LAM12020 - International and cross border: Overseas life insurance companies FA12/S139(1)

An overseas life insurance company (OLIC) with a permanent establishment (PE) in the UK is subject to corporation tax on the profits arising from the PE in the same way as other companies CTA09/S5

There are a small number of special provisions in the legislation as well as specific OECD guidance on attribution of profits to an insurance PE. The latter are explained in more detail in the General Insurance Manual (GIM10000 onwards).

This section sets out the life insurance specific provisions and considerations for non-resident insurance companies with a UK PE.

  1. FA12/S139(1) defines an OLIC as a non-UK resident insurance company carrying out insurance business through a PE in the UK. An ‘insurance company’ (FA12/S65) may be a UK company or a PE of a non-UK company and either UK or EEA/EU regulated. The I-E provisions would then apply to any BLAGAB written by the PE.
  2. A significant example of this is the chargeable gains provisions. FA12/S117 applies the chargeable gains ‘boxes’ rules to transfers of UK assets. UK assets are those attributed to the UK PE under the provisions of CTA09. The ‘boxes’ provisions apply in a similar way to that for UK life insurance companies under FA12/S116 LAM03210. FA12/S120 similarly applies the share pooling rules in FA12/S119 LAM03230 to UK securities attributed to overseas life insurance companies.
  3. The attribution of assets to the UK PE must be in accordance with Part IV of the OECD Report on the Attribution of Profits to Permanent Establishments. The important role of capital and regulation for insurance companies means that reference to the company’s regulatory returns may be required as these will set out the regulatory capital requirements to support the business being written. Attribution of capital is discussed in more detail in the General Insurance Manual (GIM10000 onwards) and OECD guidance.
  4. FA12/S96 makes provision to restrict the BLAGAB management expenses where an OLIC’s BLAGAB in the UK includes exempt FOTRA profits (see LAM04040).
  5. FA12/S144 provides a power to make regulations to modify the provisions of FA12 or other relevant provisions as applied to OLICs. No such regulations have been laid as at November 2018.
  6. SI2006/3271 ‘The Overseas Life Insurance Companies Regulations 2006’ were not repealed when FA2012 was introduced. Some of the provisions are obsolete. Other provisions may apply by virtue of the general transitional provision in FA12/SCH17/PARA36 and FA12/S144. Some provisions that may be relevant include e.g. those relating to transfers of insurance business such as the definition in Regulation 6(4) of ‘insurance business transfer scheme’ and Regulation 6(5) of ‘qualifying overseas transfer’, used in CTA09/S337 and S636 and in CAA01/S560

There are therefore only a few specific rules relating to OLICs with the normal rules for UK PEs applying with adjustments to take account of the different circumstances of an overseas life insurance company.