IPTM3310 | Policies and contracts charged: qualifying policies

In general, qualifying policies - IPTM2020 - only give rise to chargeable events in restricted circumstances, namely if

• within 10 years from the making of the insurance, or, if sooner

• within three-quarters of the term for which the policy is to run if not ended by death or disability

any of the following events occur;

• surrender or assignment of all rights under the policy

• an ‘excess event’ where a ‘periodic calculation’ shows a gain, see IPTM3555 and IPTM3560

• the end of the insurance year in which a ‘part surrender or assignment event’ gives rise to a gain, see IPTM3555 and IPTM3585.

The full range of chargeable events described at IPTM3400 does, however, apply to a qualifying policy if

• it is converted into a paid-up policy within the same 10 year or three-quarter term timetable as above, or

• there is, except in relation to ‘transaction-related calculations’, a company interest in the policy rights, that is

- a company beneficially owns the policy

- the rights are held on trusts created by a company

- the policy is held as security for a company’s debt.

‘Transaction-related calculations’ are explained at IPTM3580.

A policy is said to be ‘converted into a paid-up policy’ when there has been a permanent cessation of premium payments, other than where premium payments have ceased at the end of the contractual premium payment term. There cannot be any possibility of resumption of payment of premiums.

Any sum lent under an arrangement with the insurer to or at the direction of the policyholder on a policy or contract made after 26 March 1974 is treated as a part surrender of rights - see IPTM3545. Loans relating to qualifying policies are, however, excepted if they carry interest at a commercial rate.

Note that the relevant periods (first 10 years or three-quarters of the term, if sooner) are deemed to restart where a policy has a premium increase at any time other than under the terms of a policy option/feature. Further details on variations, substitutions and options are provided at IPTM8100 onwards.