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HMRC internal manual

Corporate Finance Manual

Debt cap: financial services groups: insurance related activities

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Circumstances under which activities related to insurance will be treated as a qualifying activity

The second qualifying activity also includes insurance related activities which are defined by TIOPA10/S269 (2) as the following:

  1. ‘Activities that are ancillary to insurance activities’. The term ‘activities’ includes the buying, holding, managing of assets (see section 269 (6)). The term ‘ancillary’ is not defined and therefore takes its everyday meaning, namely something that is of secondary importance or subordinate to an activity within section 269 (1).. It is intended to cover activity that is not strictly insurance activity but is an activity that only takes place because of insurance activity undertaken by members of the worldwide group.
  2. Activities within section 269 (2) (b) cover the management of funds that are not actually derived from the contracts of insurance written by other members of the group. This type of business is not truly ancillary, as investment business is a core part of insurance business. The distinction is that it is the management of funds on behalf of someone other than the worldwide group.

Section 269 (4) limits the extent to which income from insurance related activities can be treated as income from qualifying activities and works in much the same way as section 268 (2) (see CFM97890). It excludes insurance related activities from being qualifying activities where the income from those activities forms a significant part of the aggregate income comprising the income derived from those activities and the income derived from the insurance activities of the worldwide group. So where, for example, the income from managing funds on behalf of someone other than the worldwide group generates fees of £100 million, and the income of the group from underwriting, investment and management of investments amounts to £5 billion, the income derived from the insurance related activities is not significant.