LAM06050 - I-E Profit: Calculation of the tax charge: Determining the policyholders’ share of I-E profit - example
Consider a set of computations with the following figures:
| Description | Amount |
|---|---|
| BLAGAB trade profit (BTP) of the period | 800,000 |
| BLAGAB losses brought forward | 300,000 |
| BLAGAB non-taxable distributions (BNTD) | 150,000 |
| Income (I) calculated under steps 1 to 3 of FA12/S73 | 1,450,000 |
| FA12/S104 example: adjusted amount of BLAGAB trade profits | |
| BLAGAB trade profit | 800,000 |
| losses b/f | (300,000) |
| Shareholders’ share of BTND | (75,000) |
| Adjusted amount of BLAGAB trade profits | 425,000 |
FA12/S105 example: shareholders’ share of BLAGAB non-taxable distributions
(BTP) 800,000 x (BNTD) 150,000 = 75,000
(BTND) 150,000 + (I) 1,450,000
Therefore the Shareholders’ share of BLAGAB non-taxable distributions in this example is 75,000.
FA12/S103 example: the policyholders’ share of the I-E profit
Where there is an I-E profit, a comparison is made between the I-E profit and the adjusted amount of BLAGAB trade profit for the period (see LAM06030) to calculate the policyholders’ share of the I-E profit (if any).
- Scenario 1: if the company does not have a BLAGAB trade profit for that period, the policyholders’ share of the I-E profit is the whole of that profit;
- Scenario 2: if the adjusted amount of a company’s BLAGAB trade profit is less than the I-E profit for the period, the difference between those amounts represents the policyholders’ share;
- Scenario 3: if the adjusted amount of a company’s BLAGAB trade profit is equal to or more than the I-E profit for the period, there is no policyholders’ share.
| Scenario 1 | Scenario 2 | Scenario 3 | |
|---|---|---|---|
| Assume I-E profits are | 625,000 | 625,000 | 315,000 |
| Adjusted amount of BLAGAB trade profits | nil | 400,000 | 400,000 |
| Amount of I-E profits charged at shareholder rate | 0 | 400,000 | 315,000 |
| Amount of I-E profits charged at policyholder rate | 625,000 | 225,000 | 0 |