IPTM7375 - Assignments of policies on divorce: position until mid-2003
View of the law until mid-2003
Until mid-2003, HMRC took the view that an assignment as part of a divorce settlement was for money or money’s worth, based on legal advice that such an assignment involved a valuable exchange of rights. As a consequence, the assignment of all or part of the policy rights was potentially within the charge to tax.
An insurer may have issued chargeable event certificates on events that arose under the previous interpretation of the law which would not have arisen under the current interpretation. Insurers are not required to revisit these events by withdrawing the certificates previously issued, as they arose under the view and practice prevailing at the time.
Calculation of gains on later chargeable events where there have been earlier part assignments on divorce
The calculation of the gain on a later chargeable event may be affected by whether any earlier part assignments were for money or money’s worth. All part assignments which occurred in an insurance year beginning before 6 April 2001 could have given rise to chargeable events, whether or not they were for money or money’s worth. Therefore, this is only an issue for part assignments which occurred in an insurance year beginning on or after 6 April 2001.
In calculating the gain on a later event, the insurer should treat any such part assignment as if it had taken place under the current view of the law, even if it originally occurred before the change of view and chargeable event certificates were issued at the time. Thus if the insurer knows that the part assignment took place as part of a divorce settlement, it may assume that it was under a court order (unless it has information suggesting otherwise) and that no chargeable event arose on it.