Income Tax (Trading and Other Income) Act 2005

Pre-14th March 1975 policies and contracts: calculation of gains under section 507 U.K.

100 (1) This paragraph applies to— U.K.

(a) a policy in respect of an insurance made before 14th March 1975, and

(b) a contract made before that date.

(2) Section 507 (method for making periodic calculations under section 498) applies to a policy or contract to which this paragraph applies with the following modifications.

(3) In subsection (4) (calculation of net total value of rights assigned and surrendered)—

(a) in paragraph (a) of step 1 after “at any time”, in both places where it occurs, and

(b) in paragraph (b) of step 1 after “assigned”,

insert “ during the reference period ”.

(4) In subsection (5) (calculation of net total allowable payments), for step 1 substitute— “Step 1 Find the allowable element in each allowable payment made during the reference period by multiplying the amount of the payment by—

where X is the number of insurance years in the period beginning with the year in which the payment is made and ending with the reference period or, if it is less, 20.”

(5) After that step insert— “Step 1A Find any allowable element in any allowable payment made before the reference period by multiplying the amount of the payment by—

where Y is the number of insurance years in the period beginning with the year in which the payment is made and ending with the last insurance year before the reference period or, if it is less, 20.”

(6) In subsection (6) insert the following definition in the appropriate place—

• ““the reference period” means the period beginning with the first insurance year which falls wholly after 13th March 1975 and ending with the insurance year as at the end of which the calculation under this section is required to be made,”.