593 Life assurance and deferred annuities

Summary

This section deals with gains and losses from the disposal of or of an interest in a life assurance policy or a contract for a deferred annuity on the life of any person. Where the person making the disposal is the original beneficial owner of the policy or contract, any gain accruing on the disposal is not a chargeable gain and, consequently, any loss arising on the disposal is not an allowable loss. This treatment does not extend to gains or losses on disposals by persons other than the original beneficial owners.

Details

Application

(1) The section applies to any policy of assurance or contract for a deferred annuity on the life of a person.

Exemption for original beneficial owners only

(2) No chargeable gain (and consequently no allowable loss) accrues on the disposal of or of an interest in rights under life assurance policies or contracts for deferred annuities except in a case where the person making the disposal is not the original beneficial owner and acquired the rights or interests for a consideration in money or money’s worth.

Time of disposal and valuation

(3) The time of disposal for the purposes for the charge to tax is when the assurance money or the first instalment of the annuity is due or when the surrender of the policy or contract takes place. The current value of future annuity instalments is to be included in the consideration for a disposal of a contract for a deferred annuity. Any questions concerning the valuation of interests in deferred annuities should be referred to the Office of the Chief Inspector of Taxes for instructions.

Transfer of investments treated as payments

(4) A transfer of investments or other assets to the owner of a policy of assurance is to be treated as a payment of the sum assured under the policy. Thus, the value of investments which are part of the proceeds of an investment linked policy are to be included in the amount of the consideration in cases where the proceeds are chargeable.

Relevant Date: Finance Act 2021