|
| |
|
502 | Exception from section 501 for loans to buy life annuities |
| |
(1) | Section 501 does not apply to a loan made under a contract for a life annuity if |
| |
all the interest on the loan is eligible for tax relief. |
| |
(2) | If part of the interest is eligible for tax relief, section 501 only applies to the part |
| |
of the loan carrying ineligible interest. |
| 5 |
(3) | For the purposes of this section, interest is eligible for tax relief if it is eligible |
| |
for relief under section 353 of ICTA (general provision for relief for interest) as |
| |
a result of section 365 of ICTA (loan to buy life annuity). |
| |
503 | Exception from section 501 for certain loans under qualifying policies |
| |
(1) | Section 501 does not apply to a loan made by the body issuing a qualifying |
| 10 |
policy if either or both of conditions A and B are met. |
| |
(2) | Condition A is that interest is payable on the loan at a commercial rate. |
| |
(3) | Condition B is that the loan was made— |
| |
(a) | before 6th April 2000, |
| |
(b) | to a full-time employee of the body issuing the policy, and |
| 15 |
(c) | to assist the employee in purchasing or improving a dwelling to be |
| |
used as the employee’s only or main residence. |
| |
504 | Part surrenders: payments under guaranteed income bonds etc. |
| |
(1) | This section applies to so much of any payment of an amount by an insurer |
| |
under a guaranteed income bond contract as meets conditions A to C (and so |
| 20 |
it falls within section 500(d)). |
| |
(2) | Condition A is that it is a sum which, but for subsection (6), would be treated |
| |
for income tax purposes as interest or an annual payment. |
| |
(3) | Condition B is that it is not a sum paid or falling to be paid because of |
| |
provisions of the guaranteed income bond contract which, taken alone, would |
| 25 |
constitute a contract of insurance— |
| |
(a) | within Part 1 or 2 of Schedule 1 to the Financial Services and Markets |
| |
Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but |
| |
(b) | not within paragraph 1 or 3 of Part 2 of that Schedule (life and annuity |
| |
contracts including certain linked long-term contracts). |
| 30 |
(4) | Condition C is that it does not represent late payment interest. |
| |
(5) | This section does not apply if the payment comprises the whole of the last |
| |
benefit to be paid under the contract (ignoring late payment interest). |
| |
(6) | A sum to which this section applies is not regarded as interest or as an annual |
| |
payment for any income tax purposes. |
| 35 |
| |
“guaranteed income bond contract” means a policy of life insurance that |
| |
is a contract of insurance which— |
| |
(a) | is within paragraph 1 or 3 of Part 2 of Schedule 1 to the Financial |
| |
Services and Markets Act 2000 (Regulated Activities) Order |
| 40 |
| |
|
| |
|
| |
|
(b) | is neither an annuity contract nor a contract effected in the |
| |
course of a company’s pension business, |
| |
“late payment interest”, in relation to a contract, means interest on an |
| |
amount payable under the contract which is paid for a period |
| |
beginning on or after the date of the occurrence as a result of which the |
| 5 |
| |
“pension business” has the meaning given by section 431B of ICTA (or the |
| |
corresponding enactment in force when the contract was effected). |
| |
505 | Assignments etc. involving co-ownership |
| |
(1) | For the purposes of this Chapter (except this section and section 506)— |
| 10 |
(a) | a transaction to which this section applies is taken to be one or more |
| |
assignments of part only of the rights under the policy or contract in |
| |
respect of which the transaction occurs, and |
| |
(b) | those assignments are the ones specified in section 506. |
| |
(2) | If subsection (1) applies to a transaction that is an assignment— |
| 15 |
(a) | of the whole of the rights under a policy or contract, or |
| |
(b) | of a part of or a share in those rights, |
| |
| any reference to the assignment in this Chapter (except this section and section |
| |
506) is to be read as a reference to the assignment or assignments that the |
| |
transaction is taken to be under subsection (1). |
| 20 |
(3) | This section applies to a transaction in respect of which conditions A and B and |
| |
either condition C or D or E are met. |
| |
| |
(a) | immediately before the transaction the whole or part of, or a share in, |
| |
the rights under the policy or contract (“the ownership interest”) was in |
| 25 |
the beneficial ownership of one person or of two or more persons |
| |
jointly (“the old ownership”), and |
| |
(b) | as a result of the transaction the ownership interest becomes |
| |
beneficially owned by one person or by two or more persons jointly or |
| |
in common (“the new ownership”). |
| 30 |
(5) | Condition B is that at least one person who is a member of the old ownership |
| |
