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HMRC internal manual

Insurance Policyholder Taxation Manual

From
HM Revenue & Customs
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Chargeable event gains: number of years for top- slicing relief

Although insurers do not need to know how top-slicing relief is calculated, they doneed to report on certificates the number of years for top-slicing reliefpurposes for every gain.

Policies and contracts from UK insurers (except post-16 March 1998 OLAB policies andcontracts)

For a death, full surrender, maturity orwhole assignment, the number of years is the number of complete years(periods of 12 months, not insurance years) from the date the policy or contract starteduntil the date of the event, subject to a minimum of one. Where there have been one ormore earlier related policies - see IPTM7515 - the number ofyears must be calculated by reference to the date that the earliest related policy wasmade. The day on which the policy ends should be treated as a full day, so for instance ifa policy begins on 1 September 2002 and ends on 31 August 2004 then the number of completeyears is two.

For an excess event or a part surrender or assignment event,the number of years is the number of complete years from the end of the insurance year inwhich the most recent earlier event occurred until the end of the insurance year in whichthe current event occurred.

If there have been no previous excess events or part surrender or assignment events thenthe calculation of the number of years runs from the start of the policy or contract, orthe earliest related policy, until the end of the insurance year in which the currentevent occurred.

If there is more than one part surrender or assignment event in an insurance year then thenumber of years for top-slicing relief purposes is the same for each event.

For a personal portfolio bond event, insurers must always report thenumber of years as 1. This is because top-slicing relief is not available on gains onpersonal portfolio bond events.

Example

A life policy was taken out on 17 January 2000. It is not an OLAB policy. There was apart surrender or assignment event on 23 August 2002, an excess event on 16 January 2004and full surrender on 10 May 2004.

Event on 23 August 2002: This event occurred in the insurance year ended16 January 2003 and there are 3 complete years to this date from the start of the policy.

Event on 16 January 2004: There is 1 complete year from the end of theinsurance year in which the previous part surrender or assignment event occurred until theend of the insurance year in which the excess event occurred.

Event on 10 May 2004: As this is a final event, the number of years iscounted from the start of the policy. There are 4 complete years in this period.

Policies from overseas insurers and post-16 March 1998 OLAB policies

The rules are slightly different for

  • OLAB policies and contracts that were made, or varied to increase the benefits or extend the term, on or after 17 March 1998
  • life policies and capital redemption policies from an overseas insurer.

In such cases, for an excess event or a part surrender orassignment event, the ‘number of years’ is the number of complete yearsthe policy or contract has run from the start of the policy or contract, or the earliestrelated policy, until the end of the insurance year in which the event occurred.

Further reference and feedback IPTM1013