Income Tax (Trading and Other Income) Act 2005 section 538

Recovery of tax from trustees

Section 538 allows an individual who is personally liable for tax on a gain arising from a life insurance policy or capital redemption contract held by non-charitable trustees to recover the extra tax from those trustees, subject to certain limits and repayment obligations.

• Where rights under a policy or contract are held on non-charitable trusts and a chargeable event produces a gain, the individual liable for the resulting income tax can recover the extra tax (after top slicing relief) from the trustees
• The amount recoverable is capped at the total of any sums and the value of any benefits the trustees actually received as a result of the chargeable event
• The individual may ask HMRC to certify the recoverable amount, and that certificate is conclusive evidence of the figure
• If the individual's tax liability is later reduced or removed following a recalculation under section 507A or 512A, the individual must repay to the trustees the difference between what was recovered and the revised lower entitlement