What was the purpose of section 11AC of the Taxes Management Act 1970?

Section 11AC modified the corporation tax computation rules in sections 11AA and 11AB to accommodate non-annual accounting methods used by general insurance businesses. It ensured profits and losses from underwriting were taxed consistently with how the business actually accounted for results, rather than forcing an artificial annual measurement on longer-tail classes of insurance business.

Why did general insurance businesses need special tax accounting rules under section 11AC?

General insurance businesses often account for underwriting results over periods longer than one year, particularly for longer-tail classes where claims may not emerge for several years after a policy is written. The standard annual rules for computing corporation tax did not produce fair or practical results, so section 11AC provided necessary adjustments to the computation framework.

When and why was section 11AC repealed?

Section 11AC was repealed by the Finance Act 1998, Schedule 27, Part 3(28), with effect from a date appointed by statutory instrument SI 1998/3173. The repeal formed part of a broader overhaul of insurance company taxation in the United Kingdom, after which the separate treatment for non-annual accounting in general insurance was no longer required.

How did section 11AC affect corporation tax computation for general insurance companies?

Section 11AC allowed a general insurance company using a non-annual accounting cycle to compute corporation tax in line with that cycle. For example, if an underwriting result was finalised over three years rather than annually, the modification ensured tax was charged on profits only when properly determined under the company's actual accounting approach.

Taxes Management Act 1970 section 11AC

Modifications of sections 11AA and 11AB in relation to non-annual accounting of general insurance business

Section 11AC modified the rules in sections 11AA and 11AB for computing corporation tax where general insurance businesses used non-annual accounting methods. This section was repealed by the Finance Act 1998.

This section applied where general insurance companies used accounting periods that did not align with the standard annual basis for reporting profits and losses.
It modified the way sections 11AA (which dealt with the general computation of corporation tax) and 11AB (which dealt with further provisions on corporation tax computation) applied to such businesses.
The modifications were necessary because general insurance business often accounts for underwriting results over periods longer than one year, meaning the standard annual rules needed adjustment.
Section 11AC was repealed by the Finance Act 1998, Schedule 27, Part 3(28), with effect from a date appointed by statutory instrument (SI 1998/3173), reflecting wider reforms to the taxation of insurance companies.

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