271Deemed surrender in cases of certain loans
(1)Where—
(a)under section 547 a gain arising in connection with a policy or contract would be treated as forming part of an individual’s total income; and
(b)the policy was issued in respect of an insurance made after 26th March 1974 or the contract was made after that date; and
(c)any sum is at any time after the making of the insurance or contract lent to or at the direction of that individual by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;
then, subject to subsection (2) below, the same results shall follow under sections 268 to 270 as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy or contract and the sum had been paid as consideration for the surrender (and if the policy is a qualifying policy, whether or not the premiums under it are eligible for relief under section 266, those results shall follow under section 269, whether or not a gain would be treated as arising on the surrender).
(2)Subsection (1) above does not apply—
(a)in relation to a policy if—
(i)it is a qualifying policy; and
(ii)either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence; or
(b)in relation to a contract if and to the extent that interest on the sum lent is eligible for relief under section 353 by virtue of section 365.