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ICTA88/S444BA (7) and ICTA88/S444BA (8) are anti-avoidance provisions which give HMRC the right to rewrite the equalisation reserve where arrangements have been made or transactions have been entered into solely or mainly to obtain a tax benefit. HMRC staff should make a submission to CT&VAT (Technical) Insurance Group where it appears that an unintended tax advantage is being obtained - see the ‘Technical Help� link on left bar.

It might, for example, be possible for a group to maximise relief for equalisation reserves by arranging for more volatile business to be diverted away from a company that has reached its reserve ceiling. If that were to happen a transfer into the reserve of the recipient would be vulnerable to attack under ICTA88/S444BA (7) to the extent that it was triggered by premiums referable to the diverted business. A risk assessment pointer may be a reserve sticking at its maximum level, particularly if this is associated with changes in the mix of business that the company writes, or in the pattern of claims development.

»Ê¹ÚÌåÓýapp tax advantage in the GIM7340 example will not be apparent on the face of the equalisation reserve computation for the first company, it being necessary to look at a group’s affairs as a whole in order to detect the existence of possible avoidance arrangements.