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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Exceptions: group life policies: pre-9 April 2003 policies

Transitional rules

The exemption from the chargeable event rules for group life policies which meet theconditions to be excepted described in IPTM7025 to IPTM7040 came into effect on 9 April 2003.

Where a group life policy was made before 9 April 2003 and did not meet the conditions tobe excepted, for instance because it also provided benefits on other contingencies such asdisability, a transitional provision allowed it to be varied to meet the conditions.

Provided the terms of the policy were varied before 6 April 2004 so that it met theconditions to be excepted, the policy is treated as having met the conditions throughoutthe transitional period from 9 April 2003 until 5 April 2004 and no chargeable events willhave arisen. The only exception to this is if sums were paid from the policy, other thanon death or disability, in the transition period before the variation was made. This is ananti-avoidance provision and genuine protection policies will not have been affected.

Where the variation which was needed to ensure that the policy complied with theconditions was sufficiently fundamental that contractually it brought into existence a newpolicy replacing the old pre-varied policy then for the purposes of the excepted grouplife policy rules and the chargeable event rules the old and new policies are treated as asingle policy.

If a group policy did not meet the conditions on 9 April 2003 to be excepted and was notvaried within the transitional period to meet the conditions then it is within thechargeable event gain rules. Chargeable events may arise, or have arisen, on or after 9April 2003, potentially giving to taxable gains as described in IPTM7545.

Retrospective tax exemption for events before 9 April 2003

Where an event which would have been a chargeable event, such as a death, arose on a‘pure protection’ group life policy before 9 April 2003 that event isretrospectively deemed not to have been a chargeable event ensuring that no taxable gaincan have arisen. For this purpose, a ’pure protection policy’ means one whoseterms do not provide for sums or other benefits to be paid other than on death ordisability.

Further reference and feedback IPTM1013