CG68960 - Valuation: interests in trusts/rights conferred by life insurance policies
A disposal of an interest in a trust which has at all times had UK resident trustees will not give rise to a chargeable gain where the person making the disposal is a person for whom the interest was 'created by the terms of the settlement'. However, if such gains accrue in any other circumstances they may be chargeable, see CG38000+. For example, there is no gain if the original remainderman sells his or her interest to a third party. There would be a gain on the third party if they dispose of their interest or if they become absolutely entitled to the settled property.
Gains on the disposal of rights conferred by a policy of insurance or contract for deferred annuity on the life of any person are exempt from Capital Gains Tax, except where
- for disposals on or after 9 April 2003 (see CG69050), the policy or any interest in it has at any time been acquired for 'actual consideration' (as defined in CG69051)
- for disposals before 9 April 2003 (see CG69055), the person making the disposal is not the original beneficial owner of the policy and acquired the rights for consideration in money or money's worth.
In such cases, any valuation which is required can be obtained from the Board’s Actuarial Officer. The papers should be submitted to the Board’s Actuarial Officer, HMRC Inheritance Tax, Nottingham, and the information set out below should be supplied.
IN THE CASE OF A PURCHASED REVERSIONARY INTEREST -
- A copy of the instrument, that is, the deed or will out of which the interest arises (the purchaser will have obtained a copy on their acquisition of the interest)
- Details of the asset(s) over which the interest exists at the date of the relevant valuation
- The names of the trustees (it is material to know whether they are professional trustees)
- The estimated rate of Inheritance Tax which would have been payable on the death of a life tenant at the date of valuation. The purchaser of the interest should have ascertained this at the time of their acquisition because it is material for the ascertainment of the market value. If they have not, they should be asked to do so.
IN THE CASE OF A PURCHASED INTEREST IN A WHOLE LIFE OR ENDOWMENT POLICY -
- A copy of the policy
- Details of bonuses declared and of any which have been withdrawn FROM THE DATE THE POLICY WAS EFFECTED up to the date of required valuation.
This information should be obtained for both actual and deemed disposals (for example rebasing to 31 March 1982).