Income and Corporation Taxes Act 1988 (c. 1)

PART XII U.K. SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I U.K. INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

Modifications etc. (not altering text)

C1 Definitions in Pt. XII Chapter I (ss. 431-458) applied by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 16(7), 18

C2 Pt. XII Chapter I (ss. 431-458) applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 212(7)(b), 289 (with ss. 60, 101(1), 171, 201(3))

Insurance companies: general U.K.

Modifications etc. (not altering text)

C3 See 1989 ss.82-92 for changes made by Finance Act 1989 and 1990 ss.41-48 for changes made by Finance Act 1990.

431 Interpretative provisions relating to insurance companies. U.K.

(1) M1 This section has effect for the interpretation of this Chapter.

(2) M2 Unless the context otherwise requires—

• “annuity business” means the business of granting annuities on human life;

• “general annuity business” means any annuity business which is not pension business [F1 or overseas life assurance business], and “pension business” shall be construed in accordance with subsections (3) and (4) below;

• “annuity fund” means, where an annuity fund is not kept separately from the life assurance fund of an insurance company, such part of the life assurance fund as represents the liability of the company under its annuity contracts, as stated in its periodical returns;

• [F2 “basic life assurance business” means life assurance business other than general business, pension business and overseas life assurance business;

• [F3 “basic life assurance and general annuity business” means life assurance business other than pension business and overseas life assurance business;]

• “closing” and “opening”, in relation to a period of account, refer respectively to the position at the end and at the beginning of the period and, in relation to an accounting period, refer respectively to the position at the end and at the beginning of the period of account in which the accounting period falls;

• “closing liabilities” includes liabilities assumed at the end of the period of account concerned in consequence of the declaration of reversionary bonuses or a reduction in premiums;

• “industrial assurance business” has the same meaning as in the M3 Insurance Companies Act 1982;]

• “insurance company” means a company to which Part II of the Insurance Companies Act 1982 applies;

• [F4 “investment reserve”, in relation to an insurance company, means the excess of the value of the assets of the company’s long term business fund over the liabilities of the long term business;

• “liabilities”, in relation to an insurance company, means the liabilities of the company estimated as for the purposes of its periodical return (excluding any that have fallen due or been reinsured and any not arising under or in connection with policies or contracts effected as part of the company’s insurance business);]

• “life assurance business” includes annuity business;

• [F5 “linked assets” means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined;

• “long term business” has the meaning given by section 1(1) of the Insurance Companies Act 1982;

• “long term business fund” means the fund maintained by an insurance company in respect of its long term business or, where the company carried on both ordinary long term business and industrial assurance business, either or both (as the context may require) of the two funds so maintained;]

• “offshore income gain” has the same meaning as in Chapter V of Part XVII;

• [F6 “ordinary long term business” and “ordinary life assurance business” means respectively long term business and life assurance business that is not industrial assurance business;

• “overseas life assurance business”—

  (a)

  in the case of life assurance business other than reinsurance business, means business with a policy holder or annuitant not residing in the United Kingdom the policy or contract for which was effected at or through a branch or agency outside the United Kingdom where life assurance business is carried on; and

  (b)

  in the case of reinsurance business, means business the contract for which was effected at or through a branch or agency outside the United Kingdom where none, or no significant part, of the reinsurance business carried on relates to life assurance business with policy holders or annuitants residing in the United Kingdom;

• “overseas life assurance fund” shall be construed in accordance with Schedule 19AA;]

• “overseas life insurance company” means an insurance company having its head office outside the United Kingdom but carrying on life assurance business through a branch or agency in the United Kingdom; and

• “periodical return”, in relation to an insurance company, means a return deposited with the Secretary of State under Part II of the Insurance Companies Act 1982.

• [F7 “policy holders’ fraction” and “shareholders’ fraction” shall be construed in accordance with section 89of the Finance Act 1989.]

• [F8 “value”, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the company’s periodical return;

• “with-profits liabilities” means liabilities in respect of policies or contracts under which the policy holders or annuitants are eligible to participate in surplus;]

[F9 (2A) Linked assets shall be taken to be linked solely to long term business of a particular category if, and only if, all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.]

(3) M4 Subject to section 439, any division to be made between general annuity business, pension business and other life assurance business shall be made on the principle of—

(a) referring to pension business any premiums falling within subsection (4) below, together with the incomings, outgoings and liabilities referable to those premiums and the policies and contracts under which they are or have been paid;

(b) allocating to general annuity business all other annuity business [F10 that is not overseas life assurance business];

and references to “pension fund” and “general annuity fund” shall be construed accordingly, whether or not any such funds are kept separate from the insurance company’s life assurance fund.

