5 The taxation of life assurance and pension-based protection policies Flashcards
For gains on life policies, what does the taxation depend upon?
The surrender value of the policy
If a life policy doesn’t have a surrender value, would it be classed as qualifying or non-qualifying?
Non-qualifying
What is the minimum term for an endowment policy to be qualifyingand how often should premiums be paid?
10 years & paid annually
Which 2 types of polciies are normally qualifying policies?
Whole of Life
Endowments
Name 2 factors which can affect the qualifying status of a life assurance policy
- change in the life assured
- if the policy lapses over 13 months
- substitutions/ variations
What is the annual premium limit for policies?
£3600
What is an RRPQ?
A restricted relief qualifying policy
How are RRPQs taxed?
Partly on qualifying and partly on non-qualifying bases
what are the usual taxation rates for UK life funds regarding CGT & income tax?
20%
When could a UK policyholder be subject to pay income tax for offshore life funds?
When it is surrendered
In order to assess whether a chargeable gain has arisen for a life policy, what needs to be established?
whether a chargeable event has occurred
Name 2 chargeable events for non-qualifying polciies
death, assignment, maturity, excess events, surrender
Name 2 chargeable events for non-qualifying polciies
death, maturity
Which types of policies are used to help cover IHT libilities?
Whole of life
Regarding IHT liabilities, Why are life policies often written in to trust?
To place the funds outside of the estate and to help the beneficiaries cover the IHT liabilitiies
