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For tax purposes, a life company is carrying on a trade. »Ê¹ÚÌåÓýapp long-term business trade profits must be split into two separate businesses for tax purposes (FA12/S66):

• relating to products where the investment return to policyholders is to be taxed under the I-E regime (BLAGAB) as a separate business
• all other profits (non-BLAGAB) taxed as a single trade

In addition, the company must determine which part of income, gains and expenses must be allocated to BLAGAB and brought into the I-E profit computation.

A life company may have ‘Long-term Business Fixed Capital� (LTBFC) under the transition from the pre 2013 life tax regime and/or structural assets such as subsidiaries, which are not part of the trading activity. LAM11000.

A small number of life companies also write general insurance business with ‘compositeâ€� licences. Such licences are no longer granted to direct insurers. In these cases the accounts often separate out the general insurance business so apportionments are not necessary. »Ê¹ÚÌåÓýapp general insurance or ‘short-termâ€� business will be a separate trade for tax purposes FA12/S66.

»Ê¹ÚÌåÓýapp split of the life company into these elements can be illustrated as follows, with the definitions of the types of long-term business for tax purposes set out in LAM01140

Apportionments have to be made between BLAGAB and non-BLAGAB for both trade profit calculations and for calculation of BLAGAB investment income, gains and expenses. LAM05000

Given the regulatory prohibition on insurance companies engaging in any non-insurance related activities, any substantive activity outside the insurance trade, other than holding subsidiary companies and investments in associated companies and joint venture entities is unlikely- see PRA Rulebook Conditions Governing Business rule 9. This prohibition means that insurance groups will often set up separate service and/ or employment companies to ensure compliance with this rule. Regulatory restrictions may in some circumstances result in recharges at cost. This is further explained in LAM12200.