Income Tax (Trading and Other Income) Act 2005 section 528

Reduction in amount charged: non-UK resident policy holders

Section 528 provides a mechanism to reduce the taxable gain on a life insurance or capital redemption policy to reflect periods when the policyholder was not UK resident.

• Where a policyholder has "foreign days" (days of non-UK residence or days in the overseas part of a split year) during the material interest period, the chargeable gain is reduced proportionately.
• The reduction is calculated as a fraction: the number of foreign days divided by the total number of days in the material interest period.
• Where a policy has been assigned between spouses or civil partners before the chargeable event, the assignor's period of interest and their residence status are also taken into account when calculating the reduction.
• If a policy is a replacement ("new policy") for an earlier policy, the policy period is treated as running from the issue of the original policy, and all earlier policies are taken into account.