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HMRC internal manual

Insurance Policyholder Taxation Manual

Assignments of policies on divorce: position until mid-2003

View of the law until mid-2003

Until mid-2003, HMRC took the view that an assignment as part of a divorce settlementwas for money or money’s worth, based on legal advice that such an assignmentinvolved a valuable exchange of rights. As a consequence, the assignment of all or part ofthe policy rights was potentially within the charge to tax.

An insurer may have issued chargeable event certificates on events that arose under theprevious interpretation of the law which would not have arisen under the currentinterpretation. Insurers are not required to revisit these events by withdrawing thecertificates previously issued, as they arose under the view and practice prevailing atthe time.

Calculation of gains on later chargeable events where there have been earlier partassignments on divorce

The calculation of the gain on a later chargeable event may be affected by whether anyearlier part assignments were for money or money’s worth. All part assignments whichoccurred in an insurance year beginning before 6 April 2001 could have given rise tochargeable events, whether or not they were for money or money’s worth. Therefore,this is only an issue for part assignments which occurred in an insurance year beginningon or after 6 April 2001.

In calculating the gain on a later event, the insurer should treat any such partassignment as if it had taken place under the current view of the law, even if itoriginally occurred before the change of view and chargeable event certificates wereissued at the time. Thus if the insurer knows that the part assignment took place as partof a divorce settlement, it may assume that it was under a Court Order (unless it hasinformation suggesting otherwise) and that no chargeable event arose on it.

Further reference and feedback IPTM1013