GIM4180 - Taxation of general insurance: funded accounting: other tax issues

Because of the difficulty of having to pay tax on estimated figures pending the final closure of the fund, the Revenue has in the past agreed different methods from that described above to arrive at taxable profits. In some cases the company will have drawn up a “memorandum account” prepared on an annual accident year basis, in addition to the funded basis Companies Act accounts and regulatory return. This approach was agreed with the British Insurance Association in 1978.

IPRU(INS) Vol.1 paragraph 9.15 makes it clear that where business is accounted for in the Companies Act accounts on a non-annual basis, the FSA return forms used should be those required for underwriting basis business. It is unlikely that there will be cases where the shareholder accounts relating to funded business are prepared on a different basis to the regulatory return, but if this were to be the case the Revenue would expect the tax computations to be based on the shareholder accounts.

Most general insurance companies write business in more than one accounting class. There may have been cases where the accounts incorporate business accounted for on both an annual and funded basis. Different parts of the tax computations may therefore be prepared on different bases, but the end result for any accounting period is, nonetheless, a single figure for the Case I profit or loss for the general insurance trade as a whole.