GIM4160 - Taxation of general insurance: funded accounting: CTSA

Where a company uses funded accounting, it will not be possible to finalise the Case I profit or loss figure for a particular year until the accounts and computations for one, two or three further years have been received and examined. Nonetheless, companies are expected to submit a CTSA return at the usual time, containing the best estimate that it is then possible to make of the final liability, and to pay tax on the basis of this return. FA98/SCH18/PARA85 extends the time limit for amending a corporation tax self assessment for general insurance companies using non-annual accounting. The company may make an amendment within 12 months from the date on which the technical provision is replaced. The Revenue is allowed two years from this date to enquire into the return.

The date of the replacement of the technical provision is the date the accounts are signed off. In practice this will be some time after the balance sheet date. So for example, a company using three-year funded accounting prepares accounts for year 1 to 31 December 2000. The fund at the end of this year is the figure the company uses provisionally for its CTSA return and on which it pays tax. The fund for year 1 is closed when the company prepares its accounts for the year ended 31 December 2002. The accounts are signed off, say, on 30 April 2003. This is the date on which the technical provision is replaced and on which the enquiry window opens. This is different to the usual position under CTSA. Here the enquiry window is based on an accounting concept (the date the accounts are finalised) and not on the date of the submission of a return or an amended return. Because of this, the Revenue is entitled to make assumptions about when the accounts are signed off.