EXPLANATORY MEMORANDUM TO
THE LIFE INSURANCE QUALIFYING POLICIES (STATEMENT AND REPORTING
REQUIREMENTS) (AMENDMENT) REGULATIONS 2015
2015 No. 544
1. This explanatory memorandum has been prepared by Her Majesty’s Revenue and
Customs (HMRC), on behalf of HM Treasury, and is laid before the House of Commons
by Command of Her Majesty.
2. Purpose of the instrument
2.1 Beneficiaries of a qualifying life insurance policy must provide specified
information to insurers following certain defined events that occur in relation to their
policy. The instrument provides for exceptions to the requirement to produce such a
statement following certain assignments of the policy when there are no further premiums
payable under the policy that has been assigned.
3. Matters of special interest to the Select Committee on Statutory Instruments
3.1 None.
4. Legislative Context
4.1 Paragraph B3 of Schedule 15 to the Income and Corporation Taxes Act 1988
(“ICTA 1988”) requires beneficiaries of qualifying policies to make a statement to the
issuer of the policy on the occurrence of certain events. The Life Insurance Qualifying
Policies (Statement and Reporting Requirements) Regulations 2013 (SI 2013/1820)
contain the information that must be included in such a statement, alongside some
exceptions to the requirements of paragraph B3 of Schedule 15 to ICTA 1988.
4.2 This instrument amends SI 2013/1820 to introduce a further exception from the
requirement to produce a statement following specified assignments of a policy with no
further premiums payable where the provision of the information included in the
statement has no consequences for the taxation of the policy.
5. Territorial Extent and Application
5.1 This instrument applies to all of the United Kingdom.
6. European Convention on Human Rights
6.1 As the instrument is subject to negative resolution procedure and does not amend
primary legislation, no statement is required.
7. Policy background
• What is being done and why
7.1 Finance Act 2013 introduced a new condition to be met for qualifying policy status.
The new condition was that the beneficiary of the policy must not have exceeded a new
annual premium limit of £3,600 which applied from 6 April 2013.
7.2 SI 2013/1820 ensures the effective application of the annual premium limit by
requiring a statement from policy beneficiaries confirming that they have not breached the
annual premium limit.
7.3 This instrument amends SI 2013/1820 to remove a compliance burden on
beneficiaries and insurance companies, where there is an assignment of a paid up policy and
the assignment does not change the tax payable upon maturity of the policy. There is no tax
effect because even if the assignee was in breach of the annual premium limit, meaning the
policy would lose qualifying policy status, S463D of the Income Tax (Trading and Other
Income) Act 2005 reduces the gain to nil.
7.4 Across industry there are a large number of qualifying policies that are paid up
policies. One insurer has approximately 1.5 million such policies and this insurer handled in
excess of 2,000 assignments of these policies in a 12 month period. Extrapolated across the
industry, there are likely to be a large number of such assignments requiring statements that
serve no real purpose.
• Consolidation
7.5 There is no intention to consolidate the relevant legislation.
8. Consultation outcome
8.1 Following informal discussions with industry throughout 2014, a draft of this
instrument was shared with an industry working group on 11 February 2015. A
consultation period ran to 27 February 2015. The length of the consultation period
reflected the previous discussions in the lead up to the issue of the draft instrument, the
nature of the instrument and the desire to prevent completion of any further unnecessary
statements.
8.2 Industry raised no concerns with this draft.
9. Guidance
9.1 Guidance will be published in the Insurance Policyholder Taxation Manual.
10. Impact
10.1 The regulations apply to taxpayers with qualifying life insurance policies and
businesses that sell qualifying life insurance policies. There is no impact on business,
charities or voluntary bodies.
10.2 A Tax Information and Impact Note is attached to this memorandum and will be
published alongside the Explanatory Memorandum on www.legislation.gov.uk.
11. Regulating small business
11.1 The legislation applies to small business.
11.2 The aim of the instrument is to relieve an administrative burden by removing the
requirement for beneficiaries to provide, and consequently for insurers to process,
statements. This applies equally to small business.
12. Monitoring & review
12.1 The outcome of the instrument will be subject to constant review alongside
relevant industry stakeholders.
13. Contact
John Stokes at Her Majesty’s Revenue and Customs
Tel: 03000 588827
Email: [email protected]