Calculating gains: death, maturity, full surrender or assignment
There is a gain on a chargeable event where the whole of the rights under the policy or contract is given up in some way - see IPTM3500 - if the total benefits of the policy or contract exceed the sum of total deductions and previous gains (if any). There are simple examples in helpsheets HS320 and HS321 and a more detailed example at IPTM7535.
- The value of the policy or contract, as explained at IPTM3515.
In relation to any occurrence before the event in question
- any capital sum paid under the policy or contract, or previous capital benefit
- the amount of any loan made treated as a part surrender, see IPTM3545
- any amount treated as an ‘income payment’ under a guaranteed income bond contract, see IPTM3550
- if the event is an assignment, the amount or value of any share in the rights of the policy previously assigned, but not if that previous assignment occurred in an insurance year that began on or after 6 April 2001 and was not for money’s worth, which includes if made under a court order, see IPTM3420.
Capital sums and benefits exclude any sum attributable to a person’s disability.
- The amount of premiums paid under the policy or contract before the event.
- The amount of any repayment of a loan that was treated as a part surrender of rights: except where the ‘whole of rights being given up’ is on assignment of them.
Premiums include lump sum consideration, and property transferred to the insurer. But where a financial adviser or other intermediary has rebated to the policyholder commission it received on a policy or contract or reinvested it in the policy as additional premium, the allowable premium must be restricted in some circumstances - see IPTM3527 and IPTM3528.
In the case of
- a life annuity under which annuity payments have been made, the sum is reduced by any exempt capital elements - see IPTM4100 - in those payments
- a capital redemption policy that has been assigned for money or money’s worth before the event, the amount of premiums is the consideration given for the last such assignment plus the total amount of premiums paid since the assignment.
A special rule governs endowment policies held as security for company debts - IPTM3530.
These are the total gains treated as arising on ‘calculation events’ under the policy or contract before the current event. ‘Calculation events’ comprise, as defined at IPTM3555
- ‘excess events’
- ‘part surrender or assignment events’
- ‘personal portfolio bond events’.
Further reference and feedback IPTM1013