The charge to tax: income tax and corporation tax
Chargeable event gains are charged to income tax where, as is usually the case, the policy is for the benefit of individuals, or settled on trust by individuals.
Companies sometimes hold life investment bonds, perhaps because of the flexibility of the investment medium which can, for example, allow for the restructuring of underlying investments without an immediate charge to tax.
Following FA08/SCH13, companies are within the loan relationships rules in respect of most life policies, purchased life annuities and capital redemption policies that they own for accounting periods starting on or after 1 April 2008 and the chargeable event gain rules no longer apply for those periods. The loan relationships rules already applied from 10 February 2005 to companies that own capital redemption policies that are money debts, that is, capital redemption bonds, following F2A05/SCH7/PARA14.
For accounting periods starting before 1 April 2008, companies are taxable under the chargeable event gain rules on policies and contracts, although for capital redemption policies that are money debts the loan relationships rules take precedence from 10 February 2005.
The differences between the charge to income tax and corporation tax under the chargeable event gain rules are considered at IPTM3130.