IPTM3400 - Chargeable events: when events occur: general

The chargeable event regime is founded on a ‘realisation’ basis, and consequently is applicable when policy benefits become receivable, or when the value of a policy is realised on sale. In certain circumstances, when a loan is made in connection with a life assurance policy it is treated as a partial surrender and so a chargeable event - see IPTM3545. Events are defined in detail at ITTOIA05/S484 as follows.

Types of chargeable events that can arise

A chargeable event is

• the surrender of all rights under a policy or contract
• the assignment for value in money or money’s worth of all the rights under a policy or contract
• the maturity of a life insurance or capital redemption policy
• a death giving rise to benefits on a life insurance policy, or payment of a capital sum on a life annuity where the annuity was made on or after 10 December 1974
• an ‘excess event’ where ‘periodic calculations’ show gains, see IPTM3560
• a ‘part surrender or assignment event ’ where ‘transaction-related calculations’ show gains, see IPTM3580
• a ‘personal portfolio bond event’ where annual personal portfolio bond calculations show gains, see IPTM3600
• for life annuity contracts only, the taking of a capital sum as a complete alternative to the, or further, annuity payments.

The different types of event are explained at IPTM3555.

An assignment not for value (or ‘money or money’s worth’), for instance an assignment by way of gift, is not a chargeable event.

Certain exceptions are set out at IPTM3410, notably in relation to qualifying policies.

Guaranteed income bonds

‘Income payments’ under a guaranteed income bond are treated as part surrenders of rights, unless the payment is the final benefit paid under the contract in which case it is treated as arising from a full surrender. IPTM1420 explains the concept of a guaranteed income bond, and IPTM3550 the types of payments regarded as ‘income payments’.