D7.5108 Non-profit funds—apportionment of income and value movements for periods beginning on or after 1 January 2007
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.
The investment return to be apportioned is described in the legislation as the 'net income' which is the sum of the following items, all of which correspond directly to entries on the Form 40 revenue account in the FSA return:
(a) investment income,
(b) increases in the value of assets, or
(c) other income
less any decreases in the value of assets1.
There is a two-step process for apportioning the company's income and increases or decreases in asset values, firstly between its life assurance business and its PHI business (for the purposes of the life assurance trade profit provisions) and secondly between gross roll up business and other categories of business.
When considering the apportionment between life assurance business and PHI business, income and value movements arising either on assets linked to life assurance business or on foreign currency assets are not apportioned but are wholly referable to life assurance business2.
The amount of the remaining net income ('the appropriate fraction') referable to life assurance business is calculated using the formula—
A is the average of the opening and closing life assurance business liabilities (taking the average to be nil if it would be less than nil) reduced (but not below nil) by the average of the