Part 4Savings and investment income

Chapter 9Gains from contracts for life insurance etc.

Part surrenders and assignments: periodic calculations and excess events

504Part surrenders: payments under guaranteed income bonds etc.

1

This section applies to so much of any payment of an amount by an insurer under a guaranteed income bond contract as meets conditions A to C (and so it falls within section 500(d)).

2

Condition A is that it is a sum which, but for subsection (6), would be treated for income tax purposes as interest or an annual payment.

3

Condition B is that it is not a sum paid or falling to be paid because of provisions of the guaranteed income bond contract which, taken alone, would constitute a contract of insurance—

a

within Part 1 or 2 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but

b

not within paragraph 1 or 3 of Part 2 of that Schedule (life and annuity contracts including certain linked long-term contracts).

4

Condition C is that it does not represent late payment interest.

5

This section does not apply if the payment comprises the whole of the last benefit to be paid under the contract (ignoring late payment interest).

6

A sum to which this section applies is not regarded as interest or as an annual payment for any income tax purposes.

7

In this section—

  • “guaranteed income bond contract” means a policy of life insurance that is a contract of insurance which—

    1. a

      is within paragraph 1 or 3 of Part 2 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, and

    2. b

      is neither an annuity contract nor a contract effected in the course of a company's pension business,

  • “late payment interest”, in relation to a contract, means interest on an amount payable under the contract which is paid for a period beginning on or after the date of the occurrence as a result of which the amount is payable, and

  • “pension business” has the meaning given by section 431B of ICTA (or the corresponding enactment in force when the contract was effected).