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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Exceptions: pre-14 March 1989 policies and contracts owned by a company

Life insurance policies made before 14 March 1989Where a life insurance policy made before 14 March 1989 is beneficially owned by a company, the company is not liable to tax on chargeable event gains arising on the policy. This is also the case if the policy is held on trusts created by the company or as security for a debt owed by the company.

This is provided that the policy has not been varied on or after 14 March 1989 so as to increase the benefits secured or to extend the term - seeIPTM7080 for more on this. If it has been so varied, it is treated as having been made on or after 14 March 1989. For this purpose, the exercise of rights under an option in the policy is treated as a variation.

Such policies are also excepted from the loan relationships legislation, which now applies generally for policies and contracts owned by a company –IPTM3900 onwards.

Insurer’s reporting requirementsIt is possible for the policyholder to be a person different from the beneficial owner of a policy. Even if a life policy made before 14 March 1989 policy is held by a company, it can still give rise to a chargeable event if the beneficial owner of the policy is an individual. An insurer is required to report chargeable events and, unless it has information to confirm the identity of the beneficial owner, it cannot know for certain whether a pre-14 March 1989 policy held by a company is potentially liable under the chargeable event regime.

However, in the absence of any information to the contrary, the insurer may assume that where the holder of a policy made before 14 March 1989 is a company, it is also the beneficial owner and so no chargeable events arise to be reported.

A company is, in addition, not liable on chargeable event gains arising from capital redemption policies and life annuity contracts made before 14 March 1989 that it owns beneficially.

Further reference and feedback IPTM1013