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HMRC internal manual

International Manual

HM Revenue & Customs
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DT applications and claims - Types of income: Interest

Reinsurance Deposits

Reinsurance means that part of the risks of an insurance company is passed to andaccepted by the reinsurance company under a contract or ‘treaty’ which may in turn bepassed on to another reinsurance company under another contract etc. The reinsurer assumesliability on the same terms as the original insurer/previous reinsurer. If the reinsureris not resident in the UK but is carrying on reinsurance business in the UK it needs tohave money available to meet insurance claims. It usually places money in current/depositbank accounts but it also invests in short-term bonds. The interest paid on the short-termbonds purchased for this purpose is normally regarded as short interest. This follows thedecision in General Re- Insurance Co Ltd v Tomlinson 48 TC 81. It can be paid withoutdeduction of UK income tax and you should deal with it in the same way as in INTM342060.

This instruction does not apply to other types of interest payable by UK InsuranceCompanies such as

  • interest on an inter-company loan
  • interest paid because of late payment of a maturing savings policy.