Income Tax (Trading and Other Income) Act 2005 section 499

Meaning of "insurance year" and "final insurance year"

Section 499 defines the terms "insurance year" and "final insurance year" for the purposes of calculating gains on life insurance policies and similar contracts.

• An insurance year is each successive 12-month period running from the date the policy or contract was taken out, or from any anniversary of that date.
• Certain specified events — such as surrendering all rights, death giving rise to benefits, maturity, or taking a capital sum instead of annuity payments — cut short the insurance year in which they occur, and that shortened year is called the "final insurance year".
• If the final insurance year would both begin and end within the same tax year, it is merged with the previous insurance year so that the two together count as a single insurance year — the "final insurance year".
• This merging rule exists to avoid the complexity of two separate gain computations falling in the same tax year, although where transaction-related calculations under section 510 apply, more than one computation may still arise.