SolvedIPTM3515 | Calculating gains: death, maturity, full surrender or assignment: value of the policy or contract
From HM Revenue & Customs · Insurance Policyholder Taxation Manual
The value of the policy or contract to be brought in under ‘total benefits’ depends on the nature of the chargeable event.
Surrender of all rights, maturity
The value of the policy or contract is
any sum payable because of the event
in the case of a life insurance or capital redemption policy:
- if a right to periodical payments arises because of the event, an amount equal to the capital value of those payment at the time the right arises
- the amount or value of any other benefits arising because of the event.
An ‘income payment’ under a guaranteed income bond contract is treated as a full surrender if it is the final benefit under the contract - see IPTM3550.
Events under annuity contracts treated as a surrender of all rights
The approach under the previous heading also applies to:
death under a life annuity contract made on or after 10 December 1974 providing for a capital sum on death
taking a capital sum as a complete alternative to annuity payments, or further annuity payments, under a life annuity.
Assignment of all rights
The value of the policy or contract is the amount or value of the assignment consideration, unless the assignment is of a life policy or annuity between connected persons. In that case the market value is substituted, unless there was no consideration so the assignment was not a chargeable event - see IPTM3400. The meaning of connected persons is given by the definition in ICTA88/S839 and S994 for income tax, and CTA10/S1122 and S1123 for corporation tax. See CG14580 onwards, which refers to the similar connected persons definition at TCGA92/S286.
Death
The value of the policy is its surrender value immediately before death. This has the effect of confining the gain to investment growth and excluding the life risk element.
Disregarded amounts
There are some amounts disregarded under these rules