IPTM3220 | Person liable to charge: individuals and companies

Individuals

An individual is chargeable under the chargeable event regime if UK resident in the tax year in which the gain arises and

• the individual beneficially owns the rights under the policy or contract

• the rights under the policy or contract are held on non-charitable trusts which the individual created, or

• the rights under the policy or contract are held as security for the individual’s debt.

The question of domicile is irrelevant in the context of the chargeable event regime. Gains are chargeable under the rules without regard to whether proceeds have been remitted to the UK.

Beneficiaries under a trust have an interest but, unless the trust is a bare trust, do not beneficially own the rights. There is more on the treatment of policies and contracts held on trust at IPTM3250.

An individual is not liable to tax under the chargeable event regime on any gains arising in any tax year or accounting period in which the individual is not UK resident. This rule does not apply to:

• the charge on a UK branch of a non-UK resident company

• the special provision which applies where assets have been transferred abroad, and the rights of the policy are held by a non-UK resident trust or a foreign institution (ITA07/PT13/CH2) - see IPTM3260.

The rule does not affect the charge on UK resident trustees where the policy is held on trust and the settlor is non-UK resident, see IPTM3230.

Where an individual is charged as creator (or settlor) of a non-charitable trust, that person may recover the tax from the trustees. If so, HMRC must certify the amount recoverable. The HMRC office should send the following details to the Insurance Team within the Financial Services Team in BAI in order for certification to be made:

• name and address of the taxpayer

• name of the trust concerned

• amount of the chargeable event gain, and

• the additional tax charged as a result of the chargeable event gain.

This information can be sent by email to [email protected] or by post to:

HM Revenue & Customs
BAI Financial Services Team 3/64
100 Parliament Street
London
SW1A 2BQ

Separate details must be provided for each policy, year and trust concerned. The tax recoverable is limited to that relating to the sums or benefits received by the trustees under the chargeable event.

Section 11 of the Married Women’s Property Act 1882, and equivalent Scottish (section 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880) and Northern Irish (section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964)legislation, provides that a trust is created automatically where a policy of assurance is expressed to be for the benefit of spouse and children. The insured may appoint trustees of the benefits payable but, if not, the policy vests in him/her or his/her personal representatives as trustees. ITTOIA05/S465(6) ensures that the normal rule relating to trusts created by an individual applies in these circumstances, even though the trust is created by operation of law. In most cases the charge will be on the creator - see IPTM3250.

Companies

The loan relationships rules apply to companies - see IPTM3900 onwards.