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HMRC internal manual

Insurance Policyholder Taxation Manual

Calculating gains: part surrenders and part assignments: ‘transaction-related calculations’: ‘final insurance year’: special rules

The special rules apply if

  • a ‘transaction-related calculation’, see IPTM3585, is made for a relevant transaction in the final insurance year, and
  • the total transaction value for the transaction exceeds the gains limit, and this has not previously occurred for an earlier transaction in the final insurance year on the same policy or contract.

There are examples of ‘transaction-related calculations’ for the final year at IPTM7640 and IPTM7645.

Total transaction value

This is the transaction value, see IPTM3585, for the transaction in question plus any transaction values for any relevant transactions occurring earlier in the ‘final insurance year’ on the same policy or contract.

Gains limit

This is the amount of the gain that would have been treated as arising on the chargeable event that ends the ‘final insurance year’ (that is, for life policies, on maturity, surrender or death giving rise to benefits), if the ‘transaction-related calculation’ rules did not apply.

The effect of the gains limit in the ‘transaction-related calculation’ is

  • to limit the total transaction value to the gains limit for any transaction that would otherwise exceed the limit
  • to prevent any further ‘transaction-related calculations’ on any subsequent transactions.
Further reference and feedback IPTM1013