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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Reporting requirements for policy in a void ISA: events and certificates

Termination events

Where an ISA manager discovers an ISA holding a life policy to be void, for instancebecause subscription limits have been breached, then this gives rise to a‘termination event’, which is deemed to be a surrender chargeable event.

The circumstances in which a termination event arises, and the date of such an event, aredescribed in IPTM7395. Where the ISA manager is not theinsurer, it must notify the insurer within 30 days of discovering that the ISA is voidthat there has been a termination event and the circumstances which have caused the ISA tobe void.

Chargeable events prior to a termination event

Where a chargeable event has occurred prior to a termination event, the exemption fromtax provided by the policy being held within an ISA no longer applies. The only suchevents possible are excess events on earlier part surrenders since policies held in ISAscannot be assigned in whole or part.

Reporting requirements for a termination event and excess events prior to atermination event

Certificates to investor. Where there has been a termination event, chargeableevent certificates must be issued to the ISA investor reporting

  • the termination event if a gain has arisen on the event, and
  • any excess events and gains which have occurred before the termination event.

The information to be provided on the certificate is the same as that required forgeneral chargeable events other than whole assignments, as listed in IPTM7125, except income tax treated as paid,which is not available on gains on policies in void ISAs. As a termination event is adeemed surrender, it may be reported on the certificate as a full surrender.

The time limit for providing the certificate to the investor is three months from the datethat the insurer first becomes aware of the termination event, either because it has beennotified of the event by the account manager or because it comes to the insurer’snotice.

Certificates to HMRC. In the rare event of a gain on a termination eventor earlier excess event exceeding half the basis rate limit, a certificate must beprovided to HMRC reporting the same information about the event and gain as is required onthe certificate to the investor. It must be in the prescribed format, see IPTM7160 to IPTM7190. If the event is atermination event then it should be reported with code number 3 as a deemed fullsurrender.

The limit for providing the certificate to HMRC is three months from the later of

  • the date that the insurer first becomes aware of the termination event
  • the end of the tax year in which the event occurred.
Further reference and feedback IPTM1013