Income Tax (Trading and Other Income) Act 2005 section 465B

Temporary non-residents

Section 465B ensures that individuals who leave the UK temporarily cannot avoid income tax on gains from life insurance policies and similar contracts by realising those gains while non-resident, and then returning to the UK.

• If an individual is temporarily non-resident and a gain arises during that period from a life insurance policy or contract taken out before departure, the gain is taxed in the year the individual returns to the UK
• The gain is only caught if the individual would have been liable to tax on it had they remained UK resident throughout, and provided no one else (such as personal representatives or UK resident trustees) is already liable for the gain
• The section does not apply where the gain arises from a part surrender or part assignment and a terminal event (such as full surrender, maturity or death) occurs during the non-resident period or the year of return, provided someone is liable to tax on the gain from that terminal event
• Double taxation agreements cannot be used to override this charge, and the taxable amount is calculated as if the individual had been UK resident for the full tax year in which the gain arose