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HMRC internal manual

General Insurance Manual

HM Revenue & Customs
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Equalisation reserves: application of the regulatory rules

The equalisation reserves regulatory rules apply to insurance business in specified classes carried on by an insurer

  • whose head office is in the UK, or
  • whose insurance business in the UK is restricted to reinsurance, or
  • whose head office is not in a European Economic Area (EEA) State.

The rules do not apply to

  • ‘assessable mutuals’ - these are mutual associations where the provision of business is limited to members and whose rules call for deficiencies to be made up by members, for instance P&I clubs
  • friendly societies
  • Lloyd’s syndicates or members
  • companies that conduct no insurance business in the UK or other EEA state even though UK incorporated
  • UK branches of EEA companies, meaning companies resident in another Member State of the EEA which are regulated by that State, unless the business is pure reinsurance.

But there are special tax rules for the last two categories. See GIM7300 and GIM7320.