IPTM3860 - Deficiency relief: entitlement

There is no relief under the chargeable event regime for an investment loss sustained on a policy or contract. Additionally, a loss on one policy cannot be set against a gain on another.

A special relief called ‘deficiency relief’ may be available to individuals only when a policy or contract comes to an end, where they have been taxed on more than the overall economic gain on the policy.

Entitlement to deficiency relief

An individual will be entitled to deficiency relief if

• the calculation of the gain, as described in IPTM3510, on the final chargeable event shows a negative amount: this will be the case if total benefits are less than total deductions plus previous gains
• one or more gains arose on ‘excess events’ or ‘part surrender or assignment events’ (see IPTM3555) in earlier tax years on which the individual was liable, and
• the individual is the liable person – the person who would have been liable to income tax on a gain on the final chargeable event, had the calculation shown a gain.

The calculation of deficiency is explained and illustrated by examples in IPTM3870.

How deficiency relief is calculated is described in IPTM3880.