IPTM7400 | Chargeable events on void ISAs: other chargeable events

Excess events

If there have been part surrenders of the policy then excess events might have arisen on the policy in the normal way, as described in IPTM7605 to IPTM7620.

If the ISA is void giving rise to a termination event as described in IPTM7395 then gains on any earlier excess events become taxable on the investor and the event and gains must be reported to the investor as described in IPTM7220. This is the case even if the circumstances that caused the ISA to become void only occurred after the part surrenders were made.

Full surrender, maturity and death

Where a policy meets all the conditions to be a qualifying investment in a valid ISA, any investor is specifically exempt from tax on gains on chargeable events and the insurer is released from the requirement to issue chargeable event certificates reporting the events and gains. The ISA rules do not prevent chargeable events from occurring in the first place.

When an ISA is void, the tax exemption and release of insurers from providing certificates is removed for termination events and excess events but it is not removed for other chargeable events.

So, insurers do not need to calculate gains or issue certificates where a policy in a void ISA is brought to an end by surrender, maturity or death. Since a policy in an ISA must automatically terminate when the ISA manager becomes aware that the ISA is void, this will only be an issue if the policy comes to an end before the ISA manager becomes aware that the ISA is void. Although there may be a taxable and reportable gain on the deemed termination event when an ISA is made void and terminated, there will not be a taxable gain on an event that actually brings the policy to an end.

Since another condition of a policy to be held within an ISA is that it may only be on the life of the investor, the death of the investor will bring the policy to an end.

Assignments and part assignments

As it is a fundamental condition of policies within ISAs that they cannot be assigned, either in whole or in part, no chargeable events will arise on whole or part assignments of a policy held within a void ISA.