(4) The premiums to be referred to pension business are those payable under contracts falling within one or other of the following descriptions, that is to say—

(a) M5 any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to income tax in respect of relevant earnings (as defined in section 623(1) and (2)) from a trade, profession, vocation, office or employment carried on or held by him (being a contract approved by the Board under section 620), or any substituted contract within the meaning of section 622(3);

(b) M6 any contract (including a contract of insurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme as defined in Chapter I of Part XIV, being a contract so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

(c) a M7 ny contract made under approved personal pension arrangements within the meaning of Chapter IV of Part XIV;

(d) any annuity contract entered into for the purposes of—

(i) M8 a scheme which is approved or is being considered for approval under Chapter I of Part XIV;

[F11 (ii) a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV;] or

(iii) a fund to which section 608 applies,

being a contract which is approved by the Board and made with the persons having the management of the scheme or fund (or those persons and a member of or contributor to the scheme or fund) and by means of which relevant benefits as defined by section 612(1) (but no other benefits) are secured;

(e) any annuity contract approved by the Board which is entered into in substitution for a contract within paragraph (d) above;

(f) M9 any contract with the trustees or other persons having the management of a scheme approved under section 620 or, subject to subsection (5) below, of a superannuation fund which was approved under section 208 of the 1970 Act, being a contract which—

(i) was entered into for the purposes only of that scheme or fund or, in the case of a fund part only of which was approved under section 208, for the purposes only of that part of that fund, and

(ii) (in the case of a contract entered into or varied after 1st August 1956) is so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme or fund (or the relevant part of the fund).

(5) [F12 Subsection (4)(f) ] above shall not apply to premiums payable under a contract where the fund in question was approved under section 208 of the 1970 Act unless—

(a) immediately before 6th April 1980 premiums paid under the contract with the trustees or other persons having the management of the fund fell within section 323(4) of that Act (premiums referable to pension business); and

(b) the terms on which benefits are payable from the fund have not been altered since that time; and

(c) section 608 applies to the fund.

(6) M10 In subsections (3) to (5) above “premium” includes any consideration for an annuity.

Textual Amendments

F1 1990 s.41and Sch.6 para.1(2)(a)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F2 1990 s.41and Sch.6 para.1(2)(b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F3 In s. 431(2): definition of "basic life assurance and general annuity business" inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 2

F4 1990 s.41and Sch.6 para.1(2)(b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F5 1990 s.41and Sch.6 para.1(2)(b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F6 1990 s.41and Sch.6 para.1(2)(b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F7 1989 s.84and Sch.8 para.1—with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).Repealed by 1990 s.132and Sch.19 Part IV—repeal deemed always to have had effect.

F8 1990 s.41and Sch.6 para.1(2)(b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F9 1990 s.41and Sch.6 para.1(3)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F10 1990 s.41and Sch.6 para.1(4)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F11 1989 s.75and Sch.6 paras.2and 18(1)—deemed to have come into force on 14March 1989.Previously

“a statutory scheme as defined by section 612(1);”.

F12 Words in s. 431(5) substituted (retrospectively) by Finance Act 1994 (c. 9), Sch. 17 para. 4

Modifications etc. (not altering text)

C4 S. 431(2) modified (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S.I. 1992/1655, regs. 1, 5(1)

C5 For application of definition see—1975 (No.2) s.58(10)—disposal of shares and securities.1988 Sch.19 para.5(3)—distributable income.

Marginal Citations

M1 Source—1970 s.323(1); 1973 s.40(7); 1982 s.58(7)

M2 Source—1970 s.323(2); 1970(F) Sch.5 Pt.III 11(4)

M3 1982 c. 50.

M4 Source—1970 s.323(3); 1970(F) Sch.5 Pt.III 11(5); 1981 s.41

M5 Source—1970 s.323(4)(a); 1970(F) Sch.5 Part III 11(3); 1978 s.26(5)

M6 Source—1970 s.323(4)(aa); 1970(F) Sch.5 Part III 11(1)

M7 Source—1970 s.323(4)(ab); 1987 (No.2) s.39(3)

M8 Source—1970 s.323(4)(ac), (ad); 1987 (No.2) Sch.3 16

M9 Source—1970 s.323(4)(b)

M10 Source—1970 s.323(4)

Yn ddilys o 21/07/2008

[F13 431ZA Election that assets not be foreign business assets U.K.

