LAM12040 - International and cross border: Overseas Life Assurance Business (OLAB) FA12/S61

Overseas Life Assurance Business (OLAB) is a category of non-BLAGAB life assurance business. It is business written with non UK resident policyholders which is not ‘excluded business’ and which meets certain conditions. Reinsurance of OLAB is not OLAB, instead it qualifies as Life Reinsurance Business. OLAB is non-BLAGAB under FA12/S57(2)(f) and is therefore taxed on a trading basis.

This treatment enables UK companies to write life assurance business for non-UK residents without incurring an I-E charge, where the OLAB conditions are met.

Excluded business in FA12/S61(3) takes out of OLAB, categories of business written with non-UK residents to the extent that these already fall within the defined non-BLAGAB categories in FA12/S57 such as pension business, child trust fund business, individual savings account business etc. OLAB rules therefore only need to be applied where none of these other categories are relevant. In certain circumstances, where a non-UK cedant reinsures life assurance business where the benefits are linked to UK land, the reinsurer will be taxed on the business as BLAGAB LAM10320.

There are regulatory powers in FA12/S61(4-8) in particular to prescribe the requirements to demonstrate that business is OLAB. These are set out in SI2089/2000 ‘The Insurance Companies (Overseas Life Assurance Business) (Excluded Business) Regulations 2000’ and subsequent amendments, the latest being SI2007/2086 ‘The Insurance Companies (Overseas Life Assurance Business) (Excluded Business) (Amendment) Regulations 2007’. These regulations continue to apply by virtue of FA12/SCH17/PARA36. There are detailed rules governing trusts, companies and types of policies. However, the basic requirement is that the policyholder is non-UK resident, with more complex rules for trusts and where there are multiple policyholders.

Because OLAB treatment is available for what would otherwise be BLAGAB business on the basis of, broadly, policyholder residence, companies are required to maintain appropriate records, for example of policyholder residence, to demonstrate compliance with the OLAB regulations.