Life assurance and CTT

The value of any life assurance- policy when it is taken into account as a lifetime gift which is liable for CTT is taken as not less than the total premiums paid before the transfer of the benefits, minus any sum of money which has been paid for the surrender of the policy.

If the transfer is made on death, the value of the policy is the amount of money claimed by the beneficiaries.

Some policies are not subject to C17 and the proceeds from them can be used to settle other CTT liabilities. Without such funds, it is not unusual for assets to be sold to pay the tax.

The rules are quite straightforward, but a little technical, so read them carefully:

1 All policies taken out on ones own life fort ones own benefit form part of an estate in the event, of death and the proceeds, if they are part of an -estate valued above the tax level, are liable for CTT, but not if the proceeds go to Other the husband or wife under the terms of a will, or whin the spouse dies intestate.

2 If the policy is taken out on someone elses life, the proceeds are not subject to CTT on the death of the life that is assured, but the tax liability arises on the death of the person taking out the policy.

3 Where a policy is issued under the terms of one of the Married Womens Property Acts, each premium payment is exempt from CTT.

On the death of the life assured there is no CTT to pay, but later when the wife dies there is a charge on the value of the policy or the premiums paid, uhless the estate is left to the husband, when the exemption from CTT will apply.

4 Where a policy is issued under one of the MWP Acts, or in trust for a child, each premium payment will be subject to CTT, unless one of the exemptions applies, that is, it comes out of normal expenditure, the £250 annual gifts or the £600,000 exemption. This actually covers most policies of this kind and on the death of the life assured there is not CTT to pay.

If the child dies, however, there will be a charge to CTT on the value of the policy or the premiums paid, whichever is greater. But if the benefit of the policy reverts to the life assured or his or her spouse, then there is no CTT to pay.


Life assurance and CTT

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Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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The value of any life assurance- policy when it is taken into account as a lifetime gift which is liable for CTT is taken as not less than the total premiums paid before the transfer of the benefits, minus any sum of money which has been paid for the surrender of the policy.

If the transfer is made on death, the value of the policy is the amount of money claimed by the beneficiaries.

Some policies are not subject to C17 and the proceeds from them can be used to settle other CTT liabilities. Without such funds, it is not unusual for assets to be sold to pay the tax.
Life assurance and CTT - more