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Tax adjustments to the RITC or EFL

Before FA2000, FA93/S177 and FA94/S224 determined the extent to which the RITC premium or the EFL was deductible in computing profits for tax purposes (LLM3210). The ‘fair and reasonable� approach required by those provisions did not in practice work entirely satisfactorily. FA00/S107 introduced legislation governing the tax implications of sums added to RITC (LLM2060) or EFL (Estimate of Future Liabilities for run-off syndicates - LLM2070). This legislation, which operated at member level and applied also to general insurance companies, was again found to suffer from drawbacks, and was repealed by FA07/SCH11. There is more about the history of these provisions at GIM6150, GIM6190 and GIM6510.

See LLM3000+ for the detailed application of FA00/S107 and its successor FA07/SCH11. FA07/SCH11 and the related regulations SI2009/1926 potentially restrict RITC and EFL to an ‘appropriate amount�, which in the opinion of a ‘skilled person�, normally an actuary, is ‘not excessive�.