Income Tax (Trading and Other Income) Act 2005 section 108

Pre-14th March 1989 policies and contracts: application of section 501

Section 108 explains when the rules on part surrenders and loans under section 501 do not apply to life insurance policies and contracts that pre-date 14th March 1989, specifically where companies are involved.

• Section 501 (part surrenders and loans) does not apply to policies issued, or contracts made, before 14th March 1989 where a company beneficially owns the policy rights, the rights are held on trusts created by a company, or the rights are held as security for a company's debt.
• A pre-14th March 1989 policy loses its protected status if it is varied on or after that date to increase benefits or extend the term of the insurance.
• Any exercise of rights conferred by the policy counts as a variation, which could cause the policy to be treated as issued on or after 14th March 1989.
• The effect is that once a policy is varied in this way, the section 501 rules on part surrenders and loans will apply to it, even though it originally pre-dated 14th March 1989.