Income Tax (Trading and Other Income) Act 2005 section 498

Requirement for periodic calculations in part surrender or assignment cases

Section 498 deals with the requirement to carry out a gain calculation when part of the rights under a life insurance policy or contract are surrendered or assigned for value.

• The section applies when a partial interest in a life insurance policy or contract is surrendered, or when such a partial interest is assigned in exchange for money or money's worth.
• When either event occurs, a calculation must be made under section 507 at the end of the insurance year in which the surrender or assignment takes place, to determine whether a chargeable gain has arisen and, if so, its amount.
• There is no requirement to carry out this calculation in years where no surrender or assignment has occurred, since no gain could arise in those circumstances.
• Certain events that might not obviously constitute a part surrender or assignment may nonetheless be treated as such under sections 500 to 506, and practitioners should be aware of these deemed events.