IPTM7045 - Exceptions: group life policies: pre-9 April 2003 policies: ITTOIA05/SCH2/PARA116

Transitional rules

The exemption from the chargeable event rules for group life policies which meet the conditions to be excepted described in IPTM7025 to IPTM7040 came into effect on 9 April 2003.

Where a group life policy was made before 9 April 2003 and did not meet the conditions to be excepted, for instance because it also provided benefits on other contingencies such as disability, a transitional provision allowed it to be varied to meet the conditions.

Provided the terms of the policy were varied before 6 April 2004 so that it met the conditions to be excepted, the policy is treated as having met the conditions throughout the transitional period from 9 April 2003 until 5 April 2004 and no chargeable events will have arisen. The only exception to this is if sums were paid from the policy, other than on death or disability, in the transition period before the variation was made. This is an anti-avoidance provision and genuine protection policies will not have been affected.

Where the variation which was needed to ensure that the policy complied with the conditions was sufficiently fundamental that contractually it brought into existence a new policy replacing the old pre-varied policy, then for the purposes of the excepted group life policy rules and the chargeable event rules the old and new policies are treated as a single policy.

If a group policy did not meet the conditions on 9 April 2003 to be excepted and was not varied within the transitional period to meet the conditions then it is within the chargeable event gain rules. Chargeable events may arise, or have arisen, on or after 9 April 2003, potentially giving to taxable gains as described in IPTM7545.

Retrospective tax exemption for events before 9 April 2003

Where an event which would have been a chargeable event, such as a death, arose on a ‘pure protection’ group life policy before 9 April 2003, that event is retrospectively deemed not to have been a chargeable event ensuring that no taxable gain could have arisen. For this purpose, a ’pure protection policy’ means one whose terms do not provide for sums or other benefits to be paid other than on death or disability.