Life Insurance: Apportionment of income and gains - Mazars - United Kingdom
Life Insurance: Apportionment of income and gains
Draft legislation has been published aiming to prevent with-profits life insurance companies with non-profit business from manipulating their mix of business to permanently shelter profits from tax.
elections could continue to reduce taxable profits, but that amounts released would be apportioned, not by reference to the mix of business in the year of release., but by reference to the mix of business in the year of the book value election.
The legislation, will be introduced in the Finance Bill 2010 and has effect in relation to accounting periods beginning on or after 9 December 2009. Under the transitional rules, investment reserves already accumulated will be brought into tax on the basis of the mix of business in the period beginning before 9 December 2009.
This means that for most calendar year companies, the formula by reference to which their current accumulated investment reserves will be taxed in the future when released to revenue account will be the formula for apportioning profits for the year ending 31 December 2009.
The legislation identifies amounts released on a LIFO basis so that they are treated as released from most recent years first, and any unallocated amount is treated as released from the reserve accumulated for the period beginning before 9 December 2009.
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