(1) An insurance company may, in its company tax return for the first accounting period of the company beginning on or after 1 January 2008 in which any of the assets of the company's long-term insurance fund would (apart from this section) be foreign business assets, elect that none of the assets of the company's long-term insurance fund are to be regarded for the purposes of this Act as being foreign business assets.

(2) The election has effect for that accounting period and all subsequent accounting periods of the company.

(3) An election under subsection (1) is irrevocable.]

Textual Amendments

F13 S. 431ZA inserted (with effect in accordance with Sch. 17 para. 10(6)(7) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 10(2)

[F14 431A Amendment of Chapter etc. U.K.

Where it is expedient to do so in consequence of the exercise of any power under the M11 Insurance Companies Act 1982, the Treasury may by order amend the provisions of this Chapter and any other provision of the Tax Acts so far as relating to insurance companies.]

Textual Amendments

F14 S. 431A inserted (1.1.1990) by Finance Act 1990 (c. 29), Sch. 6 paras. 2, 11(2) (with Sch. 6 para. 12)

Marginal Citations

M11 1982 c. 50.

Yn ddilys o 03/05/1994

[F15 431AA Relevant benefits for purposes of section 431(4)(d) and (e). U.K.

(1) Subsection (2) below applies where—

(a) section 431(4)(d)(i) applies, or

(b) section 431(4)(e) applies and the contract within section 431(4)(d) was entered into for the purposes of a scheme falling within section 431(4)(d)(i).

(2) In such a case, relevant benefits fall within this section if they correspond with benefits that could be provided by a scheme approved under Chapter I of Part XIV, and for this purpose—

(a) a hypothetical scheme (rather than any particular scheme) is to be taken, and

(b) benefits provided by a scheme directly (rather than by means of an annuity contract) are to be taken.

(3) Subsection (4) below applies where—

(a) subsection 431(4)(d)(ii) applies, or

(b) section 431(4)(e) applies and the contract within section 431(4)(d) was entered into for the purposes of a scheme falling within section 431(4)(d)(ii).

(4) In such a case, relevant benefits fall within this section if they correspond with benefits that could be provided by a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV, and for this purpose—

(a) a hypothetical scheme (rather than any particular scheme) is to be taken, and

(b) benefits provided by a scheme directly (rather than by means of an annuity contract) are to be taken.

(5) Subsection (6) below applies where—

(a) section 431(4)(d)(iii) applies, or

(b) section 431(4)(e) applies and the contract within section 431(4)(d) was entered into for the purposes of a fund falling within section 431(4)(d)(iii).

(6) In such a case, relevant benefits fall within this section if they correspond with benefits that could be provided by a fund to which section 608 applies, and for this purpose—

(a) a hypothetical fund (rather than any particular fund) is to be taken, and

(b) benefits provided by a fund directly (rather than by means of an annuity contract) are to be taken.]

Textual Amendments

F15 S. 431AA inserted (with application in accordance with s. 143(5) of the amending Act) by Finance Act 1994 (c. 9), s. 143(4)

432 Separation of different classes of business. U.K.

(1) M12 Where an insurance company carries on life assurance business in conjunction with insurance business of any other class, the life assurance business shall, for the purposes of the Corporation Tax Acts, be treated as a separate business from any other class of business carried on by the company.

(2) Where an insurance company carries on both ordinary life assurance business and [F16 industrial assurance] business, the business of each such class shall, for the purposes of the Corporation Tax Acts, be treated as though it were a separate business, and section 76 [F16 and where appropriate the provisions of this chapter] shall apply separately to each such class of business.

Textual Amendments

F16 1990 s.41and Sch.6 para.3(a), (b)on and after 1January 1990subject to the commencement provisions of paras.11and 12.Previously

“industrial life assurance”

in subs.(2)line 2.

Marginal Citations

M12 Source—1970 s.307

[F17 432A Apportionment of income and gains. U.K.

(1) This section has effect where—

(a) an insurance company carries on in any period both ordinary long term business and industrial assurance business, or life assurance business and other long term business, or more than one class of life assurance business, and

(b) it is necessary for the purposes of the Corporation Tax Acts to determine in relation to the period what parts of—

(i) income arising from the assets of the company’s long term business fund, or

(ii) gains or losses accruing on the disposal of such assets, are referable to any of the categories of business in question.

