Income Tax (Trading and Other Income) Act 2005 section 514

Chargeable events where transaction-related calculations show gains

Section 514 deals with when a relevant transaction on a life insurance policy or capital redemption contract becomes a chargeable event because transaction-related calculations reveal a gain, and sets out rules for determining the tax year in which that gain is charged.

• Where a transaction-related calculation shows a gain has arisen on a policy or contract, that transaction is itself treated as a chargeable event — though for qualifying policies, this is subject to additional restrictions.
• If the chargeable event transaction falls in a different tax year from the end of the insurance year, the gain is taxed in the tax year in which the insurance year ends, not the year of the transaction.
• This reallocation rule also covers cases involving temporary non-residents, where the transaction occurs in the individual's year of return to the UK.
• If the transaction occurs in the final insurance year, it is treated as taking place before the chargeable event that closes that year, ensuring the two calculations remain separate.