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In certain unusual circumstances life insurance policyholders can inadvertently generate taxable gains, when making a part surrender or part assignment of their policy, which are wholly disproportionate to the policy’s underlying economic gain.
At Budget 2016 the government announced its intention to introduce legislation in Finance Bill 2017 changing the current tax rules. A public consultation on possible alternatives ran from 20 April 2016 to 13 July 2016.
Following this consultation draft legislation has been published, together with this summary of consultation responses, to allow policyholders to apply to HM Revenue and Customs (HMRC) to have disproportionate gains recalculated on a just and reasonable basis.
As announced at Budget 2016, the government will change the current rules for part surrenders and part assignments of life insurance policies to prevent excessive tax charges arising on these products.
This consultation invites views on possible alternatives and sets out, in detail, three options for change.