Commentary

D7.5165 Taxing the transferee – Reduction in income of the transferee

Corporate tax
Corporate tax | Commentary

D7.5165 Taxing the transferee – Reduction in income of the transferee

Corporate tax | Commentary

D7.5165 Taxing the transferee – Reduction in income of the transferee

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.

As well as taxing amounts in the transferor that might otherwise escape tax, the legislation also needs to recognise that it is inappropriate to tax sums in the transferee that have previously been recognised as surplus in the transferor and therefore have already been subject to taxation. This is achieved in broad terms by reducing the amount that would be treated as income of the transferee through the operation of FA 1989, s 83(2)(e) (business transfers-in, see D7.5100) by the amount of the transferred surplus previously recognised by the transferor1. The reduction applies whenever there is an insurance business transfer and the transferor is not a mutual company2. The reduction does not apply when the transferor is a mutual company because surplus arising in such a company may not have suffered taxation. There is some dispute between the Revenue and the industry over the extent to which this is true following the introduction of

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