FAQ's – Life Insurance – Qualifying Policies - HM Revenue & Customs

8) What is the effect of a policy becoming a RRQP
Example 1?
A qualifying policy is issued on 1 January 2000. It is therefore a protected policy. Its
annual premiums payable are £4,000.
No other qualifying policies are held.
The policy is due to mature on 31 December 2024.
On 1 January 2014 the policy is varied and the amount of premiums payable per
annum is increased to £5,000. The protected policy now becomes a RRQP.
Total premiums payable are (£4,000 x 14) and (£5,000 x 11) = £111,000
The policy matures on 31 December 2024 giving rise to a gain of £100,000.
Relief in full would be available for £4,000 per annum from 1 January 2000 to 31
December 2013 (£4,000 x 14 = £56,000).
Relief between 1 January 2014 and 31 December 2024 would be restricted to £3,600
per annum (£3,600 x 11 = £39,600)
The gain chargeable to tax on the maturity of that policy is reduced using the
statutory formula:
Gain x Total amount of allowable premiums payable
Total amount of premiums payable
This formula applies in respect of the policy on which the chargeable gain arises and
not the total premiums payable for all policies in existence.
In this case the calculation would be:
£100,000 x (£56,000 + £39,600) = £86,126
£111,000
The taxable gain is:
Gain £100,000
Less reduction of 86,126
Revised gain 13,874
9) What is the effect of a policy becoming a RRQP
Example 2?
A qualifying policy is issued on 1 January 2000. It is therefore a protected policy. Its
annual premiums payable are £4,000.
The policy is due to mature on 31 December 2024.
On 1 June 2013 another qualifying policy is issued with premiums payable per
annum of £2,000. This policy remains in existence at 31 December 2024.