The Insurance Companies (Reserves) (Tax) Regulations 1996

Double taxation relief

10.—(1) This regulation applies in any case where an insurance company which, in accordance with section 34A regulations, is required to make transfers into or out of an equalisation reserve in respect of any business carried on by that company for any accounting period, is carrying on any business by reference to which double taxation relief is afforded in respect of any income or gains.

(2) Paragraphs (a) and (b) of subsection (2) of section 444BA shall be modified so as—

(a) to require that the amounts which, in accordance with section 34A regulations, are transferred into or out of the equalisation reserve in respect of the company’s business for the accounting period in question shall be apportioned amongst each branch outside the United Kingdom through which the company carries on business and business which is not carried on through branches outside the United Kingdom; and

(b) to provide that only those amounts which, pursuant to sub-paragraph (a), are apportioned to each branch outside the United Kingdom through which the company carries on business shall be brought into account for the purposes of computing the profits or losses by reference to which double taxation relief is afforded.

(3) The apportionment of each transfer into the equalisation reserve which is required by this regulation shall be made in accordance with the formula—

• A is the amount which, in accordance with section 34A regulations, is transferred into the equalisation reserve in respect of the company’s business for the accounting period in question;

• B is the amount of net premiums written by reference to which A is calculated that is attributable to business carried on through the branch outside the United Kingdom for the accounting period in question; and

• C is the amount of net premiums written by reference to which A is calculated for the accounting period in question.

(4) In paragraph (3) “net premiums written” means gross premiums written net of reinsurance premiums payable under reinsurance ceded.

(5) The apportionment of each transfer out of the equalisation reserve which is required by this regulation shall be made in accordance with the formula—

• D is the amount which, in accordance with section 34A regulations, is transferred out of the equalisation reserve in respect of the company’s business for the accounting period in question;

• E is the amount of claims attributable to business carried on through the branch outside the United Kingdom that is to be taken into account in determining whether, by comparison with premiums, any transfer out of the equalisation reserve needs to be made for the period in question; and

• F is the amount of claims to be taken into account in determining whether, by comparison with premiums, any transfer out of the equalisation reserve needs to be made for the period in question.

(6) Paragraph (7) applies where—

(a) an insurance company carries on business through one or more branches outside the United Kingdom,

(b) an amount is transferred into an equalisation reserve in respect of the business of that company for any accounting period, and

(c) the company has made an election for the purposes of subsection (4) of section 444BA so that there is an unrelieved transfer in relation to that accounting period.

(7) The company—

(a) shall apportion the amount transferred into the equalisation reserve in accordance with paragraph (3) without having regard to the existence of the unrelieved transfer, and

(b) may then set the amount of the unrelieved transfer, or any part of that amount, against the amount transferred into the equalisation reserve for that accounting period (and the action of the company under this sub-paragraph is called “the allocation” in paragraph (8)).

(8) The allocation may be made—

(a) in such amounts, and

(b) in relation to such of the apportioned amounts transferred into the equalisation reserve pursuant to paragraph (7) (a) (and whether in relation to business carried on in the United Kingdom or in relation to business which the company carries on through a branch outside the United Kingdom),

as the company thinks fit.

(9) Paragraph (10) applies where—

(a) an insurance company carries on business through one or more branches outside the United Kingdom,

(b) an amount is transferred out of an equalisation reserve in respect of the business of that company for any accounting period, and

(c) the accounting period is one to which any amount representing one or more unrelieved transfers has been carried forward under subsection (4) of section 444BA.

(10) The company—

(a) shall ascertain the amount to which the rule mentioned in subsection (2) (b) of section 444BA applies by virtue of the operation of subsection (5) of that section (in this paragraph and in paragraph (11) referred to as “the ascertained amount”), and

(b) shall then apportion the ascertained amount.

(11) Paragraph (5) shall apply for the purposes of the apportionment of the ascertained amount as it applies for the purposes of the apportionment of each transfer out of the equalisation reserve which is required by this regulation, with the modification that in the formula set out in that paragraph D shall be the ascertained amount.

(12) In paragraphs (6), (7) and (9) “unrelieved transfer” shall be construed in accordance with subsection (4) of section 444BA.