IPTM3736 - Interaction between restricted relief qualifying policies and top slicing relief

Restricted Relief Qualifying Policies (RRQPs)

If an individual has made a chargeable event gain, they will receive a chargeable event certificate from the insurer. However, some individuals will be entitled to relief on this gain, for example a time apportioned reduction, top slicing relief or because the policy is a RRQP. For more information on RRQPs, see IPTM2076.

Any time apportioned reduction due is applied to the gain calculated by the RRQP rules.

Top Slicing Relief

ITTOIA2005/S536

For further information on top slicing relief, see IPTM3820 onwards.

Top slicing relief, on gains made before 6 April 2013, is given by reference to a number ‘N�. N is the number of complete years from the issue of the policy less the number of complete years in which the policyholder was not resident in the UK. N is then used to calculate the top slicing relief. See .

From 6 April 2013, top slicing relief is given by dividing the number of foreign days in the material interest period by 365. If this number is not a whole number, it is rounded down. This is then deducted from the number of full years on which top slicing relief is calculated.

Order of Relief

»Ê¹ÚÌåÓýapp gain is reduced in the following order:

  1. RRQP
  2. Time apportioned reduction
  3. Top slicing relief.
Example

Clive makes a chargeable event gain of £50,000 on a policy that is a RRQP.

»Ê¹ÚÌåÓýapp reduction in the gain due because the policy is a RRQP is £5,000.

»Ê¹ÚÌåÓýapp time apportioned reduction is £10,000.

»Ê¹ÚÌåÓýapp top slicing relief due is £6,000.

»Ê¹ÚÌåÓýapp gain liable to tax is therefore:

Total gain £50,000

RRQP (£5,000)

RRQP relieved gain £45,000

Remaining gain £45,000

TAR (10,000)

TAR relieved gain £35,000

Remaining gain £35,000

Top slicing relief (£6,000)

Gain liable to tax £29,000