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HMRC internal manual

General Insurance Manual

From
HM Revenue & Customs
Updated
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Equalisation reserves

This section sets out the tax treatment of ‘equalisation reserves’, which general insurers were required to maintain for certain lines of general (non-life) insurance business for accounting periods ending on or after 23 December 1996 and ending before 1 January 2016. The Prudential Regulation Authority (PRA) regulatory rules on these reserves referred to ‘equalisation provisions’ because they were treated by the PRA as liabilities rather than as reserves, but the tax legislation still referred to ‘equalisation reserves’. This section of the General Insurance Manual refers to ‘reserves’ rather than ‘provisions’.

The relevant legislation was contained at ICTA88/S444BA to ICTA88/S444BD and the Insurance Companies (Reserves) (Tax) Regulations 1996, SI1996/2991.

This legislation was repealed by FA12/S26. The repeal was effective for accounting periods ending on or after 1 January 2016, the date that the Solvency II Directive (2009/138/EC) came into force.

The repeal of the legislation for the tax treatment of equalisation reserves affects general insurance companies who maintain such reserves and corporate and partnership members of Lloyd’s who maintain equivalent reserves in accordance with the Lloyd’s regulations (see LLM3400 et seq.).

Guidance on the FA 2012 changes can be found at GIM7400 onwards.

  1. GIM7010
    Background
  2. GIM7020
    Application of the regulatory rules
  3. GIM7030
    Classes of business affected
  4. GIM7040
    Classes other than credit business: limits on transfers in and out
  5. GIM7050
    Classes other than credit business: de minimus limit
  6. GIM7060
    Classes other than credit business: calculation
  7. GIM7070
    Classes other than credit business: creation of the reserve
  8. GIM7080
    Classes other than credit business: ring-fencing
  9. GIM7090
    Classes other than credit business: ring-fencing: maximum level of reserve
  10. GIM7100
    Classes other than credit business: summary of requirements
  11. GIM7110
    Classes other than credit business: example
  12. GIM7120
    Credit business: limits and calculation
  13. GIM7130
    Credit business: de minimis limits
  14. GIM7140
    Annual accounting on an underwriting year basis
  15. GIM7150
    Cessations and transfers of business
  16. GIM7160
    Cessations and transfers of business: transfers of a block or all of the business
  17. GIM7170
    Regulatory return forms
  18. GIM7180
    The tax rules
  19. GIM7190
    The tax rules: tax adjustments to premiums or claims
  20. GIM7200
    The tax rules: errors in returns or accounts
  21. GIM7210
    The tax rules: differences between accounting periods and financial years
  22. GIM7220
    The tax rules: funded accounting
  23. GIM7230
    The tax rules: shadow equalisation reserves
  24. GIM7240
    The tax rules: shadow equalisation reserves: worked example
  25. GIM7250
    The tax rules: election not to take a tax deduction
  26. GIM7260
    The tax rules: parts of reserves built up prior to the tax rules
  27. GIM7270
    The tax rules: cessations
  28. GIM7280
    The tax rules: insurers not regulated in the UK: non-statutory reserves
  29. GIM7290
    The tax rules: insurers not regulated in the UK: non-statutory reserves: tax relief for UK branches of EEA insurers
  30. GIM7300
    The tax rules: insurers not regulated in the UK: non-statutory reserves: tax relief for UK companies trading outside EEA
  31. GIM7310
    The tax rules: insurers not regulated in the UK: controlled foreign companies
  32. GIM7320
    The tax rules: insurers not regulated in the UK: UK branches of non-EEA insurers
  33. GIM7330
    The tax rules: tax credit relief
  34. GIM7340
    The tax rules: example of apportionment for double taxation relief
  35. GIM7350
    The tax rules: anti-avoidance
  36. GIM7360
    The tax rules: mutuals and partial mutuals
  37. GIM7370
    The tax rules: group regulatory returns
  38. GIM7380
    Recalculation of reserves for tax purposes
  39. GIM7390
    International Accounting Standards (IAS)
  40. GIM7400
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after 1 January 2016
  41. GIM7410
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Introduction
  42. GIM7420
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Insurer ceasing to trade during transitional period
  43. GIM7430
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Companies that had previously elected not to take a tax deduction
  44. GIM7440
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Election to accelerate receipts
  45. GIM7450
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of whole or part of the business during the transitional period
  46. GIM7460
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of the whole business or substantially the whole business: example
  47. GIM7470
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of part of the business
  48. GIM7480
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief
  49. GIM7490
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief: Examples
  50. GIM7490
    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief: Examples