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

Reduction in amount charged on basis of non-UK residence of deceased person

Section 528A provides a mechanism to reduce the tax charged on gains from life insurance or capital redemption policies where the deceased person spent time as a non-UK resident during the period they held an interest in the policy.

• Where personal representatives or trustees are liable to tax on a chargeable event gain from a life insurance or capital redemption policy, and the deceased spent some days as non-UK resident during the material interest period, the taxable gain is reduced by the proportion of "foreign days" to total days in that period.
• The reduction fraction is calculated as A divided by B, where A is the number of foreign days in the material interest period and B is the total number of days in that period; "foreign days" are days in tax years when the deceased was not UK resident, or days falling in the overseas part of a split year.
• If the policy was assigned to the deceased by a spouse or civil partner before death, the material interest period is extended to include any earlier period during which the assignor held an interest in the policy, and the assignor's residence status is used to determine foreign days for that earlier period.
• Where a policy is a replacement (or "new policy") issued in relation to an earlier policy, the policy period runs from the date the original policy was first issued, and all references to the policy include any such earlier policies in the chain.