Income Tax (Trading and Other Income) Act 2005 section 494

The total allowable deductions for a policy or contract

Section 494 sets out how to calculate the total allowable deductions when working out a chargeable event gain on a life insurance policy, life annuity contract, or capital redemption policy.

• Add together all premiums paid before the chargeable event, plus any loan repayments treated as part surrenders if the event falls at the end of the final insurance year
• For purchased life annuity contracts, reduce the total by the exempt or capital element of any annuity payments already received
• Where a capital redemption policy has been assigned for value, replace premiums paid before the assignment with the price paid on the most recent assignment, then add premiums paid after that assignment
• Premiums paid on any related policy are included in the calculation, and the rules may be modified by provisions dealing with disregarded amounts and qualifying endowment policies held as security for company debts