View more on these topics

Life Company Taxation

The recent case of Prudential Assurance Co Ltd v Bibby has now been heard, at appeal, in the High Court.



As was reported in a previous bulletin (14th May 1999) the case involved Prudential`s life assurance and pensions business, and the issue of whether it was correct for Prudential not to deduct charges on income in computing its relevant profits for the purposes of section 88 FA 1989 (policyholders share of relevant profits taxed at basic rate only) but instead deduct them from its total profits chargeable at the full corporation tax rate.



Burton J agreed with the Prudential`s contention that, in computing its total profits, management expenses were to be deducted. Section 338(1) ICTA 1988 provided that in computing the corporation tax chargeable charges on income paid by the company should be allowed as deductions against the total profits. Section 88(3) FA 1989 goes on to define the relevant profits as meaning the total profits subject to the specified adjustments in respect of management expenses, loss relief and group relief. Those were the only required adjustments to the total profits in computing the relevant profits and accordingly section 88(3) did not include the deduction on income.



The Court agreed with Prudential`s submission that Section 88(3) did not, therefore, expressly or impliedly require that charges should be deducted from the relevant profits, or that the charges should be deducted pro rata from the total profits, and that there was accordingly no express provision in Section 88(3) which prevented it in computing the corporation tax chargeable from deducting the charges from such part of the total profits as it chose.



The Court further agreed that, in the absense of a contrary statutory provision, in computing relevant profits there was no general principle of rateable allocation of charged against total profits and that it was to be assumed that a company acted in whatever way open to it was most business-like and advantageous. It therefore followed that Prudential was entitled in computing the corporation tax chargeable to deduct the charges from such part of its total profits as it chose, and therefore to deduct the charges from that part of its total profits which were charged at the normal corporation tax rate, and was not obliged to deduct them from the relevant profits which were taxed at a lower rate.



The Court thus agreed with the Prudential`s contentions, and the appeal was allowed.

Recommended

Canada Life sales driven by IFAs

IFAs sales have soared in the first six months of the year according to Canada Life.Announcing its new business figures for the first half of the year, the life office says equivalent premium income is up 16.6 per cent on the same period last year to £65.3m from £56.2m.Sales through IFAs rose 29.8 per cent […]

GPP exemptions would make stakeholder a damp squid

CIS has called upon the Government not to give group personal pension plans an exemption under stakeholder proposals.It claims this will render the proposals a damp squid.The life office says it is not satisfied there is any rational basis for allowing GPPs an exemption. Because GPPs have non-occupational status CIS claims they are not likely […]

Yorkshire based IFA launches asset management arm

Yorkshire based IFA and general insurance broker RP Hodson is launching its own investment armRP Hodson Asset Management aims to offer investors a range of services from portfolio analysis to advisory management on collective investments such as unit trusts and offshore bonds.The firm has appointed Andrew Rattray to head up the firm as managing director […]

Aberdeen Technology and Income Trust raises £200m

Aberdeen Asset Management has raised £200m for its Technology and Income Trust of which £90m is from bank borrowings.It has two share classes with 55 per cent of the equity issued as ordinary shares yielding an estimated 8.6 per cent. The remaining 45 per cent will take the form of income shares yielding 6.5 per […]

Global equities: time to de-risk?

While equity valuations have doubled since the financial crisis, Simon Edelsten explains that there are still pockets of value. But not where you might think Macro-economic uncertainty is causing turbulence in equity markets. Artemis Global Select Fund manager Simon Edelsten says his investment themes are taking him in a different direction to some of his peers – away […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment