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HMRC internal manual

General Insurance Manual

Taxation of the investment return: interest and foreign dividends

For accounting periods ending on or before 31 March 1996, interest (other than that falling within Schedule C) and foreign dividends are the main kinds of investment income that can enter into the computation of trade profits.

For accounting periods ending after 31 March 1996 the FA96 rules on government and corporate debt (loan relationships) treat all interest arising to a general insurer from its current assets as a trading credit (see GIM5090) and so as a trading receipt.

Foreign dividends may be taxed either under Case V of Schedule D or as trade profits chargeable under Case I. The Crown has an option to choose either Case, but it should always be exercised in favour of treating the income as a component of the trade profits.

More information on the Crown option is in the Business Income Manual at BIM14035 and BIM40800+.