IPTM3580 - 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 transaction-related calculation described at IPTM3585 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.