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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Friendly society tax exempt policies: premium limits: sole policyholders

Amount of premium that may be invested in a tax exempt policy

Premiums payable under any single friendly society tax exempt policy made on or after 1 May 1995 must not exceed £270 in any 12 month period, or £300 if premiums are payable more frequently than annually, for instance quarterly or monthly. See IPTM8445 where the policy was made before 1 May 1995.

Holdings of more than one tax exempt policy

An individual member of a friendly society may hold more than one tax exempt policy, either with that society or other societies. However, the member must not at any time hold tax exempt policies made on or after 1 May 1995 under which the total premiums payable in any 12 month period exceed £270, or £300 if premiums are payable more frequently than annually. See IPTM8445 where a member holds policies made before 1 May 1995.

If an individual does exceed this limit in any 12 month period, then neither the policy that causes the premium limit to be breached, nor any subsequent policies taken out in the same year, can be qualifying - this follows from the qualifying policy rule at ICTA88/SCH15/PARA6. If policies in breach of the rule are held with the same society as the earlier, valid tax exempt policies they cannot be within tax exempt business. But if they are with a different society then they will remain within tax exempt business.

To help ensure that invalid tax exempt policies are not taken out, friendly societies should check with prospective policyholders that they do not already have a tax exempt policy with another society that might cause the limit to be breached. They have the power under ICTA88/S464 (7) to require a member to make a statement to that effect.