IPTM3740 - Chargeable events: foreign
policies: reduction for non-UK policyholder: example
Michael takes out a life policy on 17
March 1997 from an insurer based in Jersey whilst working in
He returns to the UK on 20 April 2001 and
is UK resident from that date.
He fully surrenders the policy on 5
October 2005, giving rise to a chargeable event gain of
The policy is a ‘foreign
policy’ within the definition in
IPTM3330 so an apportionment of the gain
applies, as described in
IPTM3730. There must also be a
restriction in the number of years for top-slicing relief, as
The policy ran for a total of 3,125 days,
including the days on which it was made and surrendered. Michael
was not resident in the UK for 1,495 days of this period.
Michael is due a reduction in the gain of
£10,750 x (1,495/3,125) = £5,143. Thus he is liable on a
gain of £5,607, which is the figure that should be entered on
his tax return for the 2005-2006 tax year.
The policy ran for 8 complete years.
Michael was non-resident for 4 complete years so the number of
years for top-slicing relief to be entered on the tax return must
be reduced to the 4 in which he was UK resident.