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insert— | |
“214BA Interpretation | |
Expressions used in this Chapter and in Chapter 1 of Part 12 of the | |
Taxes Act have the same meaning in this Chapter as in that | |
Chapter.”. | 5 |
Schedule 34 | |
Section 170 | |
Policies of life insurance etc: miscellaneous amendments | |
Part 1 | |
Group life policies | |
Exception of certain group life policies from Chapter 2 of Part 13 | 10 |
1 (1) Section 539 of the Taxes Act 1988 (introductory) is amended as follows. | |
(2) In subsection (2) (policies and contracts to which the Chapter does not | |
apply) at the end of paragraph (d) add “; or | |
(e) to any group life policy having as its sole object the provision, | |
on the death or disability of any of the individuals insured | 15 |
under the policy, of a sum substantially the same as any | |
amount then outstanding under a loan made by a credit | |
union to that individual; or | |
(f) to any group life policy with respect to which the conditions | |
in section 539A are satisfied (“an excepted group life | 20 |
policy”).”. | |
(3) In subsection (3) (defined expressions) insert each of the following | |
definitions at the appropriate place— | |
““credit union” means a society registered as a credit union | |
under the Industrial and Provident Societies Act 1965 or the | 25 |
Credit Unions (Northern Ireland) Order 1985;”; | |
““excepted group life policy” shall be construed in accordance | |
with subsection (2)(f) above;”; | |
““group life policy” means a policy of life insurance whose | |
terms provide— | 30 |
(a) for the payment of benefits on the death of more than | |
one individual; and | |
(b) for those benefits to be paid on the death of each of | |
those individuals;”. | |
Excepted group life policies | 35 |
2 After section 539 of the Taxes Act 1988 insert— | |
“539A The conditions for being an excepted group life policy | |
(1) The conditions mentioned in section 539(2)(f) (excepted group life | |
policies) are those set out in the following provisions of this section. | |
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(2) Condition 1 is that under the terms of the policy a sum or other | |
benefit of a capital nature is payable or arises on the death of each of | |
the individuals insured under the policy who dies without attaining | |
an age which is specified in the policy and is not greater than 75 | |
years. | 5 |
In determining whether this condition is satisfied, disregard any | |
terms of the policy which exclude from benefit the death of a person | |
in specified circumstances, if the exclusion applies in relation to | |
death in those circumstances in the case of each of the individuals | |
insured under the policy. | 10 |
(3) Condition 2 is that under the terms of the policy— | |
(a) the same method is to be used for calculating the sums or | |
other benefits of a capital nature payable or arising on each | |
death, and | |
(b) if there is any limitation on those sums or other benefits, the | 15 |
limitation is the same in the case of any death. | |
(4) Condition 3 is that the policy does not have, and is not capable of | |
having, on any day— | |
(a) a surrender value that exceeds the proportion of the | |
premiums paid which, on a time apportionment, is referable | 20 |
to the unexpired paid-up period beginning with that day, or | |
(b) if there is no such period, any surrender value. | |
For the purposes of this subsection the unexpired paid-up period | |
beginning with any day is the period (if any) which— | |
(i) begins with that day, and | 25 |
(ii) ends with the earliest subsequent day on which— | |
(a) a payment of premium falls due under the policy, or | |
(b) the term of the policy ends. | |
(5) Condition 4 is that no sums or other benefits may be paid or | |
conferred under the policy, except as mentioned in condition 1 or | 30 |
condition 3. | |
(6) Condition 5 is that any sums payable or other benefits arising under | |
the policy must (whether directly or indirectly) be paid to or for, or | |
conferred on, or applied at the direction of— | |
(a) an individual or charity beneficially entitled to them, or | 35 |
(b) a trustee or other person acting in a fiduciary capacity who | |
will secure that the sums or other benefits are paid to or for, | |
or conferred on, or applied in favour of, an individual or | |
charity beneficially. | |
In this subsection “charity” means any body of persons or trust | 40 |
established for charitable purposes only. | |
(7) Condition 6 is that no person— | |
