Income Tax (Trading and Other Income) Act 2005 section 463C

Restricted relief qualifying policies: personal representatives and trustees with deceased settlors

Section 463C explains how restricted relief qualifying life insurance policies are taxed when the policyholder has died and the policy is now held by personal representatives administering the estate or by trustees where the person who created the trust has died.

• From 6 April 2013, the normal exemption for gains on qualifying policies does not apply to restricted relief qualifying policies held by personal representatives or trustees of a deceased person
• Where a taxable gain arises on such a policy, the gain may be reduced to reflect the proportion of premiums that qualified for tax relief, treating the policy as "policy X" and the personal representatives or trustees as if they were the individual
• Policies that were "related" to the main policy before the death continue to be treated as related after the death, provided they are still running, and new replacement policies can also qualify as related policies
• If the non-UK residence reduction under section 528A also applies, the restricted relief reduction must be calculated first, and then the non-UK residence reduction is applied to the already-reduced gain