LAM10220 - Reinsurance: Circumstances when cedant not subject to imputation of investment return under S90(4): reinsurance arrangements entered into before 1 June 2018

For reinsurance arrangements entered into before 1 June 2018 exclusions to the operation of FA12/S90 and these are set out in SI1995/1730/Regulations 9 and 10. The main exclusions are:

• where the reinsurer is within the charge to UK I-E tax and the parties are members of the same group.
• where the reinsurer is located within the EEA, has no UK branch and is taxed on the equivalent of an I-E basis.
• where the risk being reinsured is only mortality or morbidity risk and doesn’t generate an investment return.
• policies made and reinsured before 29 November 1994 which are grandfathered.

The exclusions are fully set out in the guidance at old LAM 4D.111A to 4D.115 which should be consulted if necessary.

Section 90(6) switches off the imputation rule where both the reinsurance arrangement and the policies or contracts that are being reinsured were entered into before 29 November 1994.

Detailed guidance on the rules in SI1995/1730, which were amended by SI2003/2573, can be found at old LAM 4D.01 onwards and are not reproduced here. The references are to TA88/S442A which is the predecessor to FA12/S190