Income Tax (Trading and Other Income) Act 2005 section 541

Pre-3rd March 2004 policy or contract: calculation of deficiencies

Section 541 sets out how deficiencies are calculated for life insurance policies, life annuity contracts and capital redemption policies that were taken out before 3rd March 2004, and provides a simplified calculation method for these older arrangements.

• Policies and contracts taken out before 3rd March 2004 benefit from a simplified deficiency calculation under section 541, with paragraph (b) of section 541(4) disapplied
• Qualifying arrangements include life insurance policies, life annuity contracts and capital redemption policies made before that date
• The simplified treatment is lost if, on or after 3rd March 2004, benefits are increased, rights are assigned, or rights are used as security for a debt
• Any exercise of rights under the policy or contract is treated as a variation that increases benefits, which can also cause the simplified treatment to be lost

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