725 Special investment policies: breaches of conditions

Summary

This section provides for a situation where a life assurance company becomes aware at any time on or before 31 December 2002, that a policy issued to a policyholder no longer qualifies as a special investment policy (or never did so qualify from the time that it was issued). An additional liability to corporation tax arises on the life assurance company in such situations.

Details

(1) The circumstances in which a policy is not to be treated as a special investment policy are set out. These include a situation where a policyholder acquires more special investment products or savings accounts than he/she is entitled to – in this regard see the notes on section 839 (limits on special investments).

(2) A life assurance company is obliged to cease to treat a policy as a special investment policy on discovering on or before 31 December 2002, that it is not entitled to be so treated. An additional liability to corporation tax is also imposed on a life assurance company where the company discovers that a particular policy should not have been treated as a special investment policy. The additional charge to corporation tax on the company is calculated by reference to the increase in its liability in respect of the policy from the time that the policy ceased to qualify as a special investment policy (or from its date of issue if it never was a special investment policy) until the time the company became aware of that fact. The increase, which is to be net of 10 per cent tax, is regrossed and the additional liability to tax is calculated at a rate being the difference between the standard rate and the 10 per cent rate.

Relevant Date: Finance Act 2021