(2) The classes of life assurance business referred to in subsection (1) above are—

(a) pension business;

F18 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) overseas life assurance business; and

F18 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F19 (e) basic life assurance and general annuity business.]

(3) Income arising from, and gains or losses accruing on the disposal of, assets linked solely to ordinary long term business, industrial assurance business, life assurance business, long term business other than life assurance business, pension business or [F20 basic life assurance and general annuity business] shall be referable to the category of business concerned.

(4) Income arising from, and gains or losses accruing on the disposal of, assets of the overseas life assurance fund (and no other assets) shall be referable to overseas life assurance business.

(5) There shall be referable to any category of business (apart from overseas life assurance business) the relevant fraction of any income, gains or losses not directly referable to any of the appropriate categories of business.

(6) For the purposes of subsection (5) above “the relevant fraction”, in relation to a category of business, is the fraction of which—

(a) the numerator is the aggregate of—

(i) the mean of the opening and closing liabilities of the category, reduced by the mean of the opening and closing values of any assets directly referable to the category, and

(ii) the mean of the appropriate parts of the opening and closing amounts of the investment reserve; and

(b) the denominator is the aggregate of—

(i) the mean of the opening and closing liabilities of the long term business, reduced by the mean of the opening and closing values of any assets directly referable to any of the appropriate categories of business, and

(ii) the mean of the opening and closing amounts of the investment reserve.

(7) For the purposes of subsections (5) and (6) above—

(a) references to appropriate categories of business—

(i) where the category of business in question is ordinary long term business or industrial assurance business, are references to those categories of business;

(ii) where the category of business in question is life assurance business or long term business other than life assurance business, are references to those categories of business; and

(iii) where the category of business in question is pension business, [F21 or basic life assurance and general annuity business], are references to [F22 those categories of business]; and

(b) income, gains or losses are directly referable to a category of business if referable to the category by virtue of subsection (3) above and assets are directly referable to a category of business if income arising from the assets is, and gains or losses accruing on the disposal of the assets are, so referable.

(8) In subsection (6) above “appropriate part”, in relation to the investment reserve, means—

(a) where all of the liabilities of the long term business are linked liabilities, the part of that reserve which bears to the whole the same proportion as the amount of the liabilities of the category of business in question bears to the whole amount of the liabilities of the long term business,

(b) where any of the liabilities of the long term business are not linked liabilities but none (or none but an insignificant proportion) are with-profits liabilities, the part of that reserve which bears to the whole the same proportion as the amount of the liabilities of the category of business in question which are not linked liabilities bears to the whole amount of the liabilities of the long term business which are not linked liabilities, and

(c) in any other case, the part of that reserve which bears to the whole the same proportion as the amount of the with-profits liabilities of the category of business in question bears to the whole amount of the with-profits liabilities of the long term business;

and in this subsection “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.

(9) Where the category of business in question is a class of life assurance business, for the purposes of this section—

(a) “liabilities” does not include liabilities of the overseas life assurance business; and

(b) assets of the overseas life assurance fund and liabilities of the overseas life assurance business shall be left out of account in determining the investment reserve.

(10) Subsection (5) above shall not apply in relation to gains or losses accruing on disposals deemed to have been made by virtue of section 46 of the Finance Act 1990 except where it is necessary to determine what parts are referable to different categories of business within subsection (3)(b) of that section (and shall apply in that case subject to appropriate modifications). ]]

Textual Amendments

F17 1990 s.41and Sch.6 para.4on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F18 S. 432A(2)(b)(d) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 3(1), 18, Sch. 19 Pt. V, Note 3

F19 S. 432A(2)(e) added (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(1), 18

F20 Words in s. 432A(3) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(2), 18

F21 Words in s. 432A(7)(a)(iii) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(3)(a), 18

F22 Words in s. 432A(7)(a)(iii) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(3)(b), 18

Modifications etc. (not altering text)

C6 s. 432A modified (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S.I. 1992/1655, regs. 1, 6(1), 7(1), 8(1)

C7 Definition employed for purposes of 1990 s.46—annual deemed disposal of holdings of unit trusts etc. by insurance companies.

C8 S. 432A(8)(9) applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 212(6), 289, (with ss. 60, 101(1), 171, 201(3))

432B [F23 Apportionment of receipts brought into account. U.K.

