Income Tax (Trading and Other Income) Act 2005 section 124

Policy holders becoming UK resident after 17th March 1998

Section 124 provides transitional relief for holders of life insurance policies or capital redemption contracts who were not UK resident on 17th March 1998 but subsequently became UK resident without initially intending to settle permanently or stay for at least two years.

• The provision applies where a policy or contract holder was not UK resident on 17th March 1998, has since become UK resident, and did not intend on arrival to become permanently resident or to remain for at least two years.
• The policy or contract can still meet condition C of the second selection condition if it was varied before the later of the end of the first insurance year starting on or after 6th April 1999, or the end of the first insurance year starting after the holder first became UK resident since 17th March 1998.
• No chargeable gain arises under section 525 (annual personal portfolio bond calculations) for any insurance year ending on or after the date the holder first became UK resident but before the insurance year in which the required variation was made.
• This effectively gives the policy holder a grace period to bring the policy or contract into compliance without incurring tax charges during the interim period between becoming UK resident and making the necessary variation.