IPTM2030 - Qualifying policies and life assurance premium relief: variations and substitutions

If any change is made to a policy, it may fall into one of three categories, depending on the scale and character of the change:

• insignificant variation, such as altering the identification, not the identity, of the insured or life assured; or a one-off change of frequency of premium payments, for example, annual premium payments changed to monthly premium payments
• significant variation, such as extending or shortening the premium term
• terminating the old policy and substituting a new one, such as converting a term assurance to whole life. This is an example of changing the contingency, a change that goes to the root of the contract and consequently redraws it.

HMRC and most customers will not, as a rule be concerned with the application of these categories and their effect on qualifying status. Qualifying status will be determined by the insurer. Detailed guidance is at IPTM8000 onwards, but the following points may be noted.

Varying the terms of a qualifying policy may:

• cause it to become non qualifying, or a restricted relief qualifying policy (for restricted relief qualifying policies, see IPTM2076), with consequent loss of life assurance premium relief where that is still being given, and the policy will no longer be protected, or wholly protected, from chargeable events
• have the effect of terminating it, which itself may be a chargeable event
• re-set the time the policy is treated as running from, for the purpose of the time scale used in determining whether a chargeable event occurs.

Problems with changes to mortgage endowments have given rise to many queries, see IPTM2040.

A variation for the purposes of the annual premium limit applicable from 21 March 2012 is considered at IPTM2080.