41 When interest in assurance policy becomes interest in possession

Summary

This section is designed to prevent an assurance policy being taxed before benefits become payable under it. Tax is payable on the proceeds of the policy if they become the subject of a gift or inheritance.

Details

(1) For the purposes of the Act, an interest in a life assurance policy will be deemed to become an interest in possession when either—

• the policy matures, or
• prior to the maturing of the policy, the policy is surrendered to the insurer for a consideration in money or money’s worth.

However, if during the currency of the policy, the insurer makes a payment of money or money’s worth in full or partial discharge of the policy, the interest will be deemed to have come into possession to the extent of such payment.

(2) Contracts for deferred annuities are treated in the same way. The annuitant is treated as coming into beneficial possession on the date of the first payment under the policy.

Relevant Date: Finance Act 2015