Commentary

D7.440 Investment return on reinsured BLAGAB

Corporate tax
Corporate tax | Commentary

D7.440 Investment return on reinsured BLAGAB

Corporate tax | Commentary

D7.440 Investment return on reinsured BLAGAB

The taxation of the profits arising from the reinsurance of life assurance business as part of the company's non-BLAGAB business under the trade profit provisions has the effect of excluding any investment return accruing for the benefit of policyholders from tax in the hands of the reinsurer (the investment return being balanced by an increase in the reinsurer's mathematical reserves). The investment return received by the cedant from an overseas reinsurer will similarly be free of tax in cases where the reinsurer is charged to tax on a profits basis and the payments to the cedant are allowed in full.

In order to preserve the integrity of the I-E basis in these cases, a notional investment return is treated as accruing to the ceding insurer on a policy by policy basis over the period of certain types of BLAGAB reinsurance1. Regulations2 prescribe the method of calculating the investment return, which is set out in the schedule to the regulations. That investment return is automatically treated as being referable to BLAGAB and accordingly falls into Step 1 in the calculation of income required by FA 2012,

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial