Taxes Consolidation Act 1997 section 730A

Profits of life business: new basis

Section 730A defines key terms used in the taxation of life assurance companies and sets out the rules for computing and charging corporation tax on new basis business, including special provisions for mutual life assurance companies.

• From 1 January 2001, profits of new basis life assurance business are charged to corporation tax under Case I of Schedule D, with new basis business treated as a trade separate from the company's other business.
• In computing Case I profits, amounts belonging to, allocated to, or expended on behalf of policyholders are excluded, but amounts merely reserved for policyholders remain taxable; foreign tax on excluded policyholder profits cannot be credited or deducted against any other profits of the company.
• Losses arising on new basis business may only be set off against profits of other business to the extent those profits are computed under Case I and section 710, preventing new basis losses from sheltering policyholder profits taxed under the old I–E regime.
• Mutual life assurance companies are taxed under Case III of Schedule D on a deemed profit equal to five per cent of the increase in their unallocated policyholder funds during the accounting period, with a corresponding relief for decreases in those funds.