IPTM4350 | Purchased life annuities: partial exemption scheme: procedure

The procedures for exempting a part of each annuity payment from income tax are set out in The Income Tax (Purchased Life Annuities) Regulations 2008 (SI 2008/562).

The regulations refer to a ‘relevant person’ which means:

• a UK-resident insurance company, UK branch or permanent establishment of a non UK-resident insurance company, or a friendly society

• a tax representative of a non-UK insurer - see IPTM4400 onwards

• a person appointed in accordance with arrangements made with HMRC under regulation 18.

All of these are referred to as an ‘insurer’ in the sequence listed below whilst an ‘annuitant’ means the person or persons entitled to receive the annuity from the insurer.

The sequence is as follows.

1. The insurer completes Part A of form PLA6, available from the government website at GOV.UK and sends it to the annuitant in time for the annuitant to complete and send it back to them before the first annuity payment becomes due and payable. For overseas insurers where an insurer is reporting directly or a UK tax representative is appointed, this step must be completed within 30 days of the date of the first annuity payment.

2. Insurers do not have to use form PLA6. They can develop their own version. An insurer thinking of this should consider obtaining a form PLA6, as this includes all of the information insurers need to obtain/supply to meet their legal requirements. CS&TD, BAI Financial Services Team suggest that an insurer considering this action send a copy of their draft form to them before bringing it into use. Their address is 100 Parliament Street 3/64, London, SW1A 2BQ; they can also be contacted by email at [email protected].

3. The annuitant, or all of them if there are more than one, completes Part B.

4. One of the annuitants answers all three questions in Part C and signs the declaration at the end of that section and returns the form to the insurer.

5. The insurer completes Part D, including calculating a figure for the exempt capital amount and sends the fully completed form to the annuitant within 30 days beginning with the date of receipt of the form from the annuitant or the date of the first annuity payment.

6. The insurer sends a copy of the fully completed form to the BAI Financial Services Team within 3 months of the date of the first annuity payment.

7. The annuitant uses form PLA6 to help them complete the SA Tax Return.

The BAI Financial Services Team’s postal address is:

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

Alternatively, the PLA6 form can be emailed to [email protected].