D7.425 Calculation of long-term business profits
Although the calculation of trade profits for both BLAGAB and non-BLAGAB business use the statutory accounts as their starting point, there are certain specific rules which reflect the unique nature of long-term insurance1.
Furthermore the calculation of the BLAGAB trade profit is subject to further specific rules that apply only to it (see D7.467)2.
As with all companies, losses are to be calculated on the same basis as profits3.
Allocations to policyholders
One of the earliest cases dealing with life insurance taxation (Last v London Assurance Ltd 2 TC 100) decided that bonuses to policyholders were allocations of profit rather than expenses incurred in earning those profits and therefore did not qualify for tax relief. However, since 1923 the legislation governing life insurance taxation has made it explicit that amounts allocated to policyholders are to be deducted as expenses in computing the trade profits of that business, effectively leaving tax to be charged on trading profits on the shareholders' portion only.
As
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Web page updated on 17 Mar 2025 17:45