Independent Taxation Manual - IN290

Assignments between spouses who live together

Gains from life insurance policies, life annuity contracts and capital redemption policies are taxed as income (AP 3130 onwards). A charge to tax on a gain may arise when a policy or contract is assigned for consideration. However, no gain arises and there is no tax payable on an assignment between spouses who live together at any time in the year of assessment in which the assignment takes place.

A transfer between spouses will mean that any subsequent gains that arise on the policy or contract are taxable on the assignee who now owns it. Normally, you may accept that an assignment between spouses transfers ownership for tax purposes. But if in an enquiry case you find out that

• gains arose on the policy or contract before the assignment and

• the new owner makes a claim to corresponding deficiency relief in box 12.9 of the SA Return (AP 3197 onwards) and

• the new owner has other income that is or would (apart from the claim) be taxable at higher rate,

please seek advice from Revenue Policy Business Tax (Insurance Group), 5th Floor, 22 Kingsway, London WC2B 6NR.