»Ê¹ÚÌåÓýapp

This section provides an overview of the main building blocks of the I-E profit computation:

Step	Method
Apportion profits, income and expenses based on commercial allocation	Companies determine a method of apportioning between BLAGAB and non-BLAGAB (where required): LAM05020
Calculate I-E profit or excess management expenses on BLAGAB business following steps in FA12/S73	Detailed rules prescribed for calculating income and chargeable gains LAM02060 (summary); LAM03000 Income and Gains; LAM04000 Expenses
Split I-E profit between shareholders� share and policyholders� share	I-E profit split between policyholders� share and shareholders� share LAM06020
Apply loss relief and other offsets such as group relief	Restriction on offsets: BLAGAB policyholder profit effectively ring fenced: Rules for offset against shareholder profits. See LAM15000
Calculate shareholder and policyholder tax	Total I-E profit split between policyholder rate and normal CT rate: LAM06000

»Ê¹ÚÌåÓýapp policy holdersâ€� share of BLAGAB I-E profit is substantially, but not completely, ring-fenced from the other profits of the company. »Ê¹ÚÌåÓýapp main drivers of I-E profit are generally loan relationships and chargeable gains (dividends being exempt). Life companies have large bond portfolios taxed on a mark to market basis. Fluctuations in market value can result in significant variations in I-E profits or produce excess management expenses. Capital gains (on property, shares and other investments) are also important and again can fluctuate depending on both market movements and realisations.

• »Ê¹ÚÌåÓýapp calculation of BLAGAB I-E profit is summarised in LAM02060 and explained further in LAM03000 and LAM04000
• LAM05000 explains how income and gains are allocated to BLAGAB for I-E calculations and allocated between BLAGAB and non-BLAGAB for trade profits calculations
• Other taxable profits broadly comprise almost everything else in the life company that is not included in BLAGAB. »Ê¹ÚÌåÓýappse will include:

1. non-BLAGAB trade profits taxed as a single trade. See LAM07100 and LAM05000 for apportionment rule
2. general insurance trade profits taxed as a separate trade (in a limited number of circumstances): normal rules apply see General Insurance Manual
3. non-trade profits: normal corporation tax principles apply: these could include profits derived from LTBFC as described in LAM08000

• Deductions against total profits will be principally loss relief and group relief. A summary of the loss and expense offset rules is included in the tax computation chapter at LAM08000
• »Ê¹ÚÌåÓýapp rules for the split of taxable profits between those taxed at the policyholder rates and those taxed as the normal CT rates are set out in LAM06000

»Ê¹ÚÌåÓýapp main components of a life insurance company tax computation are illustrated in the diagram in LAM08020 and this includes cross references to the relevant parts of this manual.