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HMRC internal manual

Insurance Policyholder Taxation Manual

Part surrenders and assignments: policies and contracts made before 14 March 1975

The periodic calculation rules are modified for pre-14 March 1975 policies and contracts.

Transactions that took place in insurance years which do not wholly fall after 13 March 1975

  • the values of any part surrenders or part assignments in these earlier years are disregarded in the periodic calculation, and
  • any premiums paid in these earlier years give rise to an allowable element by multiplying the premium by (20 - Y)/20, where Y is the number of insurance years within this period since the premium was paid, including the insurance year of payment.

So, for example, if the policy was taken out on 26 November 1970 with a premium of £5,000, there will be five insurance years before the first to fall wholly after 13 March 1975 and the allowable element relating to this premium will be (20 - 5)/20 x 5,000 = £3,750.