IPTM8415 | Friendly society tax exempt policies: premium limits: joint policies and assignments of policies

Joint policies

Even if a policy is jointly held, the limit for premiums remains as in IPTM8410. The limits apply to the policy as a whole and are not, for instance, doubled if there are two joint policyholders.

Furthermore, where two individual members jointly hold a tax exempt policy, they both hold that policy so neither of them can take out further tax exempt policies without exceeding the limits. The tests are applied by reference to the whole policy, not to individual ‘shares’ of the policy, and there is no provision for, say, attributing half the premium limit to each member.

The premium limit tests apply by reference to the members who hold the policies, not to the lives assured. For instance, if a tax exempt policy insures the lives of Sue and John with an annual premium of £270 paid monthly, but Sue is the sole policyholder, then John’s capacity to hold tax exempt policies is unaffected. John could also take out a tax exempt policy as sole policyholder with an annual premium of £270, and this could also insure both his and Sue’s lives.

Assignment of tax exempt policies

The treatment of a member who assigns a tax exempt policy, other than as collateral for a loan, depends on the membership rules of the society. If the original owner remains a member in respect of that policy then the policy assigned will still need to be taken into account in establishing whether that individual can pay premiums into further tax exempt policies. But if the sale of the policy ends membership then the policy no longer has to be taken into account when considering the individual assignor’s scope for paying further premiums into tax exempt policies.

Similarly, the treatment of the assignee will depend on the rules of the friendly society and the law on friendly societies generally. Generally, payment of premiums may only continue if the purchaser becomes a member, and this will restrict the number and value of tax exempt policies that this person may hold.