Lifetime transfers: purchase of a policy linked with an annuity
A specific charge to tax is contained in IHTA84/S263 and applies where
- a policy of life insurance (IHTM20000) is taken out or varied since 26 March 1974,
- an annuity (IHTM20000) was purchased at the same time or at any earlier or later date, and
- the benefit of the policy is vested in someone else.
Unless the taxpayer can show that the purchase of the annuity and the effecting of the policy were not associated operations (IHTM14822), they will be treated as having made a transfer of value (IHTM04024) by a disposition (IHTM04023) made at the same time as the benefit of the policy became vested – to the exclusion of any other transfer that might arise from the dealings.
The use of the word ‘treated’ here applies only to establish the date on which the disposition was made. The transferor has made a real transfer in taking out the policy for the benefit of someone else, so such transactions can qualify for potentially exempt transfer (IHTM04057) treatment.
The date the policy became vested in the other person is ‘treated’ as the date of the transfer of value.