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HMRC internal manual

Insurance Policyholder Taxation Manual

Certificate for HMRC: time limits for delivery: extensions for late notification of deaths and assignments

Extension for late notification of deaths and whole or part assignments

It is possible that where the chargeable event is a death, or an assignment of all or part of the rights under the policy, the insurer may not receive written notification of the event before the end of the insurance year in which it occurs. This would make it difficult or impossible to report the event before the reporting date indicated by the general rule described in IPTM7195.

The strict statutory position is that in these circumstances the latest reporting date is three months after the date that the insurer receives written notification of the event. However, provided an insurer reports chargeable event details on a death or assignment to HMRC within 3 months of the end of the tax year in which the insurer received written notification of the event, HMRC will not seek an audit recovery in respect of any failures to meet the strict statutory time limit. This will allow insurers to submit information in a single batch to HMRC annually if they wish, rather than in several batches during the year.

Example: late notification of a death

Suppose a death that occurred on 3 March 2008 is reported to the insurer on 6 August 2008. Then strictly the insurer has until 5 November 2008 to report the gain to HMRC. However, so long as the insurer reports the gain by 5 July 2009, HMRC will not penalise the insurer for reporting gains after the statutory time limit.

Extension where there is a later death or assignment which causes an earlier event to become reportable

Except for whole assignments, chargeable events only need to be reported to HMRC where the gain exceeds a threshold of half the basic rate limit. But where there are connected gains they are aggregated in determining whether the threshold is crossed - see IPTM7150.

It is possible for there to be two or more chargeable events in an insurance year which give rise to connected gains where the threshold is not exceeded until the second or later chargeable event occurs. This can happen following the occurrence of part surrender or assignment events.

If the later event is a death or assignment, the insurer may not be aware that the earlier event is reportable until after the time limits described above have passed. In such circumstances, the strict time limit for reporting the earlier event is three months from the date that the insurer receives written notification of the later event which shows that the aggregate of connected gains has exceeded the threshold, indicating that the earlier gain is reportable. However, provided the insurer reports the earlier event within 3 months of the end of the tax year in which it is notified of the later event, HMRC will not seek to penalise the insurer for reporting gains after the strict statutory time limit.

Example: late notification of a death following a part assignment

Suppose there is a gain of £10,000 on a part assignment occurring on 5 September 2007 and there is a gain of £9,000 on a death occurring on 17 March 2008 which was not notified in writing to the insurer until 23 July 2008. The normal insurance year is to 10 November each year but the final insurance year is extended to 17 March 2008, the date of death.

Although the earlier gain is below the reporting threshold of £17,300 for tax year 2007-2008, it is connected to the gain on the death. As the aggregated gains of £19,000 exceed the threshold, the gain on the part assignment becomes reportable but the normal time limit for reporting it, namely 5 July 2008, has passed.

Strictly, the time limit for reporting the gain on the earlier part assignment is 22 October 2008. However, it is relaxed to 5 July 2009, that is, three months after the end of the tax year in which the insurer received written notification of the death. This is also the time limit for reporting the gain on the death.

Further reference and feedback IPTM1013