(1) This section and sections 432C to 432E have effect where it is necessary in accordance with section 83 of the Finance Act 1989 to determine what parts of any items brought into account in the revenue account prepared for the purposes of the M13 Insurance Companies Act 1982 are referable to life assurance business or any class of life assurance business.

(2) Where in addition to the revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of any business carried on by a company there are prepared for the purposes of that Act revenue accounts relating to parts of the business, amounts referred to in sections 432C to 432E shall, so far as they relate to those parts, be ascertained by reference to the latter accounts rather than by reference to the former.

(3) Sections 432C and 432D apply where the business with which an account is concerned (“the relevant business”) relates exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus; and section 432E applies where the relevant business relates wholly or partly to other policies or contracts. ]

Textual Amendments

F23 1990 s.41 and Sch.6 para.4 on and after 1 January 1990 subject to the commencement provisions of paras.11 and 12.

Modifications etc. (not altering text)

C9 S. 432B modified by S.I. 1992/1655, reg. 9, as amended (with effect in accordance with reg. 1(2)(3) of the amending instrument) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), reg. 8, 1(1)

C10 ss. 432B-432E excluded (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S. I. 1992/1655, regs. 1,10

C11 S. 432B modified (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S.I. 1992/1655, regs. 1, 9(1)

Marginal Citations

M13 1982 c. 50.

432C [F24 Section 432B apportionment: income of non-participating funds. U.K.

(1) To the extent that the amount brought into account as income is attributable to assets linked solely to life assurance business, pension business or [F25 basic life assurance and general annuity business], it shall be referable to the category of business concerned.

(2) To the extent that that amount is attributable to assets of the overseas life assurance fund, it shall be referable to overseas life assurance business.

(3) There shall be referable to any category of business (apart from overseas life assurance business) the relevant fraction of so much of the amount brought into account as income as is not directly referable to any of the appropriate categories of business.

(4) For the purposes of subsection (3) above “the relevant fraction”, in relation to a category of business, is the fraction of which—

(a) the numerator is the mean of the opening and closing liabilities of the relevant business so far as referable to the category, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to the category; and

(b) the denominator is the mean of the opening and closing liabilities of the relevant business, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to any of the appropriate categories of business.

(5) For the purposes of subsections (3) and (4) above—

(a) references to appropriate categories of business—

(i) where the category of business in question is life assurance business, are references to that category of business and long term business other than life assurance business; and

(ii) where the category of business in question is pension business, [F26 or basic life assurance and general annuity business], are references to [F27 those categories of business]; and

(b) the part of the amount brought into account as income which is directly referable to a category of business is the part referable to the category by virtue of subsection (1) above and assets are directly referable to a category of business if such part of the amount brought into account as income as is attributable to them is so referable.

(6) Where the category of business in question is a class of life assurance business, for the purposes of this section “liabilities” does not include liabilities of the overseas life assurance business. ]

Textual Amendments

F24 1990 s.41 and Sch.6 para.4 on and after 1 January 1990 subject to the commencement provisions of paras.11 and 12.

F25 Words in s. 432C(1) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(4), 18

F26 Words in s. 432C(5)(a)(ii) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(5)(a), 18

F27 Words in s. 432C(5)(a)(ii) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(5)(b), 18

Modifications etc. (not altering text)

C12 Ss. 432B-432E excluded (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S.I. 1992/1655, regs. 110

432D [F28 Section 432B apportionment: value of non-participating funds. U.K.

(1) To the extent that the amount brought into account as the increase or decrease in the value of assets is attributable to assets linked solely to life assurance business, pension business or [F29 basic life assurance and general annuity business], or to assets of the overseas life assurance fund which are linked solely to overseas life assurance business, it shall be referable to the category of business concerned.

(2) There shall be referable to any category of business the relevant fraction of the amount brought into account as the increase or decrease in the value of assets except so far as the amount is attributable to assets which are directly referable to any of the appropriate categories of business.

(3) Subsections (4) and (5) (but not (6)) of section 432C shall apply for the purposes of this section as if—

(a) each of the references to a subsection of that section were a reference to the corresponding subsection of this section, and

(b) in subsection (5)—

(i) a reference to overseas life assurance business were included after each of the references to pension business in paragraph (a)(ii), and

(ii) each of the references in paragraph (b) to income were a reference to the increase or decrease in the value of assets. ]

Textual Amendments

F28 1990 s.41 and Sch.6 para.4 on and after 1 January 1990 subject to the commencement provisions of paras.11 and 12.

