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HMRC internal manual

Capital Gains Manual

Insurance: capital redemption policies

Capital Redemption Policies are not within the charge to Capital Gains Tax. Under such a policy, on payment of a sum of money, the insurer guarantees to the insured a larger sum payable on a specified future date or dates; payment is independent of any contingency. For example, it is not dependent on a death or survival of a life. Examples of such policies include

  • an annuity certain - an annuity payable for a set period not dependent on a life
  • a leasehold redemption policy - which builds up a fund to be used in some way on expiration of a lease
  • a sinking fund policy - this accumulates a fund for eventual replacement of a wasting asset.