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HMRC internal manual

Insurance Policyholder Taxation Manual

From
HM Revenue & Customs
Updated
, see all updates

Calculation of the reduction in gain from 6 April 2013

ITTOIA2005/S528

If the gain is made on/after 6 April 2013, then the gain is reduced using the following formula: A/B, where:

A is the number of days that are foreign days in the material interest period. Foreign days are all the days in a tax year for which the individual is not UK resident and any days in a split year in which the individual is taxed as if not UK resident (the overseas part).

B is the number of days in the material interest period.

Foreign Days

The meaning of foreign days for the purposes of the above calculation depends on whether the policy held falls under the rules applicable from 6 April 2013 or the rules applicable before this date for time apportioned reductions.

Under the pre 6 April 2013 rules, foreign days are:

  • Days on which the policy holder is not UK resident, and
  • Days falling within the overseas part of any tax year that is a split year in respect of the policy holder, provided the policy holder is an individual.

 

Under the rules applicable from 6 April 2013, foreign days are:

  • Days falling within any tax year for which the individual liable to tax on the gain is not UK resident, and
  • Days falling within the overseas part of any tax year that is a split year in respect of the individual liable to UK tax on the gain.

 

Material Interest Period

The material interest period is the part of the policy period during which the individual meets one of the following conditions:

  • The individual beneficially owns the rights under the policy or contract.
  • The rights are held on non charitable trusts which the individual created.
  • The rights are held as security for the individual’s debt.

 

The policy period is the period for which the policy has run prior to the chargeable event.