HMRC internal manual

Insurance Policyholder Taxation Manual

Outline of the chargeable events regime: tax charged

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

A chargeable event gain is deemed to form part of the chargeable person’s income. In the case of a full surrender, assignment, death or maturity the gain will be assessed for the chargeable period, tax year or accounting period, in which the event happened. Special rules apply to part surrenders or assignments, involving the concept of an ’insurance year’ at whose end the gain is treated as arising. See IPTM3540 and IPTM3570.

The chargeable person, if an individual, will in many cases be treated as though tax at basic rate had been paid on the gain. This reflects the tax paid by a UK-resident insurer attributable to the income and gains arising on assets backing policyholder benefits, see IPTM3810.

The tax charge on chargeable event gains takes precedence over any possible charge on capital gains, TCGA92/S37. In any event, any gain on a life policy or deferred annuity contract is exempt from tax on capital gains unless the policy or contract was acquired for actual consideration, TCGA92/S210. More details at CG69000 onwards.

A gain on a policy or contract may be chargeable as income under a provision other than the chargeable event regime. This might, for example, happen where the benefits paid out under a policy fall to be included as receipts of a trade or profession, as well as where a policy is held as a circulating capital investment by a financial concern. ITTOIA05/S527 gives this type of charge precedence over the chargeable event regime.

In such a case none of the special chargeable event rules described in this Chapter apply.

Further reference and feedback IPTM1013