Corporation Tax

Insurance Process & 10% Rate of CT

The following is an outline of the practice adopted in relation to insurance proceeds received by companies qualifying for the 10% rate of corporation tax.:

Receipts from Insuring Goods

Where the insurance compensation is for loss of stock, is calculated on the basis of the cost of the goods to the company and does not contain any “loss of profit” element, the compensation is treated as income from goods and is included in the computation of profits which qualify for the 10% rate of tax. The premium payable in respect of such insurance is an allowable tax deduction.

Loss of Profits Insurance

Any insurance recovery for the pure loss of profits is treated as a trading receipt and not as arising from the sale of goods. It is chargeable to corporation tax at 40% subject to any appropriate deduction for expenses. The premium payable is respect of such insurance is an allowable tax deduction.

Loss of Tax Relief

Any insurance recover under a policy insuring against loss of tax relief is not regarded as a trading receipt for tax purposes and is not therefore chargeable to corporation tax. Any premium payable on such insurance is not an allowable deduction for tax purposes.