(a) who is an individual whose life is insured under the policy, | |
or | |
(b) who is, within the meaning of section 839, connected with an | 45 |
individual whose life is so insured, | |
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may, by virtue of a group membership right relating to that | |
individual, receive (directly or indirectly) any death benefit in | |
respect of another group member. | |
In this subsection— | |
(i) “group membership right”, in relation to an individual, | 5 |
means any right (including the right of any person to be | |
considered by trustees in their exercise of a discretion) that is | |
referable to that individual’s being one of the individuals | |
whose lives are insured by the policy; and | |
(ii) “death benefit in respect of another group member” means— | 10 |
(a) any sums or other benefits payable or arising under | |
the policy on the death of any other of those | |
individuals, or | |
(b) anything representing any such sums or benefits. | |
(8) Condition 7 is that a tax avoidance purpose is not the main purpose, | 15 |
or one of the main purposes, for which a person is at any time— | |
(a) the holder, or one of the holders, of the policy, or | |
(b) the person, or one of the persons, beneficially entitled under | |
the policy. | |
In this subsection— | 20 |
(i) “tax avoidance purpose” means any purpose that consists in | |
securing a tax advantage (whether for the holder of the policy | |
or any other person); and | |
(ii) “tax advantage” has the same meaning as in Chapter 1 of Part | |
17 (tax avoidance).”. | 25 |
Retrospective exception of past and present pure protection group life policies | |
3 (1) For the purposes of Chapter 2 of Part 13 of the Taxes Act 1988 (and any | |
former enactment that is re-enacted in that Chapter), any event happening | |
before 9th April 2003 in relation to a policy of life insurance which, at the | |
time of the event, was a pure protection group life policy shall be deemed | 30 |
not to have been a chargeable event. | |
(2) For the purposes of this paragraph a policy of life insurance is at any time a | |
pure protection group life policy if at that time it is a group life policy whose | |
terms do not provide for any sums or other benefits to be paid or conferred | |
except on death or disability. | 35 |
Existing group life policies: time for compliance with the conditions in section 539A | |
4 (1) Where— | |
(a) on 9th April 2003 a policy of life insurance issued in respect of an | |
insurance made before that date is a group life policy but the | |
conditions in section 539A of the Taxes Act 1988 are not satisfied, | 40 |
(b) on or after that date, the terms of the policy are varied so that those | |
conditions are satisfied before 6th April 2004, and | |
(c) during the period beginning with 9th April 2003 and ending with the | |
date when the variation takes effect (“the transitional period”), no | |
sums become payable, and no other benefits arise, under the policy | 45 |
except on death or disability, | |
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the conditions in section 539A of the Taxes Act 1988 shall be taken for the | |
purposes of Chapter 2 of Part 13 of the Taxes Act 1988 to have been satisfied | |
with respect to the policy throughout the transitional period. | |
(2) Where, for the purposes of Chapter 2 of Part 13 of the Taxes Act 1988,— | |
(a) on 9th April 2003 a policy of life insurance issued in respect of an | 5 |
insurance made before that date (“the old policy”) is a group life | |
policy but the conditions in section 539A of the Taxes Act 1988 are | |
not satisfied, | |
(b) on or after that date, the terms of the insurance are varied solely for | |
the purpose of securing that those conditions are satisfied before 6th | 10 |
April 2004 with respect to a policy in respect of the insurance, and | |
(c) as a result of the variation, the old policy is replaced by a new policy | |
(“the new policy”), | |
sub-paragraph (3) applies. | |
(3) Where this sub-paragraph applies— | 15 |
(a) the old policy and the new policy shall be treated for the purposes | |
of— | |
(i) paragraph 3(1), | |
(ii) sub-paragraph (1), and | |
(iii) Chapter 2 of Part 13 of the Taxes Act 1988, | 20 |
as a single policy issued in respect of an insurance made at the time | |
of the making of the insurance in respect of which the old policy was | |
issued, and | |
(b) that deemed single policy shall be treated for the purposes of sub- | |
paragraph (1) as if the variation mentioned in sub-paragraph (2)(b) | 25 |
