Draft Order laid before Parliament under section 1(5) of the Equitable Life (Payments) Act 2010, for approval by resolution of each House of Parliament.

2011 No.

Capital Gains Tax
Corporation Tax
Income Tax
Inheritance Tax
Tax Credits

The Taxation of Equitable Life (Payments) Order 2011

Made

Coming into force in accordance with article 1(1)

The Treasury make the following Order in exercise of the powers conferred by section 1(3) and (4) of the Equitable Life (Payments) Act 20101

In accordance with section 1(5) of that Act, a draft of this Order was laid before Parliament and approved by a resolution of each House of Parliament.

Citation, commencement, effect and interpretation1

1

This Order may be cited as the Taxation of Equitable Life (Payments) Order 2011 and shall come into force on the day after the day on which it is made.

2

This Order has effect in relation to authorised payments made after the day on which this Order is made.

3

In this Order “authorised payment” means a payment to which section 1 of the Equitable Life (Payments) Act 2010 applies.

Capital gains tax2

An authorised payment shall be disregarded for the purposes of capital gains tax.

Corporation tax3

An authorised payment shall be disregarded for the purposes of the Corporation Tax Acts.

Income tax4

An authorised payment shall be disregarded for the purposes of the Income Tax Acts.

Inheritance tax5

1

For the purposes of the Inheritance Tax Act 19842—

a

in determining the value of a person’s estate immediately before that person’s death, no account shall be taken of any value attributable to a right to, or interest in, an authorised payment made after that person’s death; and

b

in determining the value of relevant property immediately before a ten-year anniversary for the purposes of the charge under section 643 of the Inheritance Tax Act 1984, no account shall be taken of any value attributable to a right to, or interest in, an authorised payment made on or after that ten-year anniversary.

2

In this article—

  • “estate” has the meaning given by section 272 of the Inheritance Tax Act 1984;

  • “relevant property” has the meaning given by section 584 of that Act; and

  • “ten-year anniversary” has the meaning given by section 61 of that Act.

Tax Credits6

In calculating investment income in accordance with regulation 10 of the Tax Credits (Definition and Calculation of Income) Regulations 20025, an authorised payment shall be disregarded.

namenameTwo of the Lords Commissioners of Her Majesty’s Treasury
EXPLANATORY NOTE

(This note is not part of the Order)

This Order makes provision for payments which the Treasury authorise in cases where persons have been adversely affected by maladministration in the regulation before December 2001 of the Equitable Life Assurance Society. It provides for authorised payments to be disregarded, to the extent described in the Order, for the purposes of liability to tax and entitlement to tax credits.

Article 1 provides for citation and commencement and defines “authorised payment” as a payment to which section 1 of the Equitable Life (Payments) Act 2010 (c. 34) applies.

Articles 2, 3 and 4 provide respectively that an authorised payment is disregarded for the purposes of capital gains tax, the Corporation Tax Acts and the Income Tax Acts.

Article 5 provides that any value attributable to rights to, or interests in, an authorised payment that is made after a person’s death is disregarded in calculating the value of the person’s estate which is subject to inheritance tax on their death, and that such rights or interests are similarly disregarded in calculating the value of relevant property subject to a ten-year anniversary charge for inheritance tax, where an authorised payment is made on or after such anniversary.

Article 6 provides that in calculating investment income for the purposes of entitlement to tax credits an authorised payment shall be disregarded.

A full and final Impact Assessment has not been produced for this instrument as a negligible impact on the private or voluntary sectors is foreseen.