Finance Act 2012

77Section 76: meaning of “ordinary BLAGAB management expenses” etc

(1)This section explains for the purposes of section 76 what is meant by the “ordinary BLAGAB management expenses of the company referable to the accounting period”.

(2)Amounts are “ordinary BLAGAB management expenses” of the company if—

(a)they are, in accordance with generally accepted accounting practice, debited in accounts drawn up by the company for a period of account (but see subsection (3)),

(b)they are expenses of management of the company’s long-term business that are referable, in accordance with Chapter 4, to its basic life assurance and general annuity business, and

(c)they are not excluded amounts (see subsections (4) to (7)).

(3)In a case where acquisition expenses (within the meaning of section 80) incurred in the accounting period fall to be debited in successive accounts drawn up for successive periods of account, those expenses are treated instead as if they were all debited in the accounts drawn up for the first of those periods of account.

(4)The following are “excluded amounts”—

(a)amounts of a capital nature,

(b)re-insurance premiums,

(c)refunds of premiums,

(d)profit commissions and profit participations (however described),

(e)a liability of the company to pay an amount of commission or other expenses so far as exceeding the amount which it could reasonably be expected to pay if sections 68 and 69 were not applicable,

(f)non-commercial amounts payable by the company,

(g)amounts payable in connection with a policy or contract to a policyholder or annuitant under the policy or contract or to any other person entitled to receive benefits under the policy or contract.

(5)For the purposes of subsection (4)(f) expenses or other amounts are “non-commercial amounts” payable by the company so far as the company’s purpose in incurring the liability to make the payment is not a business or other commercial purpose of the company.

(6)Amounts payable as mentioned in paragraph (g) of subsection (4) include—

(a)amounts payable to any person acting on behalf of a person within that paragraph, and

(b)amounts payable to the personal representatives of a deceased person who was (or acted on behalf of a person who was) within that paragraph.

(7)Amounts payable as mentioned in subsection (4)(g) do not include amounts payable to an insurance company which is a policyholder under the policy.

(8)In the case of ordinary BLAGAB management expenses in respect of a period of account which coincides with or falls wholly in an accounting period of the company, all of those expenses are “referable to” the accounting period.

(9)In the case of ordinary BLAGAB management expenses in respect of any other period of account—

(a)those expenses are to be apportioned to the accounting period of the company in accordance with section 1172 of CTA 2010, and

(b)the apportioned amount of those expenses is “referable to” the accounting period.