(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 (3) below, the same results shall follow under this Chapter 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.
(2)If the whole or any part of the sum is repaid the repayment shall be treated, for the purpose of computing any gain arising on the happening, at the end of the final year, of a chargeable event, as a payment of a premium or lump sum consideration.
(3)Subsections (1) and (2) above do not apply in relation—
(a)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;
(b)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.
(4)In this section “final year” has the same meaning as in section 546.