GIM5280 - Taxation of the investment return: investment gains: land and property

Many general insurance groups hold investments in land and property in a separate property holding company. In such cases, income derived from the land and property will be taxable under rules for Schedule A income, and the gains will be computed as chargeable gains. Where the investment property is held directly by the insurer, gains and losses should be reflected in accounts in accordance with Schedule 9A to the Companies Act 1985 and the ABI SORP. The property should be subject to periodic revaluation (at least every five years), and paragraph 285 of the 2005 ABI SORP requires unrealised gains and losses to be taken to the profit and loss account. This treatment (i.e. mark to market) should be followed for tax, where gains or losses on such investment properties are properly regarded as trade receipts or expenses. It will be a question of fact whether the property is held as a structural or portfolio investment (see GIM5020) and GIM5230), but there would be a presumption that a property to which this accounting treatment applied was a portfolio investment. See also in this regard Producers' and Citizens' Co-operative Assurance Co. Ltd. v. FCT (1956) 95 CLR 26 and Australasian Catholic Assurance Co. Ltd. v. FCT (1959) 100 CLR 502. The investment income from the property will remain assessable under Schedule A rules ( GIM5030).