(1)In this section “relevant excepted benefit” means so much of any qualifying payment under a relevant life insurance policy as—
(a)is a sum falling, but for this section, to be treated for the purposes of the Tax Acts as an amount of interest or as an annual payment;
(b)is not a sum paid or falling to be paid by virtue of provisions of that policy which, taken alone, would constitute a different sort of policy; and
(c)does not represent interest for late payment on—
(i)any other part of that qualifying payment, or
(ii)the whole or any part of any other qualifying payment under the policy.
(2)For the purposes of subsection (1)(c) above, interest on the whole or any part of a qualifying payment under a policy (“the relevant amount”) is interest for late payment if it is interest for a period beginning on or after the date of the occurrence of the event or contingency as a result of the occurrence of which the relevant amount falls to be paid.
(3)The Tax Acts shall have effect, and be deemed always to have had effect, as if—
(a)a relevant excepted benefit were neither an amount of interest nor an annual payment;
(b)the payments which are relevant capital payments for the purposes of section 541 of the Taxes Act 1988 (computation of gain in the case of life policies) included the payment of a relevant excepted benefit;
(c)on the payment of a relevant excepted benefit there were a surrender—
(i)except in a case falling within sub-paragraph (ii) below, of a part of the rights conferred by the policy in question; and
(ii)in a case where the payment of the benefit (or of that benefit together with any interest falling within subsection (1)(c) above) comprises the whole of the last payment to be made under the policy, of all of the remaining rights so conferred;
and
(d)the value of the part or rights treated as surrendered on the payment of a relevant excepted benefit were equal to the amount of the payment.
(4)For the purposes of this section a qualifying payment under a relevant life insurance policy is any amount which has been or is to be paid under that policy by the insurer.
(5)In this section “relevant life insurance policy” means any contract of insurance (whenever effected) which—
(a)is of a description applying to contracts the effecting and carrying out of which falls within Class I or III of the classes of long term business specified in Schedule 1 to the [1982 c. 50.] Insurance Companies Act 1982; and
(b)is neither—
(i)an annuity contract, nor
(ii)a contract effected in the course of a company’s pension business (within the meaning given by section 431B of the Taxes Act 1988 or the corresponding enactment in force when the contract was effected).
(6)In subsection (1)(b) above, the reference to a different sort of policy is a reference to any contract of a description applying to contracts the effecting and carrying out of which falls within any class of business specified in Schedule 1 or 2 to the [1982 c. 50.] Insurance Companies Act 1982 other than the Classes I and III specified in Schedule 1.
(7)This section shall be deemed to have had effect, for the purposes of the cases to which the enactments applied, in relation to enactments directly or indirectly re-enacted in the Tax Acts, as it has effect in relation to those Acts.
(8)For the purposes of subsection (7) above the reference in subsection (3)(b) above to section 541 of the Taxes Act 1988 shall be taken to include a reference to any corresponding provision contained in the enactments directly or indirectly re-enacted in the Tax Acts.