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HMRC internal manual

Capital Gains Manual

Life insurance policies/deferred annuities: computation of gains

In computing the gain on a disposal of the rights conferred by a life insurance policy, or an interest in those rights, the allowable expenditure is

  • subject to the Capital Gains Tax rules substituting some other amount the consideration in money or money’s worth given for the acquisition of the rights, or interest in the rights, and
  • the total amount of any premiums paid by the person making the disposal.

All the sums are regarded as being expenditure under TCGA92/S38 (1)(a) and none under TCGA92/S38 (1)(b) - see CG15160+.

See CG69044 regarding valuations if the normal rules of Capital Gains Tax (such as TCGA92/S17 - consideration given replaced by market value if transaction not a bargain made at arm’s length) require that some valuation is used in the computation.