Friendly society tax exempt policies: policies that are not from a ‘new’ society
Meaning of a new friendly society
The definition of a new society is given in ICTA88/S466.It means
- a friendly society registered after 3 May 1966,
- a friendly society registered in the three months ended 3 May 1966 but which at no time carried on life or endowment business before 3 May 1966, or
- an incorporated friendly society unless before its incorporation it was a registered friendly society falling in either of the two bullets above.
Minimum capital sum tests for policies from societies that are not new
IPTM8420 describes the general tests that the capital sum from a tax exempt policyon various contingencies needs to meet in order for the policy to qualify. There is aslight variation to the general test where the tax exempt policy is from a friendlysociety that is not new.
- an amount equal to £10 per year must be disregarded in considering the premiums payable, or
- if the premiums are payable more frequently than annually then the amount that must be disregarded is the greater of 10% of the premiums payable and £10 per year.
Clearly, the latter bullet is only of relevance if the premiums payable are less than£100 per year since under the general test 10% of the premiums payable are disregarded ifpremiums are payable more frequently than annually, regardless of whether the policy isfrom a new society or not.
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