Income Tax (Trading and Other Income) Act 2005 section 501

Part surrenders: loans

Section 501 treats certain loans made by an insurer under a life insurance policy or contract as part surrenders, thereby preventing the avoidance of tax where accumulated profits are extracted from a policy in the form of a loan rather than a withdrawal.

• A loan made by (or arranged by) the insurer under a policy is treated as a part surrender if it is made to an individual who would be liable for tax on any gain arising on that policy, or to UK resident trustees who would similarly be liable
• A loan counts as made by the insurer even if it is merely arranged by the insurer, and it counts as made to an individual or trustees even if it is made at their direction to someone else
• The "insurer" means the body that issued the policy or with which the contract was made
• Two exceptions apply: loans used to purchase life annuities, and certain loans under qualifying policies, are excluded from this treatment