LAM02050 | I-E overview: Charge to tax on I-E profit: FA12/S68-72

The charging provisions in FA12/S68 apply to the BLAGAB I-E profit. FA12/S69 excludes BLAGAB income and gains from any other charge to corporation tax, including under CTA09/S35.

The calculation of the I-E profit and any excess BLAGAB expenses is then set out in the subsequent sections which are described in FA12/S70(2) as ‘the I-E rules’. Broadly speaking these rules ensure that the I-E profit is at least the BLAGAB trade profit of the insurer, and allocate I-E profits between amounts chargeable at the corporate rate of tax and the policyholder rate.

Mutual Companies

Mutual companies’ long-term business trade profits will not be subject to corporation tax under normal principles and explicit reference is made to this in FA12/S71(3).

Mutual life insurance companies will be subject to tax on any I-E profit arising under the I-E rules at the policyholder rate as this reflects the policyholder return. FA12/S103(2) provides that all of the I-E profit will belong to the policyholders because there are no shareholders.