F29 Words in s. 432D(1) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 3(6), 18

Modifications etc. (not altering text)

C13 Ss. 432B-432E excluded (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S. I. 1992/1655, regs. 1,10

432E [F30 Section 432B apportionment: participating funds. U.K.

(1) The part of the net amount of the items referred to in subsection (1) of section 83 of the Finance Act 1989 (that is to say the income referred to in paragraph (a) of that subsection increased or reduced by the increase or reduction in the value referred to in paragraph (b)) which is referable to a particular category of business shall be—

(a) the amount determined in accordance with subsection (2) below, or

(b) the amount determined in accordance with subsection (3) below,

whichever is the greater.

(2) For the purposes of subsection (1) above there shall be determined the amount which is such as to secure—

(a) in a case where the relevant business is mutual business, that

,and

(b) in any other case, that

where—

• S is the surplus of the relevant business;

• AS is so much of that surplus as is allocated to persons entitled to the benefits provided for by the policies or contracts to which the relevant business relates;

• CAS is so much of the surplus so allocated as is attributable to policies or contracts of the category of business concerned; and

• CS is so much of the surplus of the relevant business as would remain if the relevant business were confined to business of the category concerned.

(3) For the purposes of subsection (1) above there shall also be determined the aggregate of—

(a) the applicable percentage of what is left of the mean of the opening and closing liabilities of the relevant business so far as referable to the category of business concerned after deducting from it the mean of the opening and closing values of any assets of the relevant business linked solely to that category of business, and

(b) the part of the net amount mentioned in subsection (1) above that is attributable to assets linked solely to that category of business.

(4) For the purposes of subsection (3) above “the applicable percentage”, in any case, is such percentage as may be determined for that case by or in accordance with an order made by the Treasury.

(5) Where the part of the net amount referable to a particular category or categories of business (“the subsection (3) category or categories”) is the amount determined in accordance with subsection (3) above, the amount determined in accordance with subsection (2) above in relation to any other category (“the relevant category”) shall be reduced by—

where—

• X is the excess of the amount determined in accordance with subsection (3) above in the case of the subsection (3) category (or each of them) over the amount determined in its case (or the case of each of them) in accordance with subsection (2) above;

• Y is so much of the surplus of the relevant business as is allocated to persons entitled to the benefits provided for by policies or contracts of the relevant category; and

• Z is so much of the surplus of the relevant business as is allocated to persons entitled to the benefits provided for by policies or contracts of the category (or each of the categories) which is not a subsection (3) category.

(6) Where the category of business concerned is overseas life assurance business—

(a) if the part of the income brought into account that is attributable to assets of the overseas life assurance fund not linked solely to overseas life assurance business is greater than the amount arrived at under subsection (3)(a) above, this section shall have effect as if that part of that income were the amount so arrived at; and

(b) the amount which, apart from this paragraph, would be the part of the net amount referable to that category of business shall be—

(i) reduced by the part of the net amount attributable to distributions of companies resident in the United Kingdom relating to assets of the company’s overseas life assurance fund, and

(ii) increased by the amount which is income of the relevant business by virtue of section 441A.

Textual Amendments

F30 1990 s.41 and Sch.6 para.4 on and after 1 January 1990 subject to the commencement provisions of paras.11 and 12.

Modifications etc. (not altering text)

C14 Ss. 432B-432E excluded (31.7.1992 with effect as mentioned in reg. 1 of the amending S.I.) by S.I. 1992/1655, regs. 1,10

C15 For orders see Part III Vol.5 (under

“Life assurance apportionment of participating funds: applicable percentage”).

433 Profits reserved for policy holders and annuitants. U.K.

M14 Where the profits of an insurance company in respect of its life assurance business are, for the purposes of this Act, computed in accordance with the provisions of this Act applicable to Case Iof Schedule D, such part of those profits as belongs or is allocated to, or is reserved for, or expended on behalf of, policy holders or annuitants shall be excluded in making the computation, but if any profits so excluded as being reserved for policy holders or annuitants cease at any time to be so reserved and are not allocated to or expended on behalf of policy holders or annuitants, those profits shall be treated as profits of the company for the accounting period in which they ceased to be so reserved. F31

Textual Amendments

F31 Repealed by 1989 ss.84and 187and Schs.8 para.2and 17 Part IV —deemed to have come into force on 14March 1989.For effect see s.84(6).

