LAM17090 - BLAGAB or eligible PHI business - loss of exemption in case of breach of maximum benefits payable to members: FA12/S159

The limits on benefits for exempt policies are set out at FA12/S155 (see LAM17060).

The exemptions from corporation tax provided by

• FA12/S153 (exemption for certain BLAGAB or eligible PHI business),
• FA12/S156(3) (“the £2000/£416” test),
• FA12/S156(5) (transfer of exempt BLAGAB or eligible PHI), or
• FA12/S158 (transfer from friendly societies to insurance companies etc.)

do not apply if the profits arising to a friendly society from any business is attributable to a policy which is not qualifying because of ICTA88/SCH15/PARA6(2), is not an excluded policy and would not be a qualifying policy if all excluded policies were ignored.

ICTA88/SCH15/PARA6(2) specifies that even where a policy effected on or after 19 March 1985 would qualify for exemption, it will not qualify if, when aggregated with other qualifying policies (ignoring any policies already excluded) held by that person the limits at FA12/S160 are breached, with the result that the profits from the new policy will not be exempt from corporation tax.

FA12/S159(2) allows policies which are acquired other than for money or money’s worth (e.g. in a settlement on divorce or dissolution of a civil partnership) to be excluded from this aggregation test.

FA12/S159 does not withdraw the exemption from corporation tax afforded by FA12/S153, S156(3) or (5) or S158 in relation to profits arising from any part of a business relating to contracts made on or before 3 May 1966 (FA12/S159(3)).