Commentary

D7.5103 Financial reinsurance

Corporate tax
Corporate tax | Commentary

D7.5103 Financial reinsurance

Corporate tax | Commentary

D7.5103 Financial reinsurance

These rules do not apply for periods of account beginning on or after 1 January 2008 when they are replaced by the legislation for financing-arrangement-funded transfers to shareholders (see D7.5102).

Financial reinsurance has been a long accepted way for life insurance companies to raise funds in a way that is efficient for regulatory solvency purposes. HMRC had however seen examples of some companies using financial reinsurance to defer or avoid tax by manipulating the emergence of profit or making good a deficit of assets following an insurance business transfer scheme under the Financial Services and Markets Act 2000 Pt 7 (ss 104–117). To deal with this problem, the scope of items treated as Case I profits of the company is extended to include reductions in liabilities effected by way of certain financial reinsurance

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