HMRC internal manual

Insurance Policyholder Taxation Manual

IPTM3330 - Policies and contracts charged: ‘foreign policies’

Certain life insurance policies or capital redemption policies

  • issued by a non-UK resident company, or
  • forming part of the overseas life assurance business of a UK insurer

are defined as ‘foreign policies’ and some aspects of the tax treatment are different. Detailed issues relating to ‘foreign policies’ are discussed at IPTM3700 onwards.

The definition of a ‘foreign policy’ is as follows.

Policies issued by non-UK resident companies

Where a policy is issued by non-UK resident company it is defined as a ‘foreign policy’ if it is a:

  • life insurance policy made or varied so as to increase the benefits or extend the term on or after 18 November 1983, or
  • capital redemption policy made on or after 23 February 1984.
Policies forming part of overseas life assurance business

Where a policy forms part of a UK insurer’s overseas life assurance business, it is defined as a ‘foreign policy’ if it is a:

  • life policy made or varied on or after 17 March 1998, or
  • capital redemption policy made on or after 23 March 1999.

Overseas life assurance business, or ‘OLAB’, is defined at FA12/S61 as life assurance business written with non-UK resident policyholders. Certain forms of business are excluded from being OLAB, for example pension, child trust fund and individual savings account business. UK means Great Britain and Northern Ireland and excludes the Channel Islands and the Isle of Man. UK insurers may write business through a branch or permanent establishment based outside the UK, or directly from the UK on what is called a ‘services basis’. If business is OLAB, the UK insurer, like a foreign insurer, does not account for tax on the policyholders’ share of the investment return on the relevant policies.

Regulation 7 of The Insurance Companies (Overseas Life Assurance Business) (Excluded Business) Regulations 2000 (SI 2000/2089) widens the scope of OLAB regardless of the trustees’ residence where policies are held to provide pension-type benefits or benefits to overseas employees or former employees or their spouse/dependants.