CG69004 | Insurance: capital redemption policies

Capital Redemption Policies are not within the charge to Capital Gains Tax. Under such a policy, on payment of a sum of money, the insurer guarantees to the insured a larger sum payable on a specified future date or dates; payment is independent of any contingency. For example, it is not dependent on a death or survival of a life. Examples of such policies include

• an annuity certain - an annuity payable for a set period not dependent on a life

• a leasehold redemption policy - which builds up a fund to be used in some way on expiration of a lease

• a sinking fund policy - this accumulates a fund for eventual replacement of a wasting asset.

It is possible that such policies could be used for avoidance purposes. Capital Gains Technical Group would like to monitor any developments in this area. If you suspect avoidance involving capital redemption policies in a case where substantial amounts of tax could be at stake, please make a report to Capital Gains Technical Group before expressing any opinion about the transactions concerned.