Annex 1: Minor changes in the law made by the Act: Change 91: Gains from contracts for life insurance etc: disregard of trivial inducement benefits: section 497
This change gives statutory effect to part of ESC B42 under which small non-monetary inducements to enter into insurance contracts are disregarded for the purposes of Chapter 2 of Part 13 of ICTA.
Gifts may be offered by insurers to attract insurance business. These may take a variety of forms, including small consumer goods, store vouchers and discounts offered by travel agents etc.
Under section 541(1) of ICTA on the happening of a chargeable event the amount or value of any relevant capital payments in respect of a life policy may be brought into the computation of the chargeable gain. Such payments are defined in section 541(5)(a) of ICTA so as to include, broadly, any sum or other benefit of a capital nature. This could include the value of gifts. Similar provisions apply in the case of life annuity contracts and capital redemption policies (see sections 543(1) and (3) and 545(3) of ICTA).
ESC B42 prevents non-monetary gifts, not exceeding £30 in value in aggregate, that are made as an incentive in connection with an insurance from being brought into the calculation of the chargeable gains. (It also prevents such gifts from being taken into account in determining if a policy is a qualifying policy within Schedule 15 to ICTA.)
Section 497 gives statutory effect to the concession so far as it prevents such gifts being brought into the computation of a gain. Section 497(3) also provides that the £30 limit may be increased by an order made by the Treasury.
This change is in taxpayers' favour in principle. But it is expected to have no practical effect as it is in line with current practice.