LAM06010 | I-E Profit: Calculation of the tax charge: Introduction and policyholders’ rate of tax: FA12/S68, FA12/S69 and FA12/S102

FA12/S68 establishes the charge to corporation tax on an I-E profit.

This section works in conjunction with FA12/S69 to ensure that it is the I-E profit that is brought within the charge to corporation tax rather than any BLAGAB trade profit calculated under CTA09/S35. It also supersedes any other provision of the Corporation Taxes Acts that could charge I-E profits to tax and any charge to corporation tax on chargeable gains that are referable to BLAGAB.

Two different rates of tax are potentially charged on the I-E profit. The policyholder rate of tax is charged on the policyholders’ share (if any) as a proxy for the tax the policyholder would pay if they held the investment directly, and the main corporation rate of tax is charged on the shareholders’ share (if any).

FA12/S102(3) provides that the rate of tax on the policyholders’ share of any I-E profit is the rate of tax at which income tax at the basic rate is charged for the tax year beginning 6 April that applies in England, Wales and Northern Ireland, regardless of where the company or its policyholders are resident. That is, the Scottish basic rate does not apply.