CTM40325 - Particular bodies: friendly societies: exemption for life or endowment business

ICTA88/S460 does not provide a blanket exemption from CT for a friendly society’s life or endowment business. It only exempts the profits attributable to some life or endowment contracts with members within certain limits. These limits have been changed frequently over the years. Their history is recorded at Section 460 (2).

The limits for tax exempt business with an individual member for contracts made since 1 May 1995 are:

  • Life assurance contracts - the total premiums payable by a member in any 12-month period must not exceed £270. This limit rises to £300 (equivalent to £25 per month) if premiums are payable more than once a year.
  • Annuity business - the total annuities secured under contracts with a member must not exceed £156 (though any bonus added to a with-profits annuity is disregarded).

If an individual member’s contracts and policies with the society exceed these limits, then not all of the society's profits will come within the exemption and the case should be referred to CTIAA (Insurance).

A society will not be chargeable to CT if:

  • it only carries on life or endowment business (excluding pension business, ISA business or CTF business), and
  • its rules limit a member's policies to the statutory limits on tax exempt business.

It can therefore claim a repayment of all income tax suffered by deduction. Form R69 is provided for repayment claims in these circumstances, though such repayments will now be rare as income tax is not usually deducted from payments made to a UK resident company. For detailed guidance on how to deal with forms R69 see CTM40340.

Tax credits on dividends and other distributions from a UK resident company, which are referable to life or endowment business covered by the exemption at ICTA88/S460, were payable to the society and could be entered on the form R69 for distributions made before 6 April 2004.

For the treatment of tax credits on dividends referable to friendly societies, other exempt business and cases where a society writes both exempt life or endowment business and other exempt business, see CTM40340.

The first claim by a society to exemption from tax under Section 460, on its life or endowment business, should be referred to CTIAA (Insurance), as should any question as to whether a society's life or endowment business comes within the limits for tax exempt business.