Hi, Ref: CMP Ch6, p.13 End of first bullet says: "Neither can you use BLAGAB XSE to offset BLAGAB trading profits." Second bullet says: "...unrelieved expenses are carried forward to the next year's BLABAG calculation. (This situation is known as being XSE..." Is this a contradiction?
For the taxation of BLAGAB business, there are two separate calculations that have to be performed: trading profits and "I-E". You cannot use carried forward XSE to reduce trading profits (ie the trading profits calculation ignores carried forward XSE). Carried forward XSE can, however, be used to reduce "I-E" in the next tax year, by increasing the "E" in that calculation.
Hi Lindsay, another question on xse. The company may become temporarily xse if weakening of valuation basis for supervisory returns occur. How would this be valid in s2 regime? Is it only for companies with transitional arrangements?
Hi - the trading profit is taken from the report and accounts now, so this should refer to the weakening of the liability valuation basis used for the statutory accounts (eg UK GAAP, which is based on Solvency I supervisory reporting reserves).
Lindsay, back on the first point - thanks for pointing out the XSE vs trading profits distinction. That has produced another question : What does "BLAGAB trading profits" refer to? I only see "I-E" in reference to BLAGAB, with first mention of "trading profits" being in the non-BLAGAB section.
As described in section 3 of Chapter 7, BLAGAB minimum profit is the BLAGAB trading profits (or "trade profits") - with some adjustments as set out in the Core Reading.
