Where the result of a gain calculation on a surrender, maturity or death shows a negative figure or ‘deficiency’ and the chargeable person is an individual, a relief called deficiency relief may be available to set off against that individual’s income liable to tax at the dividend upper rate or higher rate only. The deficiency cannot be set off against income liable at the additional rate or the dividend additional rate.
The amount of the deficiency that is available for relief is restricted to the amount of any gains on earlier excess events and part surrender or assignment events which formed part of the total income of the same individual who is entitled to any relief.
So, no deficiency relief is available to an individual if there have been
- no earlier part surrenders or part assignments or
- there were earlier part surrenders and assignments but they occurred before the policy or contract was owned by the individual in question.
Insurers are not required to report deficiencies on certificates to the policyholders or HMRC. There is more on deficiency relief in IPTM3860 to IPTM3880.
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