GIM10130 - Non-resident insurers: the scope of UK taxing rights: accounting periods beginning before 1 January 2003: section 11 ICTA & Article 7 OECD Model: application to insurers

Underwriting profit

Taking both section 11 and, where relevant, Article 7 into account, the balance of premiums, claims, expenses and provisions (the underwriting result) disclosed on the FSA return clearly falls within both Section 11 and Article 7. So the presumption should be made that business disclosed in that return is business falling within section 11. In the case of an EEA insurer these figures will have to be taken from whatever accounts and information are prepared by the company and submitted with its return. If nothing else is available, the details given by the company to its home state regulator as UK branch business in its Article 44.2 Third Directive return is a starting point.

Expenses

Article 7(3) of the OECD model provides that, in working out the profits of a permanent establishment, expenses shall be allowed which are incurred for the purpose of the permanent establishment, including executive and general administrative expenses, whether incurred in the state where the permanent establishment is situated or elsewhere. This provision, as far as the United Kingdom is concerned, does no more than re-affirm UK domestic law.

Equalisation reserves

GIM7290 onwards sets out the special rules for EEA insurers. Non-EEA insurers follow the same provisions as apply to UK insurers.