IPTM3515 - Chargeable events: calculating gains: death, maturity, full surrender or assignment: value of the policy or contract

The value of the policy or contract to be brought in under ‘total benefits’ depends on the nature of the chargeable event.

Surrender of all rights, maturity

The value of the policy or contract is

• any sum payable because of the event
• in the case of a life insurance or capital redemption policy

An ‘income payment’ under a guaranteed income bond contract is treated as a full surrender if it is the final benefit under the contract, see IPTM3550.

Events under annuity contracts treated as a surrender of all rights

The approach under the previous heading also applies to

• death under a life annuity contract made on or after 10 December 1974 providing for a capital sum on death
• taking a capital sum as a complete alternative to annuity payments, or further annuity payments, under a life annuity.

Assignment of all rights

The value of the policy or contract is the amount or value of the assignment consideration, unless the assignment is of a life policy or annuity between connected persons. In that case the market value is substituted, unless there was no consideration so the assignment was not a chargeable event, see IPTM3400. The meaning of connected persons is given by the definition in ICTA88/S839. See CG14580 onwards, which refers to the similar connected persons definition at TCGA92/S286.

Death

The value of the policy is its surrender value immediately before death. This has the effect of confining the gain to investment growth and excluding the life risk element.

Disregarded amounts

There are some amounts disregarded under these rules

• ‘retained replacement policy premiums’, see IPTM3520
• trivial inducement benefits, see IPTM3535.