is also a member of the new ownership. |
| |
(6) | Condition C is that there is only one member of the old ownership and there |
| |
are two or more members of the new ownership. |
| |
(7) | Condition D is that there are two or more members of the old ownership and |
| 35 |
at least one of them is not a member of the new ownership. |
| |
(8) | Condition E is that there are two or more members of the old ownership and |
| |
the share in the ownership interest of at least one of those members (see section |
| |
506(5)) exceeds that member’s share in the ownership interest as a member of |
| |
the new ownership (see section 506(6)). |
| 40 |
506 | Assignments occurring when there is a co-ownership transaction |
| |
(1) | This section sets out the assignment or assignments that are taken to occur |
| |
under section 505 when there is a transaction to which that section applies (“a |
| |
co-ownership transaction”). |
| |
|
| |
|
| |
|
(2) | If there is only one member of the old ownership, that member is to be treated |
| |
as if the co-ownership transaction had been the assignment by that member of |
| |
so much of the ownership interest as exceeds that member’s share in the |
| |
ownership interest as a member of the new ownership. |
| |
(3) | If there are two or more members of the old ownership, each such member who |
| 5 |
is not a member of the new ownership is to be treated as if the co-ownership |
| |
transaction had been the assignment by that member of that member’s share in |
| |
| |
(4) | If there are two or more members of the old ownership, each such member |
| |
whose share in the ownership interest as a member of the old ownership |
| 10 |
exceeds that member’s share in the ownership interest as a member of the new |
| |
ownership is to be treated as if the co-ownership transaction had been the |
| |
assignment by that member of that excess. |
| |
(5) | If the old ownership consists of two or more persons beneficially entitled |
| |
jointly, the members of the old ownership are to be treated as if the ownership |
| 15 |
interest had been in their beneficial ownership in equal shares instead of |
| |
| |
(6) | If the new ownership consists of two or more persons beneficially entitled |
| |
jointly, the members of the old ownership are to be treated as if the result of the |
| |
co-ownership transaction had been that the ownership interest was in the |
| 20 |
beneficial ownership of the members of the new ownership in equal shares |
| |
| |
(7) | In this section “the ownership interest”, “the old ownership” and “the new |
| |
ownership” are to be read as indicated in section 505(4). |
| |
507 | Method for making periodic calculations under section 498 |
| 25 |
(1) | This section deals with the calculation required to be made in relation to a |
| |
policy or contract as at the end of an insurance year under section 498(2) |
| |
(requirement for periodic calculations in part surrender and assignment cases) |
| |
| |
(a) | whether a gain has arisen, and |
| 30 |
(b) | if so, the amount of the gain. |
| |
(2) | There is a gain if the net total value of rights surrendered or assigned exceeds |
| |
the net total allowable payments (see subsections (4) and (5)). |
| |
(3) | The gain is equal to the excess. |
| |
(4) | To calculate the net total value of rights surrendered or assigned— |
| 35 |
| |
| |
(a) | the value, as at the time of its surrender or assignment, of any part of or |
| |
share in the rights under the policy or contract which has been |
| |
surrendered at any time or assigned at any time for money or money’s |
| 40 |
| |
(b) | the value, as at the time of its assignment, of any part of or share in the |
| |
rights under the policy or contract which has been assigned otherwise |
| |
than for money or money’s worth in an insurance year beginning on or |
| |
| 45 |
| in each case determining the value in accordance with section 508. |
| |
|
| |
|
| |
|
| |
| Add together those values. |
| |
| |
| If any previous calculation events (other than personal portfolio bond events) |
| |
have occurred in relation to the policy or contract— |
| 5 |
(a) | add together each such value which has been brought into account |
| |
under this subsection on those events, and |
| |
(b) | subtract the result of paragraph (a) from the result of step 2. |
| |
(5) | To calculate the net total allowable payments— |
| |
| 10 |
| Find the allowable element in each allowable payment by multiplying the |
| |
amount of the payment by—![equation: over[string["X"],num[20.0000000000000000,"20"]]](missing.gif) |
| |
| where X is the number of insurance years in the period beginning with the year |
| |
in which the payment is made and ending with the insurance year as at the end |
| |
of which the calculation under this section is required to be made or, if it is less, |
| 15 |
| |
| |
| Add together the allowable elements for all allowable payments. |
| |
| |