had been a variation of its terms taking effect on the date on which | |
that variation takes effect (but not resulting in the replacement of the | |
deemed single policy). | |
Deaths before 6th April 2004: period for insurer to give certificate under section 552(1)(a) | |
5 (1) If any death giving rise to benefits under a group life policy occurs— | 30 |
(a) on or after 9th April 2003, but | |
(b) before 6th April 2004, | |
subsection (6) of section 552 of the Taxes Act 1988 (relevant three month | |
period for insurer to give certificate under section 552(1)(a) to policy holder) | |
shall have effect in relation to that policy and that death as if there were | 35 |
included among the paragraphs of that subsection the unnumbered | |
paragraph set out in sub-paragraph (2). | |
(2) That paragraph is— | |
“( ) if the event is a death and the policy in question is a group life | |
policy, the period of three months following 5th April 2004;”. | 40 |
Part 2 | |
Charitable and non-charitable trusts | |
Interpretation | |
6 In section 539 of the Taxes Act 1988 (introductory) in subsection (3), insert | |
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each of the following definitions at the appropriate place— | |
““charitable trust” means any trust established for charitable | |
purposes only;” | |
““non-charitable trust” means any trust other than a charitable | |
trust.”. | 5 |
Method of charging gain to tax | |
7 (1) Section 547 of the Taxes Act 1988 is amended as follows. | |
(2) In subsection (1) (attribution of gain) in paragraph (a) (which refers to trusts | |
created by an individual) before “trusts” insert “non-charitable”. | |
(3) In paragraph (b) of that subsection (which refers to trusts created by a | 10 |
company) before “trusts” insert “non-charitable”. | |
(4) After paragraph (c) of that subsection (personal representatives) insert— | |
“(cc) if, immediately before the happening of that event, those | |
rights— | |
(i) were held on charitable trusts, or | 15 |
(ii) were held as security for a debt owed by trustees of a | |
charitable trust, | |
subsection (9) or (10) below (as the case may be) shall apply | |
in relation to the amount of the gain;”. | |
(5) In paragraph (d) of that subsection (trusts) in sub-paragraph (i) (rights held | 20 |
on trusts etc) before “trusts”, where first occurring, insert “non-charitable”. | |
(6) For the word “or” at the end of sub-paragraph (i) of that paragraph | |
substitute the following sub-paragraph— | |
“(ia) those rights were held on non-charitable trusts and | |
the circumstances were not such as are mentioned in | 25 |
paragraph (a), (b) or (c) above or sub-paragraph (i) | |
above, or”. | |
(7) In sub-paragraph (ii) of that paragraph (rights held as security for debt owed | |
by trustees) after “trustees” insert “of a non-charitable trust”. | |
(8) After subsection (4) insert— | 30 |
“(4A) In subsection (1) above— | |
(a) paragraph (cc) is subject to paragraph 12(1) of Schedule 34 to | |
the Finance Act 2003 (which applies paragraph 7(1) of | |
Schedule 14 to the Finance Act 1998); | |
(b) paragraph (d)(ia) is subject to paragraph 12(2) of that | 35 |
Schedule (exception for certain cases where insurance etc | |
made or effected before 9th April 2003).”. | |
(9) In subsection (5AA) (which, in a case falling within subsection (1)(d), | |
applies, with modifications, to trustees the tax treatment for individuals | |
under subsection (5)) for “subsection (1)(d)” substitute “subsection (1)(cc) or | 40 |
(d)”. | |
(10) In subsection (9) (treatment of gains in case falling within subsection (1)(d) | |
where trustees resident in United Kingdom)— | |
(a) for “(1)(d)” substitute “(1)(cc) or (d)”; and | |
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(b) in paragraph (b) (gain to be chargeable to income tax at the rate | |
applicable to trusts) for “the rate applicable to trusts” substitute “the | |
appropriate rate”. | |
(11) After subsection (9) insert— | |
“(9A) For the purposes of subsection (9) above, the “appropriate rate” for | 5 |
any year— | |
(a) in a case falling within subsection (1)(cc) above, is the basic | |
rate for that year; and | |
(b) in a case falling within subsection (1)(d) above, is the rate | |
applicable to trusts for that year.”. | 10 |
(12) In subsection (10) (treatment of gains in case falling within subsection (1)(d) | |
where trustees not resident in United Kingdom) for “(1)(d)” substitute | |
“(1)(cc) or (d)”. | |
Method of charging gain to tax: multiple interests | |
