Income and Corporation Taxes Act 1988

460 Exemption from tax in respect of life or endowment business. U.K.

(1) M1 Subject to subsection (2) below, a [F1 friendly society] shall, on making a claim, be entitled to exemption from F2 . . . corporation tax (whether on income or chargeable gains) on its profits arising from life or endowment business.

(2) Subsection (1) above—

(a) M2 shall not, subject to section 462, exempt a [F3 registered friendly society] registered after 31st December 1957 which at any time in the period of three months ending 3rd May 1966 entered into any transaction in return for a single premium, being a transaction forming part of its life or endowment business;

[F4 (aa) shall not, subject to section 462, exempt an incorporated friendly society which, before its incorporation, was a registered friendly society such as is mentioned in paragraph (a) above;]

(b) M3 shall not apply to profits arising from [F5 gross roll-up business];

(c) M4 shall not apply to profits arising from life or endowment business consisting—

[F6 (zai) where the profits relate to contracts made on or after the day on which the Finance Act 1995 was passed, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £270 or of the granting of annuities of annual amounts exceeding £156;]

[F7 (ai) where the profits relate to contracts made on or after the day on which the Finance Act 1991 was passed [F8 but before the day on which the Finance Act 1995 was passed], of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £200 or of the granting of annuities of annual amounts exceeding £156;]

(i) where the profits relate to contracts made after [F9 31st August 1990 but before the day on which the Finance Act 1991 was passed], of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed [F10 £150] or of the granting of annuities of annual amounts exceeding £156;

[F11 (ia) where the profits relate to contracts made after 31st August 1987 but before 1st September 1990, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £100 [F12 or of the granting of annuities of annual amounts exceeding £156].]

(ii) where the profits relate to contracts made after 13th March 1984 but before 1st September 1987, of the assurance of gross sums exceeding £750 or of the granting of annuities of annual amounts exceeding £156;

(iii) where the profits relate to contracts made before 14th March 1984, of the assurance of gross sums exceeding £500 or of the granting of annuities of annual amounts exceeding £104;

[F13 (ca) shall not apply to so much of the profits arising from life or endowment business as is attributable to contracts for the assurance of gross sums made on or after 20th March 1991 and expressed at the outset not to be made in the course of tax exempt life or endowment business;][F14 and]

[F15 (cb) F16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(d) M5 as respects other life or endowment business (“tax exempt life or endowment business”), has effect subject to the following provisions of this Chapter.

(3) M6 In determining for the purposes of [F17 [F18 subsection (2)(c)(zai), (ai),] (i) or (ia)] above the total premiums payable in any period of 12 months—

(a) where those premiums are payable more frequently than annually, there shall be disregarded an amount equal to 10 per cent. of those premiums; and

(b) so much of any premium as is charged on the ground that an exceptional risk of death [F19 or disability] is involved shall be disregarded;

and in applying the limit of £156 in [F20 [F18 subsection (2)(c)(zai), (ai),] (i) or (ia)] above, any bonus or addition declared upon an annuity shall be disregarded.

(4) In applying the limits referred to in subsection (2)(c)(ii) and (iii) above, any bonus or addition which either is declared upon an assurance of a gross sum or annuity or accrues upon such an assurance by reference to an increase in the value of any investments shall be disregarded.

[F21 (4A) Subsection (4B) below applies to contracts for the assurance of gross sums under tax exempt life or endowment business made after 31st August 1987 and before the day on which the [F22 the Finance Act 1995] was passed.

(4B) Where the amount payable by way of premium under a contract to which this subsection applies is increased by virtue of a [F23 variation made—

(a) in the period beginning with 25th July 1991 and ending with 31st July 1992, or

(b) in the period beginning with the day on which the Finance Act 1995 was passed and ending with 31st March 1996,

the contract shall, for the purposes of subsection (2)(c) above, be treated, in relation to any profits relating to it as varied, as made at the time of the variation.]]

(5) M7 A [F24 friendly society] is within this subsection if its rules make no provision for it to carry on life or endowment business consisting of the assurance of gross sums exceeding £2,000 or of the granting of annuities of annual amounts exceeding £416.

(6) M8 In the case of a [F24 friendly society] within subsection (5) above—

(a) subsection (2)(c)(iii) above shall have effect with the substitution of references to £2,000 and £416 respectively for the references to £500 and £104; and

(b) references in this Chapter to tax exempt life or endowment business shall be construed accordingly.

