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HMRC internal manual

Insurance Policyholder Taxation Manual

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

There is a gain on a ‘part surrender or assignment event’, see IPTM3580, if the transaction value for the relevant transaction exceeds the amount of available premium left. There are examples of ‘transaction-related calculations’ at IPTM7625 to IPTM7645.

Transaction value for the relevant transaction

This is the value, see IPTM3565, as at the time of its surrender or assignment, of the part of or share in the rights under the policy or contract that has been surrendered or assigned.

The transaction value is reduced in some cases where the relevant transaction occurs in the ‘final insurance year’, see IPTM3590.

Available premium left

This is the amount, if any, by which the available net allowable payments exceed the available net total values for the year. It is taken as nil if

  • one or more other relevant transactions have occurred under the relevant contract earlier in the insurance year, and
  • for the latest of them the calculation result was a gain.

 

Available net allowable payments

This is the net total allowable payments, as at the end of the ‘insurance year’, see IPTM3560. If earlier relevant transactions have taken place in the ‘insurance year’ and for the latest of them the calculation produced no gain, the sum of the transaction values for the earlier transactions is deducted from the net total allowable payments.

Available net total values

This is the net total value of rights surrendered or assigned as at the end of the ‘insurance year’, see IPTM3560, but disregarding any relevant transactions in the ‘insurance year’ that are treated as chargeable events under the ‘transaction-related calculation’ rules

less

the value, see IPTM3565, of any part of, or share in, the rights under the policy or contract that has been surrendered, or assigned for money or money’s worth, in the ‘insurance year’, taking the value as at the time of surrender or assignment.

Further reference and feedback IPTM1013