HMRC internal manual

Life Assurance Manual

LAM01150 - Introduction and long-term insurance business overview: Key concepts: tax definitions of ‘contract of insurance’, ‘contract of long-term insurance’ and ‘insurance company’: FA12/S64-65

FA12/S64 links the definitions of a contract of insurance and a contract of long-term insurance to the regulatory definition in FSMA (Regulated Activities) Order 2001. Further details of the different categories are set out  in LAM01140.

FA12/65 defines an ‘insurance company’.

An insurance company covered by this definition will generally be regulated in the UK by the PRA or have a permanent establishment in the UK with ‘passporting rights’ into the UK from another EU or EEA regulated territory. The passporting position is dependent on the UK’s status with the EU.

The clear link between tax and regulation means that it is generally straightforward to identify if there is an insurance company to which the life tax rules will apply.

Long-term business may be written by mutual insurers, which will fall with the definition of ‘insurance company’ and any BLAGAB written will fall within the I-E FA12/S68 charging provisions with only the policyholder rate of tax applying to any I-E profits.

Long-term business can also be written by registered friendly societies.  These are not insurance companies in statutory terms so are not subject to the full life company rules. Instead a modified version of the rules are applied as set out in Part 3 of Finance Act 2012 (FA12/S150-179). These rules are not covered in this manual.