4) “the premium limit” for a relevant
premium period is determined in accordance with subsections (8) to
(10).
(8)
Determine the premiums payable in the relevant premium period
10
under policies related to policy X.
(9)
If the total of those premiums is £3,600 or more, the premium limit is
nil (and, accordingly, no premiums payable under policy X in the
relevant premium period are allowable).
(10)
If the total of those premiums is less than £3,600, the premium limit
15
is the difference between that total and £3,600.
(11)
Subsection (4) does not apply if, at the time policy X became a
restricted relief qualifying policy, any policy related to policy X was
itself a restricted relief qualifying policy.
(12)
For the purposes of this section a policy is “related” to policy X if it
20
met the following requirements at the time policy X became a
restricted relief qualifying policy—
(a)
the policy is a qualifying policy under which the individual
is a beneficiary (as determined in accordance with paragraph
A5 of Schedule 15 to ICTA);
25
(b)
the policy is neither a protected policy nor a pure protection
policy.
(13)
In subsection (12)(b)—
“protected policy” is to be read in accordance with paragraph
A4 of Schedule 15 to ICTA, and
30
“pure protection policy” has the meaning given by paragraph
A6(1)(c) of that Schedule.
(14)
A policy which is a new policy in relation to a policy “related” to
policy X (whether by virtue of subsection (12) or this subsection) is
also “related” to policy X if it meets the requirements of subsection
35
(12)(a) and (b) when issued.
(15)
A policy ceases to be “related” to policy X if it ceases to meet those
requirements.
(16)
If policy X is a restricted relief qualifying policy as provided for by
paragraph A2(14) of Schedule 15 to ICTA, references in this section
40
to policy X becoming a restricted relief qualifying policy are to be
read as references to the policy determined under subsection (17)
becoming a restricted relief qualifying policy.
(17)
The policy is—
(a)
the policy (“policy Y”) in relation to which policy X was the
45
new policy, or