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HMRC internal manual

General Insurance Manual

Technical provisions: periods of account beginning on or after 1 January 2000 and ending before 19 July 2007: section 107 FA 2000: background (including commencement date and date of repeal)

FA00/S107, which applies to provisions set in ‘periods of account’

  • beginning on or after 1 January 2000, and
  • ending before 19 July 2007,

imposes a tax adjustment to technical provisions of general insurers that exceed the discounted cost of settling the liabilities in respect of which they were set. ‘Period of account’ means a period for which a general insurer draws up accounts (see GIM6160 for more details of definitions used in the legislation).

Following consultation, detailed Regulations (SI2001/1757) to supplement the legislation came into force on 29 May 2001. In 2003 the Regulations were amended (SI2003/2862) for periods of account ending on or after 5 December 2003. There were further amendments in 2005 (SI2005/3289) for periods of account ending on or after 21 December 2005 (GIM6370).

The broad intention of the legislation was to compensate the Exchequer for both over-reserving by general insurers and for the failure to discount provisions. And where the cost of settling liabilities was more than the technical provisions which were made for those liabilities, an amount was deducted in the insurer’s computations.


FA00/S107 (12) dealt with the commencement of the rules. The first period of account to which the rules applied, and for which an election under FA00/S107 (4) could be made, was the one beginning on or after 1 January 2000.

The first later period of account, in which a recalculation of technical provisions of an earlier period of account was carried out, was the one beginning on or after 1 January 2001.

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FA00/S107 (5) and FA00/S107 (6) contained regulation-making powers. The Regulations (the General Insurance Companies Reserves (Tax) Regulations) are in SI2001/1757 as amended by SI2003/2862 and SI2005/3289. They provided the method of calculating whether the technical provisions were excessive or insufficient and set out other details of the operation of the legislation. GIM6190 gives more detail on the Regulations.

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FA00/S107 (8) to FA00/S107 (11) contained special rules adapting the application of the legislation to Lloyd’s underwriters. FA00/S107 (7) defined ‘period of account’ in relation to Lloyd’s as an underwriting year in which profits are declared. The application of the rules to Lloyd’s is dealt with in Chapter 3 of the Lloyd’s Manual (LLM).

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Repeal of section 107 FA 2000

FA07/SCH11 introduced new rules for technical provisions and repealed FA00/S107 with effect for accounting periods ending on or after 19 July 2007, the date that the Finance Bill 2007 received Royal Assent. For most general insurers this meant that FA00/S107 last applied to accounting periods ending 31 December 2006 and the new rules first applied to accounting periods ending 31 December 2007.

Repeal of FA00/S107 was subject to a short transitional provision to allow an election under FA00/S107 (4) in the first period to end after 19 July 2007 - see GIM6180, which also explains the background to the repeal.