GIM8340 - Reinsurance and other forms of risk transfer: financial reinsurance and alternative risk transfer (ART): tax treatment: mutuals
Financial reinsurance has been used for tax avoidance purposes by mutual insurers, for example by entering into a time and distance policy (GIM8220) to replace taxable investment income by a non-taxable insurance recovery. Such arrangements present a risk. »Ê¹ÚÌåÓýappy are abusive and may be challenged on a variety of grounds, including that the reinsurance operation is outside the circle of mutuality. »Ê¹ÚÌåÓýapp result of this is that either the profits from it are taxable, or alternatively that the reinsurance deprives the business of its mutual nature (see GIM9040).