What are the conditions in order for a relevant life plan to be effective?

This information is for financial advisers only. It mustn’t be distributed to, or relied on by, customers.

This is detailed in the Income Tax (Earnings and Pensions) Act 2003 Section 393B(4).

  • The policy must only pay a lump sum death benefit before the age of 75.
  • The benefits must be capital in nature and not deemed income.
  • The employer can’t specify under which conditions the benefits are paid.  The benefits must be paid only  as set out in the policy conditions.
  • The policy mustn’t be capable of having a surrender value.
  • Critical illness, total permanent disability or income protection benefits can’t be included.
  • The benefits must only be paid to an individual or a charity.  Although a trust can be set up to receive the benefits, the trustees must pay these benefits to an individual or a charity.
  • The main purpose of the policy mustn’t be tax avoidance.

 

This information is based on our understanding of taxation law and HMRC practice, at date of publication.