Income Tax (Trading and Other Income) Act 2005 section 125

Policy holders becoming permanently UK resident after 17th March 1998

Section 125 provides transitional rules for insurance policies or contracts held by individuals who were non-UK resident on 17th March 1998 but subsequently became permanently UK resident, including a deadline for required policy variations and protection from deemed gains during the interim period.

• The rule applies where a policy holder was non-UK resident on 17th March 1998 and has since become UK resident, intending either to settle permanently or to stay for at least two years
• The policy or contract meets condition C in the second selection condition if the required variation was made before the later of the end of the first insurance year beginning on or after 6th April 1999, or the end of the first insurance year beginning on or after the holder's arrival date in the UK
• No chargeable gain arises under section 525 for any insurance year ending on or after the date the holder first became UK resident and before the insurance year in which the variation was made
• This effectively gives newly arrived permanent residents a grace period to bring their policies into compliance without incurring tax charges on gains calculated during that window