Taxes Consolidation Act 1997 section 81B

Equalisation reserves for credit insurance and reinsurance business of companies

Section 81B provides for the tax treatment of equalisation reserves maintained by insurance companies underwriting credit insurance risks, allowing tax deductions for transfers into the reserve and treating transfers out as taxable receipts.

• Insurance companies writing credit insurance that are required to maintain an equalisation reserve may deduct transfers into the reserve from taxable profits and must treat transfers out as taxable income.
• If a company ceases to trade, any balance remaining in the equalisation reserve is deemed to have been withdrawn immediately before cessation and is taxable as a trading receipt.
• Transfers into the equalisation reserve that are attributable to arrangements entered into wholly or mainly for tax purposes are denied tax relief and are disregarded for regulatory purposes.
• Where a transfer into or out of the reserve spans more than one accounting period, the amount is apportioned between the periods based on the number of days falling in each period.