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D7.489 Modified CFC rules for insurance companies

The controlled foreign companies regime¹ highlight a number of issues for insurance companies that hold investments in overseas companies that may be CFCs. In particular when such companies hold these investments on behalf of their policyholders there is likely to be little risk that tax will escape charge. In the first instance annual movements in the value of these investments are already taxed as a component of the BLAGAB or non-BLAGAB trade profit and secondly the returns referable to BLAGAB on many such investments are already brought into the measure of I-E profit either as income or chargeable gain depending on the nature of the investment. Nevertheless insurance companies may suffer a significant compliance burden in demonstrating that such investments ought not to be subject to a CFC charge, the cost of which is ultimately borne by the policyholders.

As a result regulations