Taxation (International and Other Provisions) Act 2010 section 371BH

Companies carrying on BLAGAB

Section 371BH provides special rules for calculating the CFC charge where the chargeable company carries on basic life assurance and general annuity business (BLAGAB) and holds its interest in the CFC as a long-term business asset.

• Where a UK insurance company carrying on BLAGAB holds shares in a CFC as long-term business assets, and changes in value or distributions from those shares fall outside the I-E profit calculation, an additional CFC charge applies at the policyholders' rate of tax rather than the main corporation tax rate.
• Four conditions (D, E or F, and G) must all be met: the company must hold shares in the CFC throughout the period, increases in share value or distributions must fall outside the I-E computation, and the assets representing the interest must be held for the company's long-term business.
• The apportioned profit from the CFC is split to identify the BLAGAB component by treating it as deemed income and applying the standard rules that allocate income between BLAGAB and other business; the policyholders' share of that component is then determined under the Finance Act 2012 rules.
• The percentages used in the CFC charge calculation (P% and Q%) are adjusted so that only the policyholders' share of the BLAGAB component is charged at the policyholders' rate, and any reduction that would normally apply for shares held as trading assets is disregarded.