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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Calculating gains: part surrenders and part assignments: ‘transaction-related calculations’

If the ‘periodic calculation’ explained at IPTM3560 shows that a gain has arisen at the end of the ‘insurance year’, but the conditions explained at IPTM3500 are fulfilled so that the transaction-based rule applies, then no ‘excess event’ is treated as occurring at the end of the ‘insurance year’. Instead,

  • a calculation as described at IPTM3585 is performed for each relevant transaction during the ‘insurance year’ to determine whether a gain has arisen and, if so, its amount, and
  • if a gain has arisen then the relevant transaction will be treated as a chargeable event called a ‘part surrender or assignment event’, unless it arises on a qualifying policy in certain circumstances, see IPTM3595.

Relevant transaction means

  • a part surrender
  • a part assignment for value.

If more than one relevant transaction occurs during an ‘insurance year’, the IPTM3585 calculation is performed for each in turn.

If the year in question is the ‘final insurance year’

  • the calculation under IPTM3585 is performed before the calculation of any gain on the chargeable event which ends the final insurance year (that is, for life polices, a full surrender, maturity or death)
  • special rules apply where the total transaction value exceeds the gains limit, as explained at IPTM3590.

There is a practical explanation of how part surrender and assignment events arise, with examples, at IPTM7625 onwards.

Further reference and feedback IPTM1013