Chargeable event for non resident self assessment

There is no reported SA exception but the software must be wrong.

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I have rewritten this as my questions were at the end.  Then I thought, "Ask the questions then show your workings".

I have a client who is not resident in the UK but files her UK income under self assessment.  For 2023/2024 the client has some policy surrenders from UK insurers where there are chargeable events.  The self assessment calculation is wrong, I think. I am working from the premise each software provider has a similar matrix for data so that it "correctly" to match HMRC's software computations.  I am not pointing a finger at the software provider as it has to produce the result as it appears.

My questions are -

  1. Is my analysis correct, non residents do not pay tax on UK insurer chargeable events?
  2. Has anyone else experienced this, or UK residents with chargeable events who have periods of non residence?
  3. How did you deal with it?  My inclination is a white space disclosure without inputting the amounts in the "appropriate boxes".
  4. Why does HMRC not list it as an exception?

Starting at section 465 IT(TOI)A 2005, a chargeable event is taxable on a UK resident or under 465B a temporary non-resident (mirrors the CGT rules).  As you report all UK income (OK, not ISA income) in the self assessment, it seems perverse to not include chargeable events.  IPTM 3734 starts the opposite way in stating who is not taxable with, "When a gain arises from a policy and the individual is not resident in the UK, the gain is not subject to tax in the UK....."

When I include chargeable event gains and report residence as non-resident, those gains are included in the tax computation.  They are not taken out as excluded income (OK again, it is not categorised as excluded income but if it goes into the computation, it must come out somewhere).  Furthermore it did not produce a top slicing relief (TSR) calculation. 

To test the results I toggled the residence status.  The result by reporting as resident, due to TSR, was a liability about 1/20th of the non-resident calculation.

To me the software cannot cope with non-resident issues on this type of income.  It is not just this situation that bring me to that conclusion, there is nowhere to input data for a UK resident with a chargeable event and periods of non-residence during the life of the policy; in those cases chargeable event is part, taxable part not.

SA101 2024 (Notes) direct you to HS320.  HS 320 is introduced, "This helpsheet deals with chargeable event gains arising from United Kingdom (UK) life insurance policies. It covers the most common circumstances that you’re likely to come across when dealing with the taxation of gains on life insurance policies. These notes are generally applicable to individuals, trustees and personal representatives of a deceased person unless the notes say otherwise."  It then directs you to ITPM for more complex cases, the introduction is weasel worded with ".. unless the notes say otherwise."  Does it mean otherwise in relation to just individual, trustees and personal representatives or to the entire helpsheet; the notes do not say otherwise, they say nothing at all about non-resident individuals only non-resident Trustees.

Flippant replies will be taken in the Friday afternoon spirit intended.  I have made a few of my own on others' questions.

Replies (4)

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By richard thomas
14th Jun 2024 13:39

There is no income to report

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By K81
14th Jun 2024 14:37

if your client is non-resident you only declare the income that is taxable in the UK on the tax return.

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By taxdigital
15th Jun 2024 14:35

Not too sure what is this big essay in the OP about.

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