IPTM7205 | Correction of chargeable event certificates: errors in certificates

A chargeable event certificate that has been delivered to a policyholder or HMRC may subsequently be found to be incorrect. This may be because of error at time of production or because a subsequent termination of the policy causes the reported event and gain to be superseded or because the insurer was not in full possession of the facts at the time the certificate was issued. If, and how, the certificate should be corrected depends on the circumstances.

Error in producing the certificate

Where an insurer discovers that a certificate which has already been issued contains an error, a revised certificate should be issued to the policyholder, and if necessary to HMRC, without delay. Even where the event and gain have been reported correctly, a revised certificate should be issued if other relevant details such as date of the event have been mis-reported since they could cause confusion about how the gain is to be taxed and which event the certificate relates to.

Where certificates are wrong because insurer was not fully informed

Insurers may also issue certificates that are correct based on the information they possess at the time the certificates are issued but which are later shown to be incorrect when it emerges that the information is incomplete or wrong.

In such circumstances, HMRC accepts that insurers need only issue revised certificates if they learn of the new information within three months of the end of the tax year in which the event reported on the original certificate occurred. Any gains on future events must, however, be calculated and reported using the correct information.

Example: part assignment thought to be by way of gift is later found to be for money or money’s worth

Suppose an insurer is told that a part assignment has occurred on 11 February 2019 and the information it receives leads it to conclude that the part assignment is by way of gift and so no chargeable event or gain arises. Then a chargeable event arises in tax year 2019-2020, for instance on a part surrender, and the insurer calculates the gain on this event on the basis that the earlier part assignment was by way of gift. However, the insurer finds out on 17 April 2020 that the earlier part assignment was in fact for money or money’s worth and so was a chargeable event.

The insurer must issue a certificate to the policyholder reporting the part assignment and, if the threshold is exceeded, to HMRC by 16 July 2020, that is, within the normal time limits described earlier. The certificate issued on the event that occurred after the part surrender is now incorrect because it does not reflect the gain that arose on the part assignment. Since the insurer learned of the new information within three months of the end of the tax year in which the event occurred, it must issue revised certificates.

But if the insurer had not learned until after 5 July 2020 that the earlier part assignment was not a gift it would not have had to issue a revised certificate in respect of the later event in 2019-2020.

Disproportionate gains arising on part surrenders

Where a disproportionate gain is recalculated by an officer of HMRC (see IPTM3596), the chargeable gain will vary from the gain reported on the chargeable event certificate. Insurers are not required to amend or reissue certificates in these circumstances, and the certificate issued showing the original gain will not be considered erroneous on that basis.