Corporation Tax Act 2010 section 357YDA

Life insurance companies: amounts representing policyholder income

Section 357YDA sets out how life insurance companies should identify and exclude the policyholder income element from restitution interest paid by HMRC, so that only the shareholder portion is subject to the restitution interest rules.

• Where HMRC pays restitution interest to a life insurance company that would otherwise be taxed under the I minus E basis for basic life assurance and general annuity business, the policyholder income portion is carved out and treated as though it is not restitution interest.
• To calculate the policyholder income portion, you first isolate the non-ACT interest element of the total amount and determine how much of it is assigned to the company's with-profits funds.
• For each with-profits fund, you apply the policyholder percentage — derived from the fund's distribution policy showing how profits are split between policyholders and shareholders — to the amount assigned to that fund.
• The total of the resulting policyholder amounts across all relevant with-profits funds represents the policyholder income that is excluded from the restitution interest rules.