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HMRC internal manual

General Insurance Manual

Taxation of the investment return: investment gains: land and property

Many general insurance groups hold investments in land and property in a separate property holding company. In such cases, income derived from the land and property will be taxable under the rules for computing Schedule A income, and the gains will be computed as chargeable gains. Where the investment property is held directly by the insurer, gains and losses should be reflected in accounts in accordance with the accounting Regulations SI2008/410 and the ABI 2005 SORP. The property is subject to periodic revaluation (at least every five years), and paragraph 285 of the ABI SORP requires unrealised gains and losses to be taken to the profit and loss account. This mark to market treatment is followed for tax purposes where gains or losses on the investment properties are regarded as trading profits or losses. It will be a question of fact whether the property is held as a trading (portfolio investment) or structural asset (see GIM5020) and GIM5230), but there is a presumption towards portfolio investment if this accounting treatment applies. See in this regard Producers’ and Citizens’ Co-operative Assurance Co Ltd v. FCT (1956) 95 CLR 26 and Australasian Catholic Assurance Co Ltd v. FCT (1959) 100 CLR 502. The investment income from the property will remain assessable under Schedule A (GIM5030).