8 (1) Section 547A of the Taxes Act 1988 is amended as follows. | 15 |
(2) In subsection (3) (the cases where a person has a relevant interest) in | |
paragraph (a) (which refers to trusts created by an individual) before | |
“trusts” insert “non-charitable”. | |
(3) In paragraph (b) of that subsection (which refers to trusts created by a | |
company) before “trusts” insert “non-charitable”. | 20 |
(4) After paragraph (c) of that subsection (personal representatives) insert— | |
“(cc) in the case of trustees of a charitable trust, if a share in the | |
rights is held by them or as security for a debt owed by | |
them;”. | |
(5) In paragraph (d) of that subsection (trustees) after “trustees” insert “of a non- | 25 |
charitable trust”. | |
(6) For the word “or” at the end of sub-paragraph (i) of that paragraph | |
substitute the following sub-paragraph— | |
“(ia) if a share in the rights is held by them which does not | |
also fall within paragraph (a), (b) or (c) above or sub- | 30 |
paragraph (i) above; or”. | |
(7) In subsection (6) (rights or share held on trusts created by two or more | |
persons) before “trusts”, where first occurring, insert “non-charitable”. | |
(8) In subsection (10) (case where different shares of the whole trust property | |
originate from different persons)— | 35 |
(a) in paragraph (a), before “trusts” insert “non-charitable”; and | |
(b) in the closing words, before “trusts” insert “non-charitable”. | |
Deemed surrender of certain loans | |
9 (1) Section 548(1) of the Taxes Act 1988 is amended as follows. | |
(2) In paragraph (a) (condition that gain would be treated under section 547 as | 40 |
part of an individual’s total income or income of a company) after “income | |
of a company” insert “or of any trustees”. | |
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(3) In paragraph (c) (condition that sum is lent to, or at the direction of, the | |
individual or company by, or by arrangement with, the body issuing etc the | |
policy or contract) after “company” insert “or those trustees”. | |
Right of individual to recover tax from trustees | |
10 In section 551 of the Taxes Act 1988, in subsection (1) (individual liable as | 5 |
settlor) in paragraph (b), for “trust” substitute “non-charitable trusts”. | |
Right of company to recover tax from trustees | |
11 In section 551A of the Taxes Act 1988, in subsection (1) (company liable as | |
settlor) in paragraph (b), for “trust” substitute “non-charitable trusts”. | |
Section 547(1)(cc) and (d)(ia): exception for certain old policies and contracts | 10 |
12 (1) Paragraph 7(1) of Schedule 14 to the Finance Act 1998 (c. 36) (exception for | |
certain cases where the trust was created before 17th March 1998, the creator | |
etc was an individual who died before that date and the insurance etc was | |
made or effected before that date) has effect in relation to section 547(1)(cc) | |
of the Taxes Act 1988 as it has effect in relation to section 547(1)(d) of that | 15 |
Act. | |
(2) Paragraph (d) of section 547(1) of the Taxes Act 1988 (trustees of a non- | |
charitable trust) does not have effect by virtue of sub-paragraph (ia) of that | |
paragraph in relation to the amount of a gain if the gain is treated as arising | |
on the happening of a chargeable event in relation to a pre-commencement | 20 |
policy or contract. | |
(3) In this paragraph “pre-commencement policy or contract” means— | |
(a) any policy of life insurance issued in respect of an insurance made | |
before 9th April 2003, | |
(b) any contract for a life annuity made before that date, or | 25 |
(c) any capital redemption policy where the contract was effected before | |
that date, | |
but does not include any such policy or contract falling within sub- | |
paragraph (4). | |
(4) A policy or contract falls within this sub-paragraph if, on or after 9th April | 30 |
2003 (but before the happening of the chargeable event in question),— | |
(a) the policy or contract has been varied so as to increase the benefits | |
secured or to extend the term of the insurance, annuity or capital | |
redemption policy (any exercise of rights conferred by the policy | |
being regarded for this purpose as a variation); or | 35 |
(b) there has been an assignment (whether or not for money’s worth) of | |
the rights, or a share in the rights, conferred by the policy or contract | |
to trustees of a non-charitable trust, as defined in section 539(3) of the | |
Taxes Act 1988. | |
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