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ICTA88/S774 (see CTM36900 and GIM5260) may also be relevant to reinsurance issues. This applies to certain reinsurance transactions between a dealing company and associated company. As noted at GIM5150+ an insurance company is a dealing company as profits on disposal of securities, land and so on are brought into the computation of trading income.

ICTA88/S774 does not require a Commissioners� order. It applies where a dealing company becomes entitled to a tax deduction, or makes a payment which is tax deductible to an associated company, in respect of the depreciation of the value of any right subsisting against an associated company, not being a dealing company. Where the depreciation or payment is not brought into account in computing the profits of the non-dealing company a charge can be raised on the non-dealing company equal to the amount of the deduction. A dealing company is defined in ICTA88/S774 one which deals in securities, land or buildings.

A mutual insurer will not be a dealing company within the meaning of ICTA88/S774. This is because it is clear from the context that in this definition ‘trading profits� means trading profits as measured for tax purposes, and gains on the sale of investments are not treated as part of the trading profits of a mutual for tax purposes (see GIM9050).