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HMRC internal manual

Insurance Policyholder Taxation Manual

Friendly society tax exempt policies: premium limits: joint policies and assignments of policies

Joint policies

Even if a policy is jointly held, the limit for premiums remains as in IPTM8410. The limits apply to the policy as a whole and are not,for instance, doubled if there are two joint policyholders.

Furthermore, where two individual members jointly hold a tax exempt policy, they both holdthat policy so neither of them can take out further tax exempt policies without exceedingthe limits. The tests are applied by reference to the whole policy not to individual‘shares’ of the policy and there is no provision for, say, attributing half thepremium limit to each member.

The premium limit tests apply by reference to the members who hold the policies, not tothe lives assured. So, for instance if a tax exempt policy insures the lives of Sue andJohn with an annual premium of £270 paid monthly, but Sue is the sole policyholder thenJohn’s capacity to hold tax exempt policies is unaffected. John could also take out atax exempt policy as sole policyholder with an annual premium of £270, and this couldalso insure both his and Sue’s lives.

Assignment of tax exempt policies

The treatment of a member who assigns a tax exempt policy, other than as collateral fora loan, depends on the membership rules of the society. If the original owner remains amember in respect of that policy then the policy assigned will still need to be taken intoaccount in establishing whether that individual can pay premiums into further tax exemptpolicies. But if the sale of the policy ends membership then the policy no longer has tobe taken into account when considering the individual assignor’s scope for payingfurther premiums into tax exempt policies.

Similarly, the treatment of the assignee will depend on the rules of the friendly societyand the law on friendly societies generally. Generally payment of premiums may onlycontinue if the purchaser becomes a member, and this will restrict the number and value oftax exempt policies that this person may hold.

Further reference and feedback IPTM1013