GIM7000 - Equalisation reserves

This section sets out the tax treatment of ‘equalisation reserves’, which general insurers were required to maintain for certain lines of general (non-life) insurance business for accounting periods ending on or after 23 December 1996 and ending before 1 January 2016. The Prudential Regulation Authority (PRA) regulatory rules on these reserves referred to ‘equalisation provisions’ because they were treated by the PRA as liabilities rather than as reserves, but the tax legislation still referred to ‘equalisation reserves’. This section of the General Insurance Manual refers to ‘reserves’ rather than ‘provisions’.

The relevant legislation was contained at ICTA88/S444BA to ICTA88/S444BD and the Insurance Companies (Reserves) (Tax) Regulations 1996, SI1996/2991.

This legislation was repealed by FA12/S26. The repeal was effective for accounting periods ending on or after 1 January 2016, the date that the Solvency II Directive (2009/138/EC) came into force.

The repeal of the legislation for the tax treatment of equalisation reserves affects general insurance companies who maintain such reserves and corporate and partnership members of Lloyd’s who maintain equivalent reserves in accordance with the Lloyd’s regulations (see LLM3400 et seq.).

Guidance on the FA 2012 changes can be found at GIM7400 onwards.

1. GIM7010

   Background
2. GIM7020

   Application of the regulatory rules
3. GIM7030

   Classes of business affected
4. GIM7040

   Classes other than credit business: limits on transfers in and out
5. GIM7050

   Classes other than credit business: de minimus limit
6. GIM7060

   Classes other than credit business: calculation
7. GIM7070

   Classes other than credit business: creation of the reserve
8. GIM7080

   Classes other than credit business: ring-fencing
9. GIM7090

   Classes other than credit business: ring-fencing: maximum level of reserve
10. GIM7100

    Classes other than credit business: summary of requirements
11. GIM7110

    Classes other than credit business: example
12. GIM7120

    Credit business: limits and calculation
13. GIM7130

    Credit business: de minimis limits
14. GIM7140

    Annual accounting on an underwriting year basis
15. GIM7150

    Cessations and transfers of business
16. GIM7160

    Cessations and transfers of business: transfers of a block or all of the business
17. GIM7170

    Regulatory return forms
18. GIM7180

    The tax rules
19. GIM7190

    The tax rules: tax adjustments to premiums or claims
20. GIM7200

    The tax rules: errors in returns or accounts
21. GIM7210

    The tax rules: differences between accounting periods and financial years
22. GIM7220

    The tax rules: funded accounting
23. GIM7230

    The tax rules: shadow equalisation reserves
24. GIM7240

    The tax rules: shadow equalisation reserves: worked example
25. GIM7250

    The tax rules: election not to take a tax deduction
26. GIM7260

    The tax rules: parts of reserves built up prior to the tax rules
27. GIM7270

    The tax rules: cessations
28. GIM7280

    The tax rules: insurers not regulated in the UK: non-statutory reserves
29. GIM7290

    The tax rules: insurers not regulated in the UK: non-statutory reserves: tax relief for UK branches of EEA insurers
30. GIM7300

    The tax rules: insurers not regulated in the UK: non-statutory reserves: tax relief for UK companies trading outside EEA
31. GIM7310

    The tax rules: insurers not regulated in the UK: controlled foreign companies
32. GIM7320

    The tax rules: insurers not regulated in the UK: UK branches of non-EEA insurers
33. GIM7330

    The tax rules: tax credit relief
34. GIM7340

    The tax rules: example of apportionment for double taxation relief
35. GIM7350

    The tax rules: anti-avoidance
36. GIM7360

    The tax rules: mutuals and partial mutuals
37. GIM7370

    The tax rules: group regulatory returns
38. GIM7380

    Recalculation of reserves for tax purposes
39. GIM7390

    International Accounting Standards (IAS)
40. GIM7400

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after 1 January 2016
41. GIM7410

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Introduction
42. GIM7420

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Insurer ceasing to trade during transitional period
43. GIM7430

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Companies that had previously elected not to take a tax deduction
44. GIM7440

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Election to accelerate receipts
45. GIM7450

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of whole or part of the business during the transitional period
46. GIM7460

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of the whole business or substantially the whole business: example
47. GIM7470

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Transfer of part of the business
48. GIM7480

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief
49. GIM7490

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief: Examples
50. GIM7490

    Repeal of equalisation reserves tax legislation for accounting periods ending on or after1 January 2016: Interaction with Double Taxation Relief: Examples