IPTM4351 | Purchased life annuities: partial exemption scheme: procedure: annuitant fails to return the form PLA6

A UK insurer must complete Part A of form PLA6 (or the relevant part of their own version of the form – see IPTM4350) and send it to the annuitant within such time as is reasonable to allow the annuitant to complete and return it 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.

There is, however, no time limit for the annuitant to return this form. If the insurer does not receive the form back from the annuitant, the insurer must send details of the annuity policy to the BAI Financial Services Team (see IPTM4350 for contact details) within 3 months of the end of the month in which the first annuity payment is due and payable.

Until the annuitant returns form PLA6, the annuity must be treated as one with no exempt sum or proportion.

Examples

UK insurer

On the 1 July 2018 Gertrude buys a purchased life annuity from a UK insurer. She had been provided with a form PLA6 before the first payment became due on 31 July 2018 but had failed to return it.

Until Gertrude returns the form

• the insurer must deduct tax from the whole amount of each annuity payment, and

• all of the payments received by Gertrude from the annuity are taxable.

Once Gertrude has returned the form the exempt sum or proportion will be calculated, and the insurer will start to deduct tax only on the non-exempt part of each payment. Gertrude will, subject to time limits, be able to claim a refund of any tax overpaid.

Overseas insurer

On 1 July 2018 John purchases an annuity from an overseas insurer. The first payment is made on 31 July 2018. The overseas insurer sent John a form PLA 6 on 10 August 2018, but he failed to return it.

Until John returns the form PLA6 all of the payments he receives under the annuity are taxable. Once the form is returned the exempt sum or proportion is calculated and John can, subject to time limits, claim a refund of any tax overpaid. If, for example, he has already submitted a tax return he can, within the time allowed, submit an amendment to the return to show only the non-exempt amount as being chargeable.