Income Tax (Trading and Other Income) Act 2005 section 464

Person liable for tax: introduction

Section 464 introduces the rules for determining who is liable for income tax on gains from life insurance policies, life annuity contracts and capital redemption policies.

• The person liable for tax depends on who owns or holds the rights under the policy or contract immediately before the chargeable event occurs — whether that is an individual, personal representatives or UK resident trustees.
• Where only a part of the rights or a share in the rights has been surrendered or assigned, the liability rules apply to that specific part or share rather than to all the rights under the policy or contract.
• In practice, where liability could theoretically fall on more than one person (for example, both the individual who placed a policy in trust and the trustees holding the legal rights), the liability of a UK resident individual normally takes priority, and the gain is not taxed twice.
• Special rules apply where two or more persons are interested in the same policy or contract, with further provisions covering non-UK resident trustees, foreign institutions, determination of ownership shares and trusts created by more than one person.