Restricted relief qualifying policies
You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.
A restricted relief qualifying policy (“RRQP”) is a qualifying policy that will not have full tax relief when a chargeable event occurs.
A qualifying policy becomes a RRQP where:
- a qualifying policy is issued on or after 21 March 2012 and before 6 April 2013 where the beneficiary under the policy is in breach of the annual premium limit of £3,600 in any 12 month period.
- an excluded assignment, other than those assignments that have no effect on the qualifying status of a policy (see IPTM2081), takes place on or after 6 April 2013 of a qualifying policy issued before 21 March 2012 where the assignment results in the assignee being in breach of their annual premium limit
- a qualifying policy issued on or after 21 March 2012 is varied before 6 April 2013 such that the premium period is or could be lengthened or the total premiums increased and the beneficiary is in breach of the annual premium limit.
- a variation (see IPTM2080) on or after 21 March 2012 of a qualifying policy issued before 21 March 2012 where that modification results in the premium period being lengthened or the total premiums increased and the beneficiary is in breach of the annual premium limit. This will also be the case if the premium period or premiums payable are decreased on or after 6 April 2013 for a qualifying policy issued before 21 March 2012.
- following a deceased beneficiary event on or after 6 April 2013 where the new beneficiary is in breach of the premium limit and the policy was issued before 21 March 2012.
Effect of a policy becoming a RRQP
The policy attracts full relief for the period up to the date that it becomes a RRQP (or, if later, 5 April 2013). From that date relief is restricted to the balance of the annual premium limit not used up by other qualifying policies.
The gain liable to tax is calculated by reducing the gain by G x TAP/TP
- G is the amount of the gain
- TAP is the total amount of allowable premiums
- TP is the total amount of premiums payable under the policy
See IPTM2077 for an example of this calculation.