IPTM3720 - Foreign policies: basic rate tax not treated as paid

Basic rate tax is not treated as paid where the policy is:

• a ‘foreign policy of life insurance’, unless it is issued by the UK branch of a non-UK resident insurer
• a ‘foreign capital redemption policy’
• a life annuity issued by a provider whose annuity business does not fall within UK ‘basic life and general annuity business’.

In these circumstances, the insurer will not have been within the ‘I minus E’ system that effectively collects tax on the insurer’s profits attributable to assets used to pay benefits to policyholders. As a result, basic rate tax is not treated as having been paid on any gains that arise on the policy or contract

However, if the policy or contract falls outside the definitions of ‘foreign policy’ or ‘foreign contract’ - see IPTM3330 - basic rate tax is treated as having been paid on any gains arising from the policy. See IPTM3810 regarding other policies and contracts where basic rate tax is not treated as paid on gains.