Annex 1: Minor changes in the law made by the Act: Change 98: Gains from contracts for life insurance etc: removal of requirement for claims for top slicing relief: section 535(1)
This change removes the requirement that a claim must be made for relief to be given under section 550 of ICTA in respect of tax on gains under Chapter 2 of Part 13 of ICTA.
Although a gain that is chargeable under Chapter 2 of Part 13 of ICTA will accrue over the life of an insurance, the whole of the gain will usually fall to be charged in one tax year. Higher rate tax liability may therefore arise when there would have been no such liability had the gain been spread throughout the period of the insurance. To compensate for the effect of assessing a gain in a single year, section 550 of ICTA provides for relief to be given. The relief only applies where there is a charge to higher rate tax and it is the chargeable event gain itself which brings the taxpayer into the higher rate field.
Section 550(1) of ICTA provides that the relief is given on the making of a claim to the Board of Inland Revenue. In practice, however, relief under section 550 of ICTA is given automatically, just as relief for deficiencies under section 549 of ICTA is given, and the requirement for a claim for relief is ignored.
Therefore in rewriting section 550 of ICTA, section 535(1) provides that a person is entitled to relief in the relevant circumstances, but does not require that a claim be made before the relief is given.
This change has no implications for the amount of tax due, who pays it or when. It affects (in principle and in practice) only administrative matters.