(7) M9 Where at any time a [F24 friendly society] within subsection (5) above amends its rules so as to cease to be within that subsection, any part of its life or endowment business consisting of business which—

(a) relates to contracts made before that time; and

(b) immediately before that time was tax exempt life or endowment business,

shall thereafter continue to be tax exempt life or endowment business for the purposes of this Chapter.

(8) Where at any time a [F24 friendly society] not within subsection (5) above amends its rules so as to bring itself within that subsection, any part of its life or endowment business consisting of business which—

(a) related to contracts made before that time; and

(b) immediately before that time was not tax exempt life or endowment business,

shall thereafter continue not to be tax exempt life or endowment business for the purposes of this Chapter.

(9) Where at any time a [F24 friendly society] not within subsection (5) above acquires by way of transfer of engagements or amalgamation from another [F24 friendly society] any life or endowment business consisting of business which—

(a) relates to contracts made before that time; and

(b) immediately before that time was tax exempt life or endowment business,

that business shall thereafter continue to be tax exempt life or endowment business for the purposes of this Chapter.

(10) Where at any time a [F24 friendly society] within subsection (5) above acquires by way of transfer of engagements or amalgamation from another [F24 friendly society] any life or endowment business consisting of business which—

(a) relates to contracts made before that time; and

(b) immediately before that time was not tax exempt life or endowment business,

that business shall thereafter continue not to be tax exempt life or endowment business for the purposes of this Chapter.

[F25 (10A) [F26 Where at any time an insurance business transfer scheme has effect to transfer to a friendly society long-term business,] any life or endowment business which relates to contracts included in the transfer [F27 , other than any to which subsection (11) or (12) below applied immediately before the transfer had effect,] shall not thereafter be tax exempt life or endowment business for the purposes of this Chapter.]

[F28 (10B) F29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(11) M10 Where at any time a [F30 friendly society] ceases F31 . . . by virtue of [F30 section 91 of the Friendly Societies Act 1992] (conversion into company) to be registered under [F32 that Act], any part of its life or endowment business consisting of business which—

(a) relates to contracts made before that time; and

(b) immediately before that time was tax exempt life or endowment business,

shall [F33 continue to be exempt from corporation tax (whether on income or chargeable gains) on profits arising from it.]

[F34 (12) Where at any time an insurance company acquires by way of transfer of engagements from a friendly society any life or endowment business consisting of business which—

(a) relates to contracts made before that time; and

(b) immediately before that time was tax exempt life or endowment business,

that business shall continue to be exempt from corporation tax (whether on income or chargeable gains) on profits arising from it.

(13) But if any contracts constituting or forming part of the business of a company covered by subsection (11) or (12) above are varied during an accounting period of the company so as to increase the premiums payable under them, the business relating to those contracts is not exempt from corporation tax for that or any subsequent accounting period.

(14) For the purposes of the Corporation Tax Acts any part of a company's business which is exempt from corporation tax by virtue of subsection (11) or (12) above shall be treated as a separate business from any other business carried on by the company.]

[F35 (15) The Treasury may by regulations provide that, where any part of the business of a company is exempt from corporation tax by virtue of subsection (11) or (12) above, the Corporation Tax Acts have effect subject to such modifications (or exceptions) as the Treasury consider appropriate.

(16) Regulations under subsection (15) above—

(a) may make different provision for different cases,

(b) may include any incidental, supplementary, consequential or transitional provisions which the Treasury consider appropriate, and

(c) may include retrospective provision.]

Textual Amendments

F1 Words in s. 460(1) substituted (19.2.1993) by Finance (No. 2) Act 1992 (c. 48), s. 56, Sch. 9 para. 5(2); S.I. 1993/236, art.2

F2 Words in s. 460(1) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 80, Sch. 3 Pt. 1 (with Sch. 2)

F3 Words in s. 460(2)(a) substituted (19.2.1993) by Finance (No. 2) Act 1992 (c. 48), s. 56, Sch. 9 para. 5(3)(a); S.I. 1993/236, art.2

F4 S. 460(2)(aa) inserted (19.2.1993) by Finance (No. 2) Act 1992 (c. 48), s. 56, Sch. 9 para. 5(3)(b); S.I. 1993/236, art.2

F5 Words in s. 460(2) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 40(a) (with Sch. 7 Pt. 2)

F6 S. 460(2)(c)(zai) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 10 para. 1(2)

F7 S. 460(2)(ai) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(3)

F8 Words in s. 460(2)(c)(ai) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 10 para. 1(3)

F9 Words in s. 460(2)(c)(i) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(4)

F10 1990 s.49(1)(a) Previously £100

F11 1990 s.49(1)(b).

