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LA 8: Remaining refundable credits: non-resident withholding tax
or “How to use or get a refund for leftover non-resident withholding tax credits”
You could also call this:

“Special tax credit rules for life insurance companies”

If you’re a life insurer, the way your tax credits work is a bit special. Your total tax credit is split between two parts of your business: the policyholder base and the shareholder base. This split happens according to rules in another part of the law.

You might still owe income tax even if you have tax credits. This can happen in two ways:

  1. If the tax credit for your policyholder base is less than the tax you owe on policyholder income.
  2. If the tax credit for your shareholder base is less than the tax you owe on shareholder income.

The amount you still owe is the total of these two differences. You pay this when you pay your final tax bill for the year.

When you use your tax credits, there are some rules to follow:

  1. You use the credits for each base (policyholder or shareholder) only for that base’s tax. You can’t use credits from one base to pay tax for the other base.
  2. If you have more tax credits than you need for either base, you use them in a specific order set by the law.
  3. If you still have credits left after paying all your tax, you need to follow the rules about what to do with leftover credits.

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Next up: LA 9: Use of tax credits

or “How tax credits can be used and their limitations”
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Part L Tax credits and other credits
General rules for tax credits

LA 8BGeneral rules particular to life insurers

  1. For the purposes of this subpart, a life insurer’s total tax credit is apportioned between their policyholder base and shareholder base, to the extent to which section EY 4 (Apportionment of income of particular source or nature, and of tax credits) applies and apportions the credit.

  2. Despite section LA 3,—

  3. a life insurer has an unsatisfied income tax liability to the extent to which—
    1. the tax credit apportioned to their policyholder base is less than their schedular income tax liability for schedular policyholder base income (the policyholder base income tax liability):
      1. the tax credit apportioned to their shareholder base is less than their income tax liability for the tax year, calculating their income tax liability (the shareholder base income tax liability) as if they only had shareholder base income and allowable deductions:
      2. the amount of unsatisfied income tax liability is the total of the difference, if any, described in paragraph (a)(i) and the difference, if any, described in paragraph (a)(ii):
        1. the amount of unsatisfied income tax liability under paragraph (b) is satisfied when the life insurer pays their terminal tax for the tax year.

          1. Despite section LA 4,—

          2. if the tax credit apportioned to the policyholder base or the shareholder base is greater than the relevant base income tax liability described in subsection (2)(a)(i) or (ii), the tax credit is used, in the order prescribed in section LA 4(1), to satisfy the relevant base income tax liability. There is no cross-crediting:
            1. tax credits not used under paragraph (a) are treated as remaining tax credits referred to in section LA 4(2) and the life insurer must deal with the credits under section LA 5.

              Notes
              • Section LA 8B: inserted, on , by section 310(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).