IPTM7340 - Surrenders: exception: change of life assured on qualifying policy where no consideration is paid

General rule

Where there is a change of life assured on a qualifying policy, the policy before the change and the replacement policy after the change are treated as a single policy and no chargeable event arises on the change, provided that the following conditions are met

• no consideration in money or money’s worth is receivable by any person in connection with the change other than the benefits provided for by the replacement policy
• the replacement policy is also a qualifying policy under the rules in ICTA88/SCH15
• any sum becoming payable by the insurer or in connection with the termination of the replaced policy is retained and applied as premium in the replacement policy.

Consideration for these purposes includes any fee payable to the insurer for administering the change and any commission paid to a financial adviser or other person.

The policies are treated as a single policy for all purposes of the chargeable event rules, including the calculation of gains on both excess events and part surrender or assignment events - see IPTM7600 onwards.

Changes of lives assured on an assignment on divorce

Where there is a change in life assured in connection with the assignment of a policy under a divorce settlement ordered or ratified by the Court then no consideration in money or money’s worth is receivable in connection with the change on that account. There is more on assignments on divorce at IPTM7370 and IPTM7375.