Income Tax (Trading and Other Income) Act 2005 section 507

Pre-14th March 1975 policies and contracts: calculation of gains under section 507

Section 507 is modified in its application to insurance policies and contracts made before 14th March 1975, so that periodic gain calculations only take account of activity during a defined "reference period" rather than the full life of the policy.

• The modifications apply to any insurance policy or contract made before 14th March 1975, restricting the calculation of surrendered or assigned rights to those occurring during the "reference period"
• For allowable payments made during the reference period, only a proportionate element is recognised, calculated by multiplying the payment by X divided by 20, where X is the number of insurance years from the year of payment to the end of the reference period (capped at 20)
• For allowable payments made before the reference period, a separate proportionate element is calculated by multiplying the payment by (20 minus Y) divided by 20, where Y is the number of insurance years from the year of payment to the last insurance year before the reference period (capped at 20)
• The "reference period" runs from the first insurance year falling wholly after 13th March 1975 to the insurance year at the end of which the periodic calculation is required

---