Background Note
6.The Government’s intention to legislate was announced in a written ministerial statement by the Financial Secretary to the Treasury on 1 April 2009 and details of the measure were given in a News Release, draft legislation and explanatory note published by HM Revenue & Customs (HMRC) on the same day.
7.Gains from offshore life insurance policies are taxed as income under special rules which may give rise to a tax charge when chargeable events, such as the surrender, assignment or maturity of a policy, take place. These rules apply income tax to gains when they arise but do not provide income tax loss relief should the calculation from a chargeable event give a negative result.
8.Sections 152 and 153 of ITA apply to certain sources of miscellaneous income, including gains from offshore life insurance policies. Although some of these sources can give rise to allowable income tax losses as well as profits, the chargeable event regime governing life insurance policies simply ensures that any taxable gains over the life of the policies are restricted to economic gains. It does not provide for income tax loss relief.
9.Avoidance schemes identified by HMRC purport to create loss relief from offshore life insurance policies which can be set off against offshore income gains. This section will remove the scope for income tax loss relief to be created from offshore policies and will put beyond any doubt the Government’s long standing view that income tax loss relief is not available.
