LAM17050 | Meaning of "BLAGAB or eligible PHI business": FA12/S154

Basic life assurance and general annuity business (BLAGAB) is defined by exclusion at FA12/S57 as life insurance business other than the categories of business listed in that section. This definition is modified for friendly societies by SI2012/3008/REG5 to exclude “tax exempt business” from BLAGAB.

Permanent Health insurance (PHI) is defined in FA12/S63 as long-term business other than life assurance business. This definition is modified for friendly societies by SI2012/3008/REG7 to exclude “tax exempt business”.

Tax exempt business (to be excluded from BLAGAB and PHI) is then defined in FA12/S57A (inserted by SI2012/3008/REG6) as business exempt from corporation tax by FA12/S153, S158, S164, S165, S166 and S167.

Eligible PHI is defined as any PHI business so far as consisting of the effecting or carrying out of qualifying contracts. In relation to PHI, a contract is “qualifying” if (subject to the further qualifications in the rest of this section):

• it was made before 1 September 1996 FA12/S154(2)(a) OR

• if made after that date and falls within paragraph I, II or III of Part 2 of Schedule 1 to the FISMA (Regulated Activities) Order 2001.

Those paragraphs of the FISMA cover the following insurance classes: life and annuity, marriage and birth and linked long-term business.

If in doubt contact HMRC’s insurance policy lead in the Business, Assets, and International – Financial Services Team.

Hybrid policies

As per FA12/S154(3), if the contract is made before 1 September 1996 and provides for injury, sickness or other infirmity as well as life cover (i.e. it is a hybrid policy) it will only fall within “BLAGAB or eligible PHI business” if:

• the policy also provides a gross sum assured independent of injury, sickness or other infirmity, AND

• at least 60% of the total premiums are attributable to the provision afforded during injury, sickness or other infirmity, AND

• there is no bonus or other additional sum payable or potentially payable in addition to the gross sum.

Consideration from another policy

As a further restriction, any annuity contract of a friendly society funded by payments made on the maturity or surrender of an “exempt BLAGAB or eligible PHI business” policy of the same friendly society will not itself be an “exempt BLAGAB or eligible PHI business” (FA12/S154(4)).