SE15061 - Non-approved retirement benefits schemes: overseas schemes: lump sums from asset disposals

Section 596A(11) ICTA 1988

As explained in SE15060 there are special rules dealing with lump sums derived from overseas unapproved “retirement benefits schemes” where the lump sum comes from either:

• the disposal of a part of an asset or
• the surrender of any part of or share in any rights in any asset and further lump sums may arise from further such disposals or surrenders

An Inspector should consider such a case.

These rules will most frequently apply to schemes where the contributions are invested in an insurance policy. The legislation applies to lump sums received from insurance- based schemes where the insurance is not with a UK office. Gains from offshore insurance policies are already chargeable to tax but Section 596A(11) ICTA 1988 takes precedence where a policy is encashed in order to pay a lump sum benefit.

SE15060 explained the calculation to be made in arriving at the amount of the Schedule E charge in these offshore cases. But where the lump sum arises under the circumstances outlined in this instruction the deduction mentioned in SE15060 is calculated in a special way:

• first, the sum is calculated following the rules of SE15060
• that sum is then:

• multiplied by the amount of the lump sum received and
• divided by the market value of the asset in relation to which the disposal or surrender occurred. In making that valuation it is assumed that the valuation is made immediately before the disposal or surrender concerned.

These rules apply where the person having a right to receive (or any expectation of receiving) a further lump sum from the scheme is:

• the employee, or the employee’s

• wife or widow, children, dependants or personal representatives or

• any person “connected” with the employee within Section 839 ICTA 1988 (for the meaning of “connected” see CG14580 onwards which deals with the virtually identical Section 286 TCGA 1992).

The market value of any asset should be arrived at following Section 272 CGTA 1992 (see CG14531).