Section 504 | Part surrenders: payments under guaranteed income bonds etc.

(1)This section applies to so much of any payment of an amount by an insurer under a guaranteed income bond contract as meets conditions A to C (and so it falls within section 500(d)).

(2)Condition A is that it is a sum which, but for subsection (6), would be treated for income tax purposes as interest or an annual payment.

(3)Condition B is that it is not a sum paid or falling to be paid because of provisions of the guaranteed income bond contract which, taken alone, would constitute a contract of insurance—

(a)within Part 1 or 2 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but

(b)not within paragraph 1 or 3 of Part 2 of that Schedule (life and annuity contracts including certain linked long-term contracts).

(4)Condition C is that it does not represent late payment interest.

(5)This section does not apply if the payment comprises the whole of the last benefit to be paid under the contract (ignoring late payment interest).

(6)A sum to which this section applies is not regarded as interest or as an annual payment for any income tax purposes.

(7)In this section—^F1

“guaranteed income bond contract” means a policy of life insurance that is a contract of insurance which—

(a)is within paragraph 1 or 3 of Part 2 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, and

(b)is neither an annuity contract nor a contract effected in the course of a company's pension business,

“late payment interest”, in relation to a contract, means interest on an amount payable under the contract which is paid for a period beginning on or after the date of the occurrence as a result of which the amount is payable, and

“pension business” has the meaning given by section 58 of FA 2012 (or the corresponding enactment in force when the contract was effected).