Where a life insurance policy made before 14 March 1989 is
beneficially owned by a company, the company is not liable to tax
on chargeable event gains arising on the policy. This is also the
case if the policy is held on trusts created by the company or as
security for a debt owed by the company.
This is
provided that the policy has
not been varied on or after 14 March 1989 so as to
increase the benefits secured or to extend the term - see
IPTM7080 for more on this. If it has
been so varied, it is treated as having been made on or after 14
March 1989. For this purpose, the exercise of rights under an
option in the policy is treated as a variation.
Such policies are also excepted from the loan relationships
legislation, which now applies generally for policies and contracts
owned by a company –
IPTM3900 onwards.
It is possible for the policyholder to be a person different
from the beneficial owner of a policy. Even if a life policy made
before 14 March 1989 policy is held by a company, it can still give
rise to a chargeable event if the beneficial owner of the policy is
an individual. An insurer is required to report chargeable events
and, unless it has information to confirm the identity of the
beneficial owner, it cannot know for certain whether a pre-14 March
1989 policy held by a company is potentially liable under the
chargeable event regime.
However, in the absence of any information to the contrary,
the insurer may assume that where the holder of a policy made
before 14 March 1989 is a company, it is also the beneficial owner
and so no chargeable events arise to be reported.
A company is, in addition, not liable on chargeable event
gains arising from capital redemption policies and life annuity
contracts made before 14 March 1989 that it owns beneficially.
| Further reference and feedback | IPTM1013 |
