[2] The first basic categorisation of long-term insurance is between life and non-life business.
This is because a trading computation would tax Premiums plus Investment return minus Expenses minus Claims, and the expectation is that policy holder claims will be greater than the premiums they pay, as policy holders tend to hold life assurance policies as an investment that they hope will grow.
To ensure the Exchequer does not lose out in a year where a trading basis would yield greater tax revenues, E (expenses of management) is restricted so the I minus E cannot be lower than the measure of trading profits, with any restricted E being carried forward and deemed to be E of the subsequent period.
Capital redemption business written since 31 December 1937 has been treated as though it were BLAGAB from the first accounting period of a company ending on or after 1 July 1999.
The precise definition of what it constitutes is closely defined by statute so that only schemes approved by the Government qualify for the tax advantages.
Any Benefits taken that exceed this Lifetime allowance will be subject to a tax charge.