IPTM7555 - Chargeable event gains: income tax treated as paid

Reporting requirements

Gains from most policies and contracts with UK insurers are treated as if income tax has already been paid on the gain (see IPTM3810).

Insurers must report on certificates the tax treated as paid on every gain unless the policy or contract is one of the few types where no tax is ever treated as paid on gains, which are listed in the next section.

For gains arising on or after 6 April 2010, income tax treated as paid is at the UK basic rate in force for the relevant year.

Policies and contracts where no income tax is treated as paid on gains

Insurers must not report any tax treated as paid where the gain is on one of the following types of policies and contracts:

• life insurance policies and life annuity contracts from a friendly society made in the course of tax exempt life or endowment business. Gains will not arise on such policies unless there is a breach of the tax exempt policy or qualifying policy rules.
• life annuity contracts made after 26 March 1974 but in an accounting period of the insurer beginning before 1 January 1992
• life insurance policies made on or after 17 March 1998, which form part of the UK insurer’s overseas life assurance business (‘OLAB’) – this also applies to any policies made before 17 March 1998 which have been varied on or after 17 March 1998 so as to increase the benefits secured or extend the term of the policy, and for this purpose an exercise of an option in the policy is regarded as a variation
• policies and contracts from an overseas insurer

- made on or after 18 November 1983, or

- made before 18 November 1983 and varied after that date to increase the benefits secured or extend the term

except where made with the UK branch or agency of the insurer, in which case tax is treated as paid.