LAM09010 - Double Tax Relief: Overview

Life insurance companies are entitled to relief for foreign tax suffered, subject to the rules in Part 2 of TIOPA10 (see INTM160000). Foreign tax will generally be either:

  • overseas tax on non-UK income, such as dividends, interest, rent etc., or
  • tax paid in relation to profits of an overseas branch

This chapter references some of the general rules in Part 2 of TIOPA10 that need particular consideration for life companies as well as variations to those rules specific to insurance companies in TIOPA10/S96 to S104.

The rationale for the differences and the main provisions to consider are:

Relating foreign tax to I-E profit and non-BLAGAB trade profit

Restriction of foreign tax credit is proportionate to split of income on the commercial allocation basis TIOPA10/S97 LAM09200.

Offset of expenses and interest is in line with normal rules but INTM guidance on interest should be read as referring to CTA09/S388, S389 and S391 re BLAGAB assets LAM09210.

CT/Policyholder rate

  • restriction of relief to the corporation tax rate
  • impact of policyholder tax rate TIOPA10/S42 and the restriction to the composite rate LAM09100.

Specific rules for CTA09/S35 trade profits computations

These include

  • general principles and ability to claim foreign tax partly as credit relief and partly as an expense in certan situations LAM09200
  • specific restrictions to credit relief in trading computations to prevent credit either for tax suffered by policyholders or tax in excess of that related to trade profit (as opposed to total profit) LAM09210 to LAM09240
  • relief for companies with overseas branches including those specific to insurance companies LAM09250
  • pension business and principle of minimisation of foreign tax TIOPA10/S33 LAM09260
  • dividends are taxable in life insurers’ trade profit calculations and therefore foreign tax credits/relief may be due

An example calculation of double tax relief is explained at LAM09240 and this example is incorporated in the example tax computation in LAM08000.