Income Tax (Trading and Other Income) Act 2005 section 527

Reduction for sums taken into account otherwise than under Chapter 9

Section 527 prevents a double charge to tax where a sum used to calculate a gain under Chapter 9 (life insurance policies and capital redemption policies) is also taxable under another provision.

• Where a receipt or credit item is used in calculating both a Chapter 9 gain and another taxable amount, a double tax charge could arise
• The Chapter 9 gain is reduced by the amount of the overlapping receipt or credit item to prevent this double charge
• This rule is needed because the chargeable event mechanism under Chapter 9 does not fit neatly with the normal priority rules that ensure income is taxed only once
• The receipt may need to be included in the Chapter 9 calculation before it can be determined whether a chargeable event or gain has arisen at all