What are the two conditions for Chapter 7 captive insurance rules to apply under section 371CF?

Both conditions must be met: first, the main part of the CFC's business during the accounting period must be insurance business; second, the CFC's assumed total profits must include amounts derived directly or indirectly from particular types of insurance contract with UK connected companies or UK resident persons linked to goods or services provided by connected companies.

What types of insurance contract trigger the Chapter 7 CFC rules under section 371CF?

Two categories apply: contracts with a UK resident company connected with the CFC or a connected non-UK resident company acting through a UK permanent establishment, and contracts with any UK resident person where the insurance is linked to goods or services provided to that person by a UK connected company. Services provided as part of the insurance business itself are excluded.

Are services provided as part of the CFC's insurance business included in the linked goods or services test?

No. Services provided as part of the insurance business itself are expressly excluded from the linked goods or services test under section 371CF. The linkage must be to non-insurance goods or services provided to the UK resident person by a UK connected company for the second category of insurance contract to be relevant.

What arrangements does section 371CF of TIOPA 2010 target in practice?

Section 371CF targets arrangements where a CFC acts as a captive insurer for a UK group, insuring risks of UK connected companies or insuring UK customers in connection with goods or services sold by UK connected companies. If either situation exists and the CFC is principally an insurance business, Chapter 7 applies to determine any CFC charge.

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

Does Chapter 7 apply?

Section 371CF sets out the conditions that must be met before the captive insurance business rules in Chapter 7 can apply to a controlled foreign company's accounting period.

Chapter 7 only applies if the main part of the CFC's business during the accounting period is insurance business and its assumed total profits include certain insurance-derived amounts
The relevant amounts are those derived from insurance contracts entered into with UK resident companies connected with the CFC, or with connected non-UK resident companies acting through a UK permanent establishment
Amounts also fall within the rules if they derive from insurance contracts with UK resident persons where the contract is linked to goods or services provided to that person by a connected company operating in the UK
Services provided as part of insurance business are excluded from the linked goods or services test

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