Income Tax (Trading and Other Income) Act 2005 section 541A

Effect of rebated or reinvested commission in certain cases

Section 541A reduces the allowable premium deduction when calculating a chargeable event gain on a life insurance policy or contract where commission has been rebated or reinvested, provided certain premium thresholds are exceeded.

• Where commission on a policy or contract has been rebated or reinvested, the total premiums allowable as a deduction in the chargeable event gain calculation must be reduced by the amount of that rebated or reinvested commission.
• The section applies when total premiums paid under the policy or contract exceed £100,000 in a relevant period (Condition A), or when the policyholder's combined policies and contracts exceed that threshold in a relevant period and premiums were paid on the policy in question during that period (Condition B).
• The relevant period is either the part of the current tax year up to the chargeable event, or any of the three preceding tax years, and the chargeable events covered include surrender, assignment for value and maturity — but not death.
• The Treasury has the power to change the £100,000 premium threshold and the definition of relevant period by order.