IPTM4100 - Purchased life annuities: introduction
A purchased life annuity is an annuity bought from an insurer that has a life contingency in its terms. Often the annuity will be for life, but it could be for a term ascertainable by reference to a life.
It does not include a pension annuity.
Commercially speaking, each annuity payment comprises a return of part of the capital plus a sum reflecting, in economic terms, interest.
Tax rules provide for the creation of a 바카라 사이트˜capital element바카라 사이트™, referred to in ITTOIA05 as an 바카라 사이트˜exempt sum바카라 사이트™ or 바카라 사이트˜exempt proportion바카라 사이트™, depending on the type of calculation involved 바카라 사이트“ see IPTM4310. It reflects the amount of exempt capital comprised within each of the annuity payments. In broad terms, the exempt capital amount is obtained by dividing the purchase price of the annuity by the subject바카라 사이트™s life expectation, determined according to prescribed mortality tables.
This Chapter explains the legislation governing the exemption in detail, and begins by looking at different types of annuity.