Income Tax (Trading and Other Income) Act 2005 section 467

Person liable: UK resident trustees

Section 467 determines when UK resident trustees are liable for tax on gains from life insurance policies and similar contracts, and how the tax rate varies depending on the nature of the trust.

• UK resident trustees are liable for tax on gains from life insurance policies or contracts if, immediately before the chargeable event, one of four conditions (A, B, C or D) is met, and any resulting gain is treated as the trustees' income for income tax purposes.
• Condition A applies where the policy or contract rights are held on charitable trusts; Condition B applies where they are held on non-charitable trusts and the settlor is non-UK resident, has died, or (in the case of a company or foreign institution) has ceased to exist — or where the gain falls into the overseas part of a split year for a UK resident settlor.
• Condition C is a residual category covering non-charitable trusts where Condition B does not apply and no individual or personal representative is liable under the relevant provisions; Condition D applies where the policy or contract rights are held as security for a debt owed by the trustees.
• Tax is charged at the basic rate where the trust is charitable (Condition A), or where the rights are held as debt security by charitable trustees (Condition D); in other cases the standard trust rate applies, reflecting the different tax treatment of charitable and non-charitable trusts.