Foreign Income 55 - Number of years of life or annuity policy

The number of years is the number of complete periods of 12 months since the policy or life annuity was made.

However, if a gain is reduced for periods of non-residence, the number of years should also be reduced. It's reduced by the number of complete periods of 12 months since the policy or annuity was made during which you, or, if you were not the policyholder when the gain arose, the policyholder, were not resident in the UK.

1 January 2010 to 31 December 2010, 1 January 2011 to 31 December 2011, 1 January 2012 to 31 December 2012 and so on. The full surrender of your policy ends the final insurance year and this means that the final insurance year may be longer or shorter than 12 months. For example, if you take out your policy on 1 January 2009 and fully surrender it on 6 March 2013, the final insurance year will be the period 1 January 2012 to 6 March 2013 because 31 December 2012 and 6 March 2013 are in the same tax year.

or

Example 1
On maturity a benefit of £10,000 arises (X).
The premiums paid total is £4,000 (Z).
(In this example, both Y and A = 0, and as with the other zeros in the following examples,
are not shown in the calculations below.)
The gain is £10,000 minus £4,000 = £6,000.

The gain is reduced where:

• the policy is not an Overseas Life Assurance Business policy
• the policy was taken out after 17 November 1983
• the policy is not held in trust
• the policyholder was resident outside the UK for any part of the period since the policy was taken out

For example, if the policy matures at the end of a term of 3,000 days and the policy holder was UK resident for 2,200 days the gain entered on the Foreign pages is reduced to £6,000 x 2,200/3,000 = £4,400. £4,400 enter this figure. However no reduction is due if at any time the policy has been held by:

• a non-UK resident trustee or trustees, and the policy was taken out or enhanced after 19 March 1985
• a non-UK resident company or other entity and the policy was taken out or enhanced after 16 March 1998

The number of complete years is calculated as follows:

Number of complete years to maturity 8 minus number of complete years not resident in the UK (3,000 minus 2,200 = 800 days which is 2 complete years) 2 Number of years 6.

The gain will not be treated as having been taxed at the basic rate because the policy was taken out after 17 November 1983 unless a claim can be made, as explained in 'Basic rate tax treated as paid', or unless the policy is from the UK branch of a foreign insurer.