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This section covers the same part of the return as chargeable event certificates. The difference is that this section will compute the gain arising on partial withdrawal or encashment. To do so it requires details of all withdrawals made during the life of the policy. Most 'qualifying' life insurance policies do not give rise to a gain. Do not enter details in such cases. Non-qualifying policies are taxable but only where the taxpayer is subject to higher rate tax. Enter details, even if the taxpayer is not a higher rate tax payer.
The Life Assurance company and policy details are entered on the provider record:
LIFE COMPANY - enter the name of the provider, this information is compulsory but is not used on the tax return
Policy - enter the policy number, this information is compulsory but is not used on the tax return
Purchase Date - enter the purchase date of the policy. This information is compulsory and is used to compute the anniversaries of the policy so that the correct term for top-slicing relief is calculated, where applicable. The date is also used to prompt for the amount of withdrawals made each year on the withdrawl records.
Premium paid - enter the premium paid for the policy. This information is compulsory.
Notional tax deducted (Y/N) - most gains from UK insurances are treated as having been taxed at the basic rate. Enter Y in the notional tax field. Gains from certain life annuities and friendly societies' tax exempt policies are not treated as having been taxed at the basic rate. Enter N in the notional tax field. Any notional tax, which is calculated automatically by IRIS, is non-refundable. The information provided by the company should indicate whether the income has been treated as taxed at the basic rate.
Encashment Date - if the policy has been encashed, enter the date of encashment. Do not enter a date (or amount) where there is only a partial surrender (withdrawal) of funds.
Amount received - enter the amount received on encashment. Do not include any income received from partial withdrawals during the life of the policy. This information should be entered on the appropriate withdrawal records.
Corresponding deficiency relief - enter the amount of relief click here for more details on this type of relief
Each annual withdrawal on the withdrawal records:
When inserting new withdrawal records, IRIS will automatically prompt for each preceding years withdrawal amount until it reaches the purchase date, unless Cancel is clicked.
Note that, by default, IRIS prompts first the withdrawal made in the policy period that starts in the fiscal year. It is the amount for the policy period that ends in the fiscal year that will be used in the tax computation.
The details of all withdrawals since purchase must be entered in order to calculate whether a gain has arisen.
Up to one twentieth of the premium paid may be withdrawn each year without giving rise to a chargeable gain. If this limit is exceeded the excess above the limit is taxable: a chargeable event on partial surrender.
If the gain arises more than one year after the purchase of the policy or the last chargeable event, top slicing relief may be available.
The calculation of the gain arising on encashment is not the same as the method for partial surrenders. The gain is calculated as:
Encashment proceeds plus
All withdrawals made less
Premium paid less
All gains that have arisen over the life of the policy (chargeable events).
