policyholder share of I-E

Question 1

Policyholder share I-E

Answer 1

The BLAGAB trade profits calculation is used to calculate the effective rate of tax for the I-E computation. The lower portion is deemed to represent shareholder profit, so is taxed at the corporation tax rate (currently 25%). The upper portion is deemed to represent policyholder profits and is taxed at the basic rate of income tax (currently 20%).

Unfortunately, the BLAGAB trade profit shown here is not the same as the BLAGAB trade profits used in the minimum profits test.

Question 2

Calc of adjusted trade profits

Answer 2

When calculating the trade profits for the “minimum profits test” the calculation was BLAGAB profit less any brought forward losses. Now we are looking at calculating the trade profits for the purpose of calculating the policyholder share of I-E. Therefore the calculation differs as it includes a deduction for the shareholder share of BLAGAB non taxable dividends.

Question 3

SH share of BLAGAB NTD

Answer 3

The relevant proportion of shareholder’s share is determined by the following formula:

Note; this formula is capped so it cannot produce a result greater than 1 or less than 0. In the event it does, we should use these boundary numbers.