Income Tax (Trading and Other Income) Act 2005 section 485

Disregard of certain events in relation to qualifying policies

Section 485 restricts which events count as chargeable events for qualifying life insurance policies, effectively sheltering many policy proceeds from an income tax charge provided certain conditions are met.

• Death, maturity, surrender, assignment and similar events on a qualifying policy are generally not chargeable events provided the policy has not been made paid-up within the earlier of 10 years from inception or three-quarters of the policy term, and no company holds an interest in the policy rights
• If a company beneficially owns the policy rights, holds them on trust, or holds them as security for a debt, the sheltering from chargeable event status is switched off and the event will be chargeable
• Where the policy is varied to increase premiums, the 10-year and three-quarter-term time limits restart from the date the variation takes effect rather than from the original policy start date
• When a qualifying policy replaces a policy originally issued by a non-UK resident insurer under the rules in Schedule 15 to ICTA, the surrender of the old policy is not treated as a chargeable event