Income Tax (Trading and Other Income) Act 2005 section 490

Last payment under guaranteed income bonds etc. treated as total surrender

Section 490 explains how the final payment under a guaranteed income bond (or similar contract) is treated for income tax purposes — specifically, that it is deemed to be a total surrender of all rights under the contract rather than a partial surrender.

• The section applies to the last payment under a guaranteed income bond or similar contract — that is, a payment that would normally be treated as a partial surrender under section 500(d), but which is excluded from that treatment by section 504(5) because it represents the whole of the final benefit payable under the contract.
• Such a final payment is treated as though the policyholder has surrendered all rights under the contract, rather than only part of them.
• A payment caught by this section is not regarded as interest or as an annual payment for any income tax purpose.
• This section supplements the general charging provisions in section 484 and is based on the original rules in section 79 of the Finance Act 1997.