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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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FA2010: risk transfer schemes: the profits pool

In order to calculate the amounts of any relevant scheme profits (CFM63380) that are available for offset by ring-fenced scheme losses (CFM63370) in any accounting period, it is necessary to keep track of the pool of scheme profits. This is termed the ‘profits pool’ and the rules for calculating the amount at the beginning of any accounting period are at CTA10/S937I(1).

The profits pool is:

The amount of the profits pool at the beginning of the previous accounting period (or nil if the scheme did not exist until the current period), PLUS

Any relevant scheme profits made in the previous accounting period that were not offset in the previous accounting period by brought-forward scheme losses LESS

Any ring-fenced scheme losses in the previous accounting period that were brought into account in the previous accounting period.

Although this formula may appear complicated, in most circumstances the result will be relatively simple, as the following example demonstrates:


Company X has made the following ring-fenced scheme losses and relevant scheme profits from a risk transfer scheme:

  y/e 31/12/10
£ y/e 31/12/11
£ y/e 31/12/12
  Ring-fenced losses   300,000  
  Relevant scheme profits 400,000   ?

The profits pool at the start of the year ended 31 December 2012 would be as follows:

  £400,000, PLUS
  £0, LESS
  = £100,000