HMRC internal manual

Company Taxation Manual

Particular bodies: friendly societies: exemption for basic life assurance and general annuityor endowment business (BLAGAB)

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FA12/S153 does not provide a blanket exemption from CT for a friendly society’s BLAGAB.  It only exempts the profits attributable to some contracts with members within certain limits.  These limits have been changed frequently over the years.  Their history is recorded at FA12/S155 (3).

The limits for tax exempt business with an individual member for contracts made since 1 May 1995 are:

  • Life assurance contracts - the total premiums payable by a member in any 12-month period must not exceed £270.  This limit rises to £300 (equivalent to £25 per month) if premiums are payable more than once a year.
  • Annuity business - the total annuities secured under contracts with a member must not exceed £156 (though any bonus added to a with-profits annuity is disregarded).

If an individual member’s contracts and policies with the society exceed these limits, then not all of the society’s profits will come within the exemption and the case should be referred to CTIS (Insurance).

A society will not be chargeable to CT if:

  • it only carries on BLAGAB, and
  • its rules limit a member’s policies to the statutory limits on tax exempt business.

It can therefore claim a repayment of all income tax suffered by deduction.  Form R69 is provided for repayment claims in these circumstances, though such repayments will now be rare as income tax is not usually deducted from payments made to a UK resident company.  For detailed guidance on how to deal with forms R69 see CTM40340.

Tax credits on dividends and other distributions from a UK resident company referable to BLAGAB were payable to the society and could be entered on the form R19FS(X) (or R69 wholly exempt societies) for distributions made before 6 April 2004. 

For the treatment of tax credits on dividends referable to friendly societies, other exempt business and cases where a society writes both exempt BLAGAB and other exempt business, see CTM40340.

The first claim by a society to exemption from tax under FA12/S153 on its BLAGAB should be referred to CTIS (Insurance), as should any question as to whether a society’s business falls within the tax exempt limits.