D7.505 Historical background – The I-E basis and the Crown Option
The rules in this division apply for accounting periods beginning before 1 January 2013. For accounting periods beginning on or after 1 January 2013 see Division D7.4.
Although insurance business is a trade, the profits of which may be assessed on normal trading provisions under CTA 2009, s 35 (Schedule D Case I before the enactment of CTA 2009), HMRC are not obliged to assess trading profits as such if there is an alternative head of charge available. In Liverpool and London and Globe Insurance Co v Bennett1 the House of Lords held that the Cases of Schedule D were not mutually exclusive (except to a limited extent in relation to Cases I and VI) so that, for example before the introduction of the loan relationships legislation, untaxed interest could be taxed under Schedule D Case III, or under Schedule D Case I if it formed part of the receipts of a trade. It was also held that the choice of Case lay with HMRC. HMRC are therefore entitled in most cases, not just life insurance, to forgo the right to assess a company's trading profits and instead to assess the investment income of the company plus gains on the realisation of investments calculated according to the capital gains tax rules. This choice is normally referred to as the Crown Option. In the context of life insurance there was an exception to this general rule for pure reinsurance. Where
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