F12 Words in s. 460(2)(c)(ia) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(5)

F13 S. 460(2)(ca) and word "and" substituted for word "and" by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(6)

F14 Word at the end of s. 460(2)(ca) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 40(b) (with Sch. 7 Pt. 2)

F15 S. 460(2)(cb) inserted (6.4.2001) by Finance Act 2001 (c. 9), s. 76, Sch. 25 para. 8(1)

F16 S. 460(2)(cb) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 40(c), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F17 Words in s. 460(3) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(7)(a)

F18 Words in s. 460(3) substituted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 10 para. 1(4)

F19 Words in s. 460(3)(b) inserted (retrospectively) by Finance Act 2003 (c. 14), s. 172(5)(6)

F20 Words in s. 460(3) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(7)(b)

F21 S. 460(4A)(4B) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(8)

F22 Words in s. 460(4A) substituted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 10 para. 1(5)

F23 Words in s. 460(4B) substituted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 10 para. 1(6)

F24 Words in s. 460(5)-(10) substituted (19.2.1993) by Finance (No. 2) Act 1992 (c. 48), s. 56, Sch. 9 para. 5(4); S.I. 1993/236, art. 2

F25 1990 s. 48 and Sch. 9 para. 6 in relation to transfers of business on or after 1 January 1990

F26 Words in s. 460(10A) substituted (1.12.2001 with effect in accordance with arts. 1(2)(a), 32(5) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 32(2)

F27 Words in s. 460(10A) inserted (retrospectively for specified purposes, and otherwise with effect in accordance with Sch. 12 para. 6(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 12 paras. 1(2), 6(1)(3)

F28 S. 460(10B) inserted (1.12.2001 with effect in accordance with arts. 1(2)(a), 32(5) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 32(3)

F29 S. 460(10B) repealed (with effect in accordance with Sch. 9 para. 17(1) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 9 para. 1(2)(d), Sch. 27 Pt. 2(9), Note

F30 Words in s. 460(11) substituted (19.2.1993) by Finance (No. 2) Act 1992 (c. 48), s. 56, Sch. 9 para. 5(5); S.I. 1993/236, art.2

F31 Words in s. 460(11) omitted (1.12.2001 with effect in accordance with art. 1(2)(a) of the amending S.I.) by virtue of The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 32(4)(a)

F32 Words in s. 460(11) substituted (1.12.2001 with effect in accordance with art. 1(2)(a) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 32(4)(b)

F33 Words in s. 460(11) substituted (retrospectively) by Finance Act 2007 (c. 11), Sch. 12 paras. 1(3), 6(1)

F34 S. 460(12)-(14) substituted for s. 460(12) (with effect in accordance with Sch. 12 para. 6(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 12 para. 1(4)

F35 S. 460(15)(16) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 12 para. 1(5)

Modifications etc. (not altering text)

C1 S. 460(2) modified (6.4.1999) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 31 (as inserted by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 25(5))

C2 S. 460(2) modified (12.8.2005 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 20; and that modifying reg. 20 is omitted (14.8.2007 with effect in accordance with reg. 1(2) of the revoking S.I.) by virtue of S.I. 2007/2134, regs. 1(1), 18(b)

Marginal Citations

M1 Source—1970 s.332(1). 1974 s.27(1)(a)

M2 Source—1970 s.333(1)

M3 Source—1970 s.332(2)(aa); 1987 (No.2) Sch.2 2(1)

M4 Source—1970 s.332(2)(a); 1984 s.73(2); 1987 s.30(2)

M5 Source—1970 s.332(2)(b)

M6 Source—1970 s.332(3); 1987 s.30(3)

M7 Source—1970 s.332(4); 1975 (No.2) s.52(1); 1980 s.57(1)

M8 Source—1970 s.332(5); 1975 (No.2) s.52(1); 1984 s.73(3)

M9 Source—1970 s.332(6)—(9); 1975 (No.2) s.52(1)

M10 Source—1970 s.332(10); 1976 s.48(1)