Commentary

D7.468 BLAGAB trade profit or loss—Policyholder tax

Corporate tax
Corporate tax | Commentary

D7.468 BLAGAB trade profit or loss—Policyholder tax

Corporate tax | Commentary

D7.468 BLAGAB trade profit or loss—Policyholder tax

In calculating the BLAGAB trade profit or loss the company must take the amount of policyholder tax of the period, both current and deferred, into consideration. Normally tax borne by a company is not taken into account in calculating its trading profits but it is acknowledged that for an insurance company, tax borne on behalf of policyholders is a proper component of the BLAGAB trade profit as a natural consequence of the purpose of the I-E system in collecting tax from both policyholders and shareholders in one sum. It should be noted that depending on economic circumstances the amount of deferred policyholder tax taken into account may either be a deduction if there is a deferred tax charge for the year or a taxable receipt if there is a deferred tax credit in the period.

The amount of current policyholder tax is the simpler figure to calculate. A deduction is permitted in calculating the BLAGAB trade profit for current policyholder tax which is defined as the amount of corporation tax charged at the policyholders' rate on the policyholders' share of the company's I-E profit for the period1.

This definition ensures

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