Finance Bill

House of Lords

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
208

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),
5
(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
10
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
15
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)
20
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
25
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-
30
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.
35
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
40
(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—
45

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
209

(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
5
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;
10
(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;
15
(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
20
(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-
25
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
30
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,
35
(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
40
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
45
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

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

(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.
5
      (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
10
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.
15
      (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
20
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
25
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
30
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
35
(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”
40
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—
45
(i)
on survival for a specified term, or
(ii)
on earlier death or on earlier death or disability,

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

(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
5
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
10
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.
15
     (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
20
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
25
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
30
(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
35
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—
40
(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
45
3(4)(c),

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


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
5
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.
10
      (3)
The maximum amount that may be left out of account under sub-
paragraph (2)(b) in the case of a relevant 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
15
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—
20
(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
25
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
30
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)
35
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.
40
      (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
45
policy B’s unique identifier.

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

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
5
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
10
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.
15
      (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.
20
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
25
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
30
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
35
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
40
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.

Finance Bill
Schedule 9 — Qualifying insurance policies
Part 1 — Amendments of Schedule 15 to ICTA etc
214

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
5
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
10
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
15
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
20
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.
25
      (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
30
(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
35
(c)
when the assignment occurs, it is intended that the policy
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
40
B1    (1)
Sub-paragraph (2) applies in relation to a policy issued in respect
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)—
45
(a)
one individual, or