IPTM7630 - Transaction-related calculations: example: part assignments for money or money's worth

This example illustrates the straightforward case where there is a part assignment for money or money바카라 사이트™s worth during the year, showing how the gain on the assignment arises on the person assigning part of the policy and that person is due the chargeable event certificate.

Transactions

A single premium policy was taken out on 10 June 2010 with a premium of £10,000 by joint policyholders Simon and Tony.

  • On 6 January 2014, Simon and Tony assign the rights under the policy to Tony, who becomes sole owner. Tony pays Simon £5,000 in return, which is the value of 50% of the policy at that date
  • On 1 May 2017, Tony assigns the policy to Tony and Suzanne jointly, and in return Tony acquires an appropriate share of Suzanne바카라 사이트™s flat. The value of the policy is £12,000.
Chargeable events

6 January 2014: Tony is an owner both before and after the assignment so the transfer is treated as an assignment of half the policy from Simon to Tony for consideration of £5,000 and a transaction-related calculation needs to be carried out.

The part assignment took place in the 4th insurance year so the allowable element of the premium is 4 x 5% x £10,000 = £2,000. There is a gain of £3,000 (that is, £5,000 바카라 사이트“ £2,000) and a part surrender or assignment event occurs on the date of the relevant transaction, 6 January 2014, which falls in tax year 2013-2014.

The gain is taxable on Simon but as the end of the insurance year in which the event occurs falls on 9 June 2014 in tax year 2014-2015, the gain is taxable on him in that later year, rather than the tax year in which the event occurs.

A chargeable event certificate must be sent to Simon as the 바카라 사이트˜appropriate policyholder바카라 사이트™ immediately before the assignment. Assuming the insurer was informed promptly of the event, this certificate must be delivered to Simon by 9 September 2014, that is within 3 months of the end of the insurance year in which the event occurred.

1 May 2017: The part assignment is for consideration as Tony exchanges his share of the policy for a share in Suzanne바카라 사이트™s flat. The value of the part assignment is £6,000. It falls in the 7th insurance year so the allowable element of premium is £1,500 (that is, 7 x 5% x £10,000 = £3,500 less the amount already used of £2,000). There is a gain of £4,500 and a part surrender or assignment event on 1 May 2017. The gain is taxable on Tony in 2017-2018, the tax year in which the insurance year ends and a certificate must be sent to Tony reporting this gain within 3 months of the end of the insurance year, by 9 September 2017.