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HMRC internal manual

Insurance Policyholder Taxation Manual

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HM Revenue & Customs
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Part surrenders and assignments: transaction- related calculations: part surrender or assignment events

Circumstances where a ‘part surrender or assignment event’ can arise

IPTM7605 and

IPTM3560 explain how to calculate whetherthere is a gain at the end of the insurance year when there have been part surrenders orpart assignments for money or money’s worth during the year.

If there is such a gain, there are two sets of circumstances where what are called‘transaction- related calculations’ need to be carried out to see if there is again on a ‘relevant transaction’, that is a part surrender or part assignmentfor money or money’s worth.

These circumstances are where during the insurance year

  • there has been a part assignment of the policy or contract for money or money’s worth, or
  • there has been both

 

 

  • a part surrender of the policy or contract, and
  • a whole or part assignment of the policy or contract other than for money or money’s worth later in the same insurance year.

If a transaction-related calculation shows a gain on a relevant transaction in eitherof these circumstances then the relevant transaction is a chargeable event, called a‘part surrender or assignment event’. If neither of these circumstances appliesthen there is simply an excess event at the end of the insurance year as described in IPTM7615.

These events may be better known to insurers as section 546C(7) events, since that is thelegislative reference in ICTA88. However policyholder taxation, except for companies, isnow contained in ITTOIA05 so this manual primarily uses the term defined in ITTOIA05/S491(4).

Date of part surrender or assignment event

The date on which a part surrender or assignment event arises is the date of therelevant transaction, not the date on which the insurance year ends. This mechanism is toensure that the gain is attributed to the person liable at the time of the event, ratherthan the person liable at the end of the insurance year.

Both the date of the event and the date on which the insurance year ends need to bereported on chargeable event certificates.

Two or more relevant transactions in an insurance year

If two or more relevant transactions occur during the same insurance year then atransaction- related calculation must be carried out on each relevant transaction, in theorder in which they occurred, to determine whether in each case a part surrender orassignment event has occurred.

The rules for calculating the gains on relevant transactions in other than the finalinsurance year are described in IPTM3585. There are specialrules where there are gains on relevant transactions in the final year, requiring thecalculation of a ‘gains limit’. These are described at IPTM3590.

The operation of the transaction-related calculation rules is best illustrated by examples- see IPTM7630 to IPTM7645.

Further reference and feedback IPTM1013