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HMRC internal manual

Life Assurance Manual

Finance Act 2012 Transitional provisions: Overview and scope of this chapter: FA12/SCH17

FA 2012 introduced a new tax regime for life insurance companies. This chapter gives an overview of the provisions dealing with the transition from the old tax regime to the new regime which commenced on 1 January 2013. The chapter focuses on the ongoing impact of the transitional rules and their impact on corporation tax returns post the 2013 transitional year.

The key change under the 2013 regime was the adoption of life company statutory accounts as the basis for the computation of taxable trade profits. Under the old regime, the taxation of life companies (and in particular the computation of trade profits) was based on returns made by companies to the industry regulator. The transitional provisions operated to quantify the transitional adjustments required to ensure that all profits were taxed once but once only, on the change of basis.

The transitional provisions are contained in FA212/SCH17 and ‘The Insurance Companies (Transitional Provisions) Regulations 2012’ (SI2012/3009). Minor subsequent amendments to these provisions were made by SI2013/2244 and SI2015/1959.

A simplification measure was also included in the transitional provisions relating to the change to the treatment of protection business which from 1 January 2013 is now within non-BLAGAB. Policies written prior to 1 January 2013 continue to be treated as BLAGAB unless the insurer made an irrevocable election for that business to be treated as non-BLAGAB (LAM14040).