PART 2Insurance companies carrying on long-term business
CHAPTER 3The I - E basis
Definitions of expressions comprising “E”
79Spreading of acquisition expenses
1
This section applies if the ordinary BLAGAB management expenses of an insurance company referable to an accounting period for the purposes of section 76 include acquisition expenses (as defined by section 80) incurred in the accounting period.
2
In the case of the acquisition expenses—
a
a reduction is to be made at step 2 in section 76 so as to secure that only one-seventh of the adjusted amount of those expenses counts as ordinary BLAGAB management expenses of the company referable to the accounting period, and
b
the remainder of that adjusted amount is to be relieved as deemed BLAGAB management expenses for succeeding accounting periods in accordance with the following provisions.
3
References in this section to the adjusted amount of the acquisition expenses are to—
a
the amount of those expenses calculated as mentioned in step 1 of section 76 (and see, in particular, section 77(3)), less
b
any amount of re-insurance commission or any repayment or refund (in whole or in part) that forms part of an I - E receipt of the company for the accounting period as a result of section 92.
4
The remainder of the adjusted amount of the acquisition expenses is relieved as follows.
5
One-seventh of the adjusted amount of the acquisition expenses is treated for the purposes of section 76 as a deemed BLAGAB management expense for each succeeding accounting period.
6
But, if a succeeding accounting period is less than a year, the fraction of that amount to be relieved for that period is proportionately reduced.
7
The reliefs operate until the whole of the adjusted amount of the acquisition expenses has been used up (and, accordingly, the rules in subsections (5) and (6) have effect subject to this subsection).
8
The treatment of any part of the adjusted amount of the acquisition expenses as a deemed BLAGAB management expense for an accounting period (“the period concerned”) as set out in subsections (5) to (7) is subject to the following restriction.
9
If expenses are reversed in the period concerned or any preceding accounting period, any acquisition expenses included in those expenses are not to count as deemed BLAGAB management expenses for the period concerned.