Income Tax (Earnings and Pensions) Act 2003 section 560

Meaning of "qualifying insurance contract"

Section 560 defines what counts as a "qualifying insurance contract" for the purposes of former employees claiming tax deductions for insurance premiums paid against liabilities arising from their previous employment.

• A qualifying insurance contract must meet four conditions (A, B, C and D) relating to the risks covered, the duration of the policy, the benefits provided, and its independence from other contracts.
• Condition A requires the contract to cover only employment-related risks, such as indemnifying a former employee against liabilities from their old job, covering vicarious liability, paying legal costs and expenses connected to claims or investigations, or indemnifying an employer for payments made to a former employee.
• Condition B limits the insurance period to no more than two years at a time, with optional renewals of up to two years each, and the insured must never be obliged to renew.
• Conditions C and D ensure the contract provides no significant additional benefits beyond the insurance cover and renewal rights, and that the contract is not connected to any other contract.