Life insurance policies/deferred annuities: disposals of policies and contracts
The normal rules on what constitutes the disposal of an asset (see CG12700+) apply to life insurance policies and deferred annuities. In addition TCGA92/S210 specifically provides that certain other occasions count as disposals of the rights conferred by a life insurance policy or deferred annuity.
For life insurance policies TCGA92/S210 (10) provides, from 9 April 2003, that
- the receipt of the sum assured by the policy, or
- the transfer of assets to the owner of the policy in accordance with the terms of the policy - assets so transferred are treated as acquired for a consideration equal to their market value - TCGA92/S204 (6), or
- the surrender of the policy of insurance
all count, for Capital Gains Tax purposes, as disposals of the rights (or of all the interests in the rights) conferred by the policy.
For deferred annuities TCGA92/S210 (11) provides, from 9 April 2003, that
- the receipt of the first instalment of the annuity, or
- the surrender of the rights conferred by the deferred annuity
both count as disposals for Capital Gains Tax purposes of the rights (or of all the interests in the rights) conferred by the contract.
When a disposal occurs on the receipt of the first instalment of an annuity, TCGA92/S210 (12) stipulates that the consideration for the disposal is the aggregate of the amount or value of the first instalment received plus the market value at the time of the disposal of the right to receive the further instalments of the annuity. And that if two or more persons have interests in the rights, that aggregate consideration is apportioned between them on a just and reasonable basis. TCGA92/S210 (12) also provides that where a disposal has occurred on the receipt of the first instalment of a deferred annuity no chargeable gain can arise on any subsequent disposal of the rights conferred by that annuity, or of any interest in them.
Before 9 April 2003 subsections (3) and (4) of (old) TCGA92/S210 made similar provision for disposals of life insurance policies and deferred annuity contracts to occur on the occasions set out above.
As regards the valuation of interests in life insurance policies, see CG68960+. You should refer questions concerning the valuation of interests in deferred annuities to Shares and Assets Valuation.