Overseas insurers: release from requirement to appoint a tax representative: pre-6 April 2000 policies and contracts: extent of reporting duties
An overseas insurer who has been released from the requirement to appoint a tax representative because it has given the undertakings described in IPTM9140 only has limited reporting duties where the ‘relevant insurance’ - see IPTM9030 - was made before 6 April 2000.
It is usually clear when a policy or contract was made. However, where a policy is altered after 5 April 2000 in such a way that goes to the root of the policy it will bring into existence a new policy, which will then fall within the reporting rules for policies made after 5 April 2000 - see IPTM7335. An example of such a change would be a change in the life assured.
Requirement to provide notices to HMRC and the reporting threshold
An overseas insurer that is released from the requirement to appoint a tax representative because it has given the necessary undertakings must report a chargeable event for pre-6 April 2000 policies if it is a last event. A chargeable event is a last event if it brings the policy or contract to an end. This will be on the maturity or full surrender of the policy or contract, or on the death of an individual giving rise to benefits under the policy.
An overseas insurer must provide a notice to HMRC reporting certain information about a ‘last event’ on a pre-6 April 2000 policy or contract where the total of benefits paid
- on the event, and
- on any other ‘last events’ in the same tax year on policies with the same insurer where at least one of the policyholders is the same
exceeds twice the ‘basic rate limit’, unless the overseas insurer is satisfied that no gain would be treated as arising on the event, for instance if it is a term assurance policy with no surrender value. The information that must be provided to HMRC is described in IPTM9190.
The basic rate limit is the amount of taxable income up to which a taxpayer is chargeable at the basic rate. For the tax year ended 5 April 2011, twice the basic rate limit is £74,800.
An insurer should keep sufficient records of all ‘last events’ for each policyholder in a tax to ensure that it is able to determine whether the reporting threshold is crossed.
An insurer must report a death chargeable event to HMRC if the amount of death benefit exceeds twice the basic rate limit. It must not substitute the surrender value immediately before death, even though for life policies that figure is used in the chargeable event gain calculation.
Notices to policyholders
An overseas insurer that has given the undertakings in IPTM9140 and has been released from the requirement to have a tax representative does not have to report information about a chargeable event on a pre-6 April 2000 policy or contract to the policyholder. However, the insurer may send the policyholder a copy of the information that it sends to HMRC, or provide information about the chargeable event and gain, to assist the policyholder in completing a UK self assessment tax return.
Further reference and feedback IPTM1013