| Add together all the allowable elements brought into account under this |
| 20 |
subsection on a previous calculation event. |
| |
| |
| Subtract the result of step 3 from the result of step 2. |
| |
| |
“allowable payment” means a premium, other than a retained |
| 25 |
replacement policy premium, and |
| |
“retained replacement policy premium” has the meaning given in section |
| |
| |
508 | The value of rights partially surrendered or assigned |
| |
(1) | For the purposes of sections 507, 511 and 512, where any part of or share in |
| 30 |
rights conferred by a policy or contract is surrendered, the value of the part of |
| |
or share in the rights surrendered is the amount or value of the sum payable or |
| |
other benefits arising because of the surrender, except where subsection (2) or |
| |
| |
(2) | In the case of a surrender within section 500(c) (loans by insurers to which |
| 35 |
section 501 applies), the value for those purposes is an amount equal to the |
| |
| |
(3) | In the case of a surrender within section 500(d) (payments by insurers under |
| |
guaranteed income bonds etc.), the value for those purposes is the amount to |
| |
which section 504 applies. |
| 40 |
(4) | For the purposes of sections 507, 511 and 512, where any part of or share in |
| |
rights conferred by a policy or contract is assigned, the value of the part or |
| |
share as at the time of the assignment is its surrender value at that time. |
| |
|
| |
|
| |
|
(5) | For the requirement to ignore certain benefits, see section 497 (disregard of |
| |
trivial inducement benefits). |
| |
509 | Chargeable events in certain cases where periodic calculations show gains |
| |
(1) | If the calculation in section 507 shows that a gain has arisen as at the end of the |
| |
insurance year, the gain is treated as arising on the occurrence of a chargeable |
| 5 |
event at the end of that year, unless condition A, B or C is met. |
| |
(2) | Subsection (1) is subject to section 485(3) (which restricts the circumstances in |
| |
which such events occur in relation to qualifying policies). |
| |
(3) | Condition A is that during the insurance year there has been an assignment for |
| |
money or money’s worth of part of or a share in the rights conferred by the |
| 10 |
| |
(4) | Condition B is that during the insurance year there has been both— |
| |
(a) | a surrender of part of or a share in the rights conferred by the policy or |
| |
| |
(b) | a later assignment, otherwise than for money or money’s worth, of the |
| 15 |
whole or part of or a share in the rights conferred by the policy or |
| |
| |
(5) | Condition C is that the insurance year is the final insurance year. |
| |
(6) | See section 510 (transaction-related calculations in certain part surrender and |
| |
assignment cases) if one or both of conditions A and B are met. |
| 20 |
Transaction-related calculations and part surrender or assignment events |
| |
510 | Requirement for transaction-related calculations in certain part surrender and |
| |
| |
(1) | This section applies if— |
| |
(a) | the calculation in section 507 shows that a gain has arisen as at the end |
| 25 |
of the insurance year, but |
| |
(b) | one or both of the conditions specified in section 509(3) and (4) are met |
| |
(and so no chargeable event is treated as occurring at the end of the year |
| |
| |
(2) | A calculation is to be made in accordance with section 511 in relation to each |
| 30 |
relevant transaction during the insurance year to determine— |
| |
(a) | whether the transaction resulted in a gain arising on the policy or |
| |
| |
(b) | if so, the amount of the gain. |
| |
(3) | In this section and sections 511 to 514 “relevant transaction” means— |
| 35 |
(a) | a surrender of part of or a share in the rights under the policy or |
| |
| |
(b) | an assignment of such a part or share for money or money’s worth. |
| |
(4) | If two or more relevant transactions occurred during the insurance year, a |
| |
calculation in accordance with section 511 is to be made in relation to each of |
| 40 |
them successively in the order in which they occurred. |
| |
|
| |
|
| |
|
(5) | A calculation falling to be made in accordance with section 511 in relation to a |
| |
relevant transaction occurring in the final insurance year is to be made before |
| |
any calculation under section 491 for the chargeable event that ends that year. |
| |
(6) | But, in the case of a relevant transaction so occurring, subsections (2) and (4) |
| |
are subject to section 513(5) (under which those subsections do not apply to |
| 5 |
some such relevant transactions). |
| |
511 | Method for making transaction-related calculations under section 510 |
| |
(1) | This section deals with the calculation required to be made under section 510 |
| |
| |
(a) | whether a relevant transaction which has occurred during an insurance |
| 10 |
year resulted in a gain arising on the policy or contract, and |
