Tax relief on management charges in pricing of BLAGAB funds

I wanted to set out a numerical example of the implications of management charges to BLAGAB unit linked funds and tax in pricing.  It's actually Phillip Govan's example but I'm going to borrow it.

Assume that there is a BLAGAB fund of £100,000 with a taxable investment reserve return of £10,000 and that there is an internal management charge to the fund of £1,000.  I'm assuming no expenses, that the BLAGAB unit linked fund is the entire business of an insurance company and that policyholder and shareholder tax rates are 0.

The question is what tax should the policyholder be charged.  It's tempting to say £2,000, that is the taxable return at 20%.

But then this gives an odd result when compared to the corporate tax charge.  The charge for the company is £2,000 (i.e £1,000 at 20% shareholder tax and £9,000 @ 20% policyholder tax). As the charge to the policyholder is also £2,000 the shareholder hasn't borne any of the tax charge.

An alternative way to do this would be to deduct tax from the BLAGAB unit linked fund net of the management charge.  Now the tax charge to the fund is £10,000 - 1,000 @ 20% = £1,800.  The charge on the corporate is £2,000 as before and the shareholder is now bearing tax of £200, which is  the management charge (which in my example is pure profit as I've set expenses to 0) @ 20%.

I think this option is superior to the take tax out of the fund at a flat 20% approach, in particular it recognises the approach of treating the BLAGAB unit linked fund as a stand alone company, meaning that the management charge is, effectively, an external expense.  I think most life companies effectively provide for tax relief on management charges but often it is disclosed as a reduction in management charge (i.e. the charge for a BLAGAB fund is 80% of the charge for a pension fund).