Paragraph 100: Pre-14th March 1975 policies and contracts: calculation of gains under section 507
3595.This paragraph applies to policies and contracts which are more than 20 years old. Premiums paid on such policies 20 or more years ago will be 100% allowable in computations of gains, subject to the restriction this paragraph applies in respect of years beginning before 14 March 1975. It introduces, for the policies and contracts to which it applies, the concept of a “reference period”, defined in sub-paragraph (6) as insurance years beginning after 13 March 1975. Where the paragraph applies, it affects the periodic calculation under section 507. It is based on section 546(1) of ICTA.
3596.Sub-paragraph (3) limits by reference to that reference period the period within which certain assignments contribute amounts in the calculation under section 507 of the “net total value” of rights assigned.
3597.Sub-paragraphs (4) and (5) amend the calculation to allow a portion of each premium paid before the reference period and during the reference period in the total of “net total allowable payments”. The portion allowed cannot exceed 100% of a premium paid in a year falling wholly in the reference period. If the premium was paid in an insurance year beginning before the reference period, the allowable amount diminishes the earlier the premium was paid. For each such premium, one-twentieth is “lost” for each year beginning before the reference period, back to and including the year the premium was paid.