Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

Status: This chapter was amended on 31 December 2020 as a result of Brexit. However, it is subject to the FCA Prudential Transitional Direction, which means that firms should not comply with these provisions yet. Instead, firms must follow this link and continue to comply with pre-IP completion day requirements (unless specified otherwise in the Direction). To see a full list of Handbook modules affected, please see Section B of the Annex to the Direction.

MIPRU 4.3 Calculation of annual income

Annual income


This section contains provisions relating to the calculation of annual income for the purposes of:

  1. (1)

    the limits of indemnity for professional indemnity insurance; and

  2. (2)

    the capital resources requirements.


'Annual income' is the annual income given in the firm's most recent annual financial statement from the relevant regulated activity or activities.


For a firm which carries on insurance distribution activity4 or home finance mediation activity1, annual income is the amount of all brokerage, fees, commissions and other related income (for example, administration charges, overriders, profit shares) due to the firm in respect of or in relation to those activities. But it does not include income generated from carrying on any home finance mediation activity for:3

  1. (1)

    second charge regulated mortgage contracts; or3

  2. (2)

    legacy CCA mortgage contracts.3

  1. (1)

    The purpose of the rule on annual income that applies to insurance intermediaries and mortgage intermediaries is to ensure that the capital resources requirement is calculated on the basis only of brokerage and other amounts earned by a firm which are its own income.

  2. (2)

    Annual income includes commissions and other amounts the firm may have agreed to pay to other persons involved in a transaction, such as sub-agents or other intermediaries.

  3. (3)

    A firm's annual income does not, however, include any amounts due to another person (for example, the product provider) which the firm has collected on behalf of that other person.


If a firm is a principal, its annual income includes amounts due to its appointed representative in respect of activities for which the firm has accepted responsibility.


If a firm is a network, it should include the relevant income due to all of its appointed representatives in its annual income.

Annual income for home finance administration11


For the purposes of the calculation of the capital resources of a firm carrying on home finance administration 1only with all the assets it administers off balance sheet, annual income is the sum of:

  1. (1)

    revenue (that is, commissions, fees, net interest income, dividends, royalties and rent); and

  2. (2)


  3. (3)

    arising in the course of the ordinary activities of the firm, less profit:

    1. (a)

      on the sale or termination of an operation;

    2. (b)

      arising from a fundamental reorganisation or restructuring having a material effect on the nature and focus of the firm's operation; and

    3. (c)

      on the disposal of fixed assets, including investments held in a long-term portfolio.


2In the calculation of the capital resources of a firm that carries on any home finance administration activity, the annual income does not include annual income from:3

  1. (1)

    second charge regulated mortgage contracts; or3

  2. (2)

    legacy CCA mortgage contracts.3

Annual income: periods of less than 12 months


If the firm's most recent annual financial statement does not cover a 12 month period, the annual income is taken to be the amount in the statement converted, proportionally, to a 12 month period.

Annual income: no financial statements


If the firm does not have annual financial statements, the annual income is to be taken from the forecast or other appropriate accounts which the firm has submitted to the appropriate regulator.