| |
(b) | if so, the amount of the gain. |
| |
(2) | There is a gain if the transaction value for the relevant transaction (see |
| |
subsection (4)) exceeds the amount of available premium left for the relevant |
| |
transaction as calculated in accordance with section 512. |
| 15 |
(3) | The gain is equal to the excess. |
| |
(4) | The transaction value for the relevant transaction is the value in accordance |
| |
with section 508, as at the time of its surrender or assignment, of the part of or |
| |
share in the rights under the policy or contract which has been surrendered or |
| |
assigned in the transaction. |
| 20 |
(5) | Subsections (2) and (4) are subject to section 513(4) (under which the |
| |
transaction value is to be reduced in certain cases where the relevant |
| |
transaction occurs in the final insurance year). |
| |
512 | Available premium left for relevant transaction |
| |
(1) | For the purposes of section 511(2), the amount of available premium left for a |
| 25 |
relevant transaction is the amount, if any, by which the available net allowable |
| |
payments (see subsection (3)) exceed the available net total values for the year |
| |
| |
(2) | But the amount of available premium left for the relevant transaction is nil if— |
| |
(a) | one or more other relevant transactions have occurred in respect of the |
| 30 |
relevant contract earlier in the insurance year, and |
| |
(b) | for the latest of them the calculation in section 511(2) produced a gain. |
| |
(3) | To calculate the available net allowable payments— |
| |
| |
| Calculate the net total allowable payments as at the end of the insurance year |
| 35 |
in accordance with section 507(5). |
| |
| |
| |
(a) | one or more other relevant transactions (“the earlier transactions”) have |
| |
occurred in respect of the policy or contract earlier in the insurance |
| 40 |
| |
(b) | for the latest of them the calculation in section 511(2) produced no gain, |
| |
| subtract the sum of the transaction values for the earlier transactions from the |
| |
| |
|
| |
|
| |
|
(4) | To calculate the available net total values for the year— |
| |
| |
| Calculate the net total value of rights surrendered or assigned, as at the end of |
| |
the insurance year, in accordance with section 507(4), ignoring for the purposes |
| |
of step 3 in that section any relevant transactions in that year that are treated as |
| 5 |
chargeable events under section 514. |
| |
| |
| Subtract from the result of step 1 the value, as at the time of its surrender or |
| |
assignment, of any part of or share in the rights under the policy or contract |
| |
which has been surrendered in the insurance year or assigned in that year for |
| 10 |
money or money’s worth, determining the value in accordance with section |
| |
| |
513 | Special rules for part surrenders and assignments in final insurance year |
| |
(1) | This section applies if— |
| |
(a) | the calculation in section 511 falls to be made in relation to a relevant |
| 15 |
transaction occurring in the final insurance year, |
| |
(b) | the total transaction value for that transaction exceeds the gains limit |
| |
(see subsections (2) and (3)), and |
| |
(c) | paragraph (b) has not applied to a relevant transaction occurring earlier |
| |
in the final insurance year in respect of the policy or contract in |
| 20 |
| |
(2) | The total transaction value is the total of— |
| |
(a) | the transaction value for the transaction in question in accordance with |
| |
| |
(b) | the transaction values for any relevant transactions occurring earlier in |
| 25 |
the final insurance year in respect of the policy or contract in |
| |
accordance with that section. |
| |
(3) | The gains limit is the amount calculated, as at the end of the final insurance |
| |
year, as the amount of the gain that would have been treated as arising on the |
| |
occurrence of the chargeable event that ends that year if in relation to that |
| 30 |
| |
(a) | section 509(1) did not refer to condition C, and |
| |
(b) | sections 510(2) and (4) and 514(1) did not apply. |
| |
(4) | The transaction value for the relevant transaction used for the calculation in |
| |
section 511(2) is reduced by the excess mentioned in subsection (1)(b). |
| 35 |
(5) | No calculations are required to be made under section 510(2) and (4) in relation |
| |
to any subsequent relevant transaction in respect of the policy or contract. |
| |
514 | Chargeable events where transaction-related calculations show gains |
| |
(1) | If the calculation in section 511 shows that a relevant transaction resulted in a |
| |
gain arising on the policy or contract, the relevant transaction is treated as a |
| 40 |
| |
(2) | Subsection (1) is subject to section 485(5) (which restricts the circumstances in |
| |
which such events occur in relation to qualifying policies). |
| |
(3) | Subsection (4) applies if— |
| |
|
| |
|