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HMRC internal manual

Insurance Policyholder Taxation Manual

Selection rules: class of policyholders

An insurer must make property or an index available for selection to a‘class’ of policyholders.

Subject to certain conditions, a class of policyholders means a number ofpolicyholders to whom the opportunity is given to select the property. In practice, thisincludes prospective policyholders.

The insurer alone must determine the composition of the class. One person cannotconstitute a ‘class’. The other conditions for a number of policyholders torepresent a ‘class’ are as follows:

Opportunity to select is identified in marketing material

The first condition is that the opportunity to select the property or index is clearlyidentified in marketing or other promotional literature that the insurer has published.The marketing material must have made the opportunity available to potential policyholdersat large. It is not necessary to spell out in detail in the marketing material all thepossible fund links, provided it is made clear that the opportunities are available.

The marketing material should also be clear that the property or index is available forselection by all policyholders in the class for the whole of the period for which it isavailable.

Opportunity is not limited to connected persons

The second condition is that the insurer does not limit the opportunity solely topersons who are connected with each other. The meaning of ‘connected persons’ isgiven by the definition in ICTA88/S839. Details are given at CG14580onwards, which refers to the similar definition at TCGA92/S286.

It is not necessary for two or more unconnected policyholders actually to select aparticular property so long as the class of policyholder to whom the insurer makesavailable the opportunity does not consist solely of connected policyholders.

The opportunity offered to the class may be to select from a wide variety of categories ofpermitted property, such as units in various unit trusts. If so, it is not necessary forevery policyholder to select the same mix of investments, so long as it is open to eachpolicyholder to select the same mix as any other policyholder, even if in practice eachpolicyholder selects a different mix.

Further reference and feedback IPTM1013