Inheritance Tax Act 1984 section 46A

Contract of life insurance entered into before 22nd March 2006 which on that day is settled property in which interest in possession subsists

Section 46A preserves the transitional inheritance tax protection for life insurance contracts held within settlements that were already in existence before 22 March 2006, ensuring that ongoing premium payments and permitted policy variations do not disrupt the favourable pre-2006 tax treatment.

• Where a pre-22 March 2006 settlement holds a life insurance contract entered into before that date, and premiums continue to be paid or allowed variations are made after that date, the rights arising from those payments or variations are treated as having been part of the settlement before 22 March 2006.
• The person beneficially entitled to the transitionally-protected interest in possession is treated as having acquired that entitlement before 22 March 2006, preserving the pre-2006 inheritance tax treatment across a wide range of statutory provisions.
• If an individual's payment of a life insurance premium constitutes a transfer of value, that transfer is classified as a potentially exempt transfer rather than an immediately chargeable one.
• Only "allowed variations" — those exercised under rights already written into the contract before 22 March 2006 — qualify for this protection; any other variation that increases benefits or extends the policy term would fall outside the scope of this relief.

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