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LAM17080 | Transfers of business - exempt BLAGAB or eligible PHI business: FA12/S157-158

From HM Revenue & Customs · Life Assurance Manual

Friendly societies are subject to the transfer of business rules in the same way as other life insurance companies (FA12/S152) with the identity of exempt BLAGAB or eligible PHI business protected through the transfer as follows:

  • If business is transferred into a friendly society from a company, the business relating to the contracts transferred is not capable of being exempt BLAGAB or eligible PHI business after the transfer (FA12/S157), unless it was exempted ex-friendly society business in the insurance company (FA12/157(2)).

  • If business is transferred from a friendly society to a company, any business that was exempt BLAGAB or eligible PHI business before the transfer will continue to be exempt from corporation tax (FA12/S158(1)). That business is treated as a separate business from any other business carried on by the company.

  • If a friendly society converts to a company under FSA1992/S91, any part of its exempt BLAGAB or eligible PHI business which predates the change and was exempt BLAGAB or eligible PHI business before the change will continue to be exempt from corporation tax (FA12/S158(2)). That business is treated as a separate business from any other business carried on by the company.

However, if the contract transferred from a friendly society to a company or taken through the conversion to a company is varied so as to increase the premium payable after the business is in the company, that contract will no longer be exempt from corporation tax for the accounting period in which the contracts were varied and any subsequent accounting period (FA12/S158(3)).

The exemption for exempt BLAGAB or eligible PHI business under FA12/S155 attaches to the business, not to the transferee. The exemption is retained if, for example, there is a transfer of exempt BLAGAB from a friendly society to an insurance company and subsequently a further transfer of that same exempt BLAGAB to another insurance company. This is provided that FA12/S155(3) conditions continue to be met.

If an insurance company transfers exempt BLAGAB or eligible PHI business (originally acquired from a friendly society as exempt under FA12/S158) to a friendly society, then the business remains exempt BLAGAB or eligible PHI business (FA12/S157(2)).

Any business in a company that is exempt from corporation tax under FA12/S158 is to be treated as a separate business from any other business of that company (FA12/S158(4)).