Life Insurance Companies apportionments and business transfers - Mazars - United Kingdom
Life Insurance Companies apportionments and business transfers
In the 2009 PBR, new legislation was announced to prevent with-profits life insurance companies with non-profit business from manipulating their mix of business to permanently shelter profits from tax. Draft legislation for the Finance Bill 2010 was published at the same time.
Where a life office has by the book value election reduced the profits in its revenue account, then profits subsequently released back to revenue account will be attributed to the mix of business in the year when the book value election was made, not when it is released. Our article on the subject can be accessed at the link below.
Life Insurance Apportionment of income and gains
HMRC subsequently noticed that this new rule could be avoided by transferring business from one non-profit fund to another. So it has announced in PBN19 preventive anti-avoidance provisions to be legislated in a second Finance Bill 2010 which it proposes be introduced as soon as possible in the next Parliament. HMRC has however undertaken to consult about the detail of the anti-avoidance rule.
We will be making representations to ensure that the additional anti-avoidance provisions relating to transfers of business do not result in overkill and that adequate statutory clearance arrangements will be available in respect of the new rule, to ensure that it will not catch innocent transactions.
HMRC has also announced rules to remove other potential distortions arising in the course of a transfer of business. In particular, it will amend existing rules to ensure that where there is a transfer of assets in excess of liabilities, this cannot cause a surplus to be taxed twice in certain circumstances, once in the tax return of the transferor and once in that of the transferee.
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