Pre-Budget Report – Life Insurance Companies
Legislation has been announced relevant to life insurance businesses that defer recognition of the profits of non-profit fund business. The new legislation will take effect for periods of account beginning on or after 9 December 2009.
The changes are in response to a number of examples that HMRC identified where there was manipulation of the deferral of tax on non-profits business. The effect of the manipulation was to change the nature of the business for tax purposes. When the deferred profits were ultimately recognised they escaped tax altogether.
The new legislation will amend the apportionment rules to ensure that, when recognised, deferred profits are taxed on an appropriate basis.