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HMRC internal manual

Trusts, Settlements and Estates Manual

From
HM Revenue & Customs
Updated
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Capital items that are income for tax purposes: foreign life assurance policy - gain chargeable on trustees

These instructions refer to gains on foreign

  • life assurance policies
  • life annuities
  • capital redemption policies

If the rights of a policy are held in trust, any gain resulting from a chargeable event, is usually chargeable on the settlor. However the gain is chargeable on the trustee if any of the following apply.

  • the individual who created the trust is not resident in the UK at the time of the chargeable event
  • the individual who created the trust is dead at the time of the chargeable event - but see IPTM3240 where the event occurs in the tax year in which the settlor died. External customers can find this guidance at
  • a company or other entity created the trust, and is not resident in the UK at the time of the chargeable event
  • a company or other entity created the trust, and has come to an end at the time of the chargeable event.

Gain deemed to be income

Any such gains of a bare or simple trust are treated as income of the beneficiary.

Gains that are deemed to be trustees’ income are chargeable at the trust rate

Gains to be excluded from Return

A gain is not deemed to be income of trustees, and is not entered on the Trust and Estate Tax Return if

  • the policy or life annuity was made before 17 March 1998; and
  • the policy or life annuity has not been enhanced after 16 March 1998 by paying further non-contractual premiums or in any other way; and
  • an individual created the trust before 17 March 1998.

Help sheet HS321 has more information. External customers can find this guidance at