CII Certificate in Insurance - Financial Protection (R05) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

In the context of UK insurance, income generated by a life fund is typically subject to corporation tax. As of recent tax regulations, the standard corporation tax rate is 19%. However, specific types of income, particularly insurance premiums, can sometimes have different considerations, leading to confusion about taxation levels.

When considering the income deposits of £50 million, the typical corporation tax applies directly based on the net income after allowable deductions. The answer of £10 million, representing 20% of the £50 million, aligns with a common understanding of how taxable income might be applied at higher corporate rates in certain contexts.

Furthermore, insurance companies have specific tax regimes that govern their operations, and while life funds might have exemptions or reduced rates in certain cases, substantial income like this usually would not escape tax entirely. Thus, the computation of tax based on the given figure reflects a realistic application of taxation principles to the life insurance sector.