GIM6180 - Technical provisions: periods of account beginning on or after 1 January 2000: section 107 FA 2000: disclaimers

FA00/S107 (4) allows an insurer to elect to disclaim any part of the technical provisions for any period of account, (not just the original provisions) and the computations of the next period are to be “adjusted accordingly”. The effect of such an election is therefore that the profits of the period for which the disclaimer is made are increased by the amount disclaimed. In the following period of account, unless the insurer elects again to disclaim the same provisions, the amount disclaimed in the previous period will be deducted in the computations. GIM6390 gives more details on elections, and GIM6400 sets out an example of the effect of an election. See GIM6290 for an explanation of the modification of amounts to be treated as deficiencies under FA00/S107 (3) where a FA00/S107 (4) election has been made.

An insurer does not permanently lose any amount disclaimed. FA00/S107 (4) states that where an election is made “...the profits of his trade for the next period of account shall be adjusted accordingly for the purposes of any computation for tax purposes”. So the lower tax deduction is brought in as a credit in the next year's tax computation in place of the full accounts reserve brought forward. The election will only affect the timing of deductions and the FA00/S107 calculations.