Marginal Citations

M14 Source—1970 s.309

434 Franked investment income etc. U.K.

(1) M15 Section 208 shall not prevent franked investment income of a company resident in the United Kingdom which carries on life assurance business from being taken into account as part of the profits in computing trading income in accordance with the provisions applicable to Case I of Schedule D.

(2) In ascertaining for the purposes of section 393 or [F32 393A(1)] whether and to what extent a company has incurred a loss on its life assurance business, any profits derived from the investments of its life assurance fund (including franked investment income of a company so resident) shall be treated as part of the profits of that business.

[F33 (3) Subject to sections 437 and 438, the [F34 policy holders’ share] of the franked investment income from investments held in connection with a company’s life assurance business shall not be used under Chapter V of Part VI to frank distributions made by the company and, accordingly, for the purposes of that Chapter (other than the application of franked investment income under section 241), in relation to any unrelieved income of a company falling within subsection (1) above, the surplus of franked investment income for any accounting period means the aggregate of—

(a) the [F34 policy holders’ share] of that franked investment income [F35 from investments held in connection with the company’s life assurance business]; and

(b) the amount determined under section 241(3) on the basis that the reference therein to franked investment income is a reference [F36 to that income excluding the amount within paragraph (a) above].

(3A) The policy holders’ [F37 share] of the franked investment income from investments held in connection with a company’s life assurance business shall be left out of account in determining, under subsection (7) of section 13, the franked investment income forming part of the company’s profits for the purposes of that section.]

(4) M16 Subject to subsection (5)below, the specified part shall be, in the case of any unrelieved income, the same fraction of it as the fraction which, on a computation of the profits of the company in respect of its life assurance business in accordance with the provisions applicable to Case Iof Schedule D (whether or not the company is in fact charged to tax under that Case for the relevant accounting period or periods),would be connoted by the words in section 433 “such part of those profits as belongs or is allocated to, or is reserved for, or expended on behalf of, policy holders or annuitants”. F38

(5) If the income exceeds the profits as computed in accordance with the provisions applicable to Case Iof Schedule D other than section 433, the specified part shall be that fraction of the income so far as not exceeding the profits, together with the amount of the excess. F38

(6) M17 For the purposes of section 239 the profits charged to corporation tax for any accounting period (as defined in subsection (6) of that section) shall be reduced by deducting [F39 the policy holders’ share of the relevant profits].

[F40 (6A) For the purposes of this section—

(a) “the policy holders’ share” of any franked investment income is so much of that income as is not the shareholders’ share within the meaning of section 89 of the Finance Act 1989, and

(b) “the policy holders’ share of the relevant profits” has the same meaning as in section 88 of that Act.]

(7) M18 For the purposes of subsection [F41 (3)] above “unrelieved income” means income which has not been excluded from charge to tax by virtue of any provision and against which [F42 disregarding relief under section 242] no relief has been allowed by deduction or set-off.

(8) M19 Where subsection (3) or (6) above would deny to a company any relief to which it would have been entitled if it had been charged to tax in respect of its life assurance business under Case I of Schedule D, corresponding relief shall be afforded to the company by repayment of, or set-off against, corporation tax or by payment of tax credit comprised in franked investment income from investments held in connection with that business.

Textual Amendments

F32 Words in s. 434(2) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para.15

F33 1989 s.84and Sch.8 para.3(1),and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).Previously

“(3) Any such part of the franked investment income from investments held in connection with a company's life assurance business as is specified in subsection (4) below (“the specified part”) shall not be used under Chapter V of Part VI to frank distributions made by the company.”.

F34 1990 s.45(4)(a).Previously

“policy holders' fraction”.

F35 1990 s.45(4)(b).

F36 1990 s.45(4)(c).Previously

“only to the shareholders' fraction of that income.”.

F37 1990 s.45(5).Previously

“fraction”.

F38 Repealed by 1989 ss.84and 187and Sch.8 para.3(2)and Sch.17 Part IVwith respect to accounting periods beginning on or after 1January 1990.

F39 1990 s.45(6).Previously

“therefrom [the policyholders' fraction thereof (1989 s.84and Sch.8 para.3(3),and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).Previously

“such fraction thereof as is equal to the fraction of the profits of the company in respect of its life assurance business which under section 433 is excluded from the computation of those profits or would be so excluded if the profits were computed in accordance with the provisions applicable to Case I of Schedule D.”.)].”.

F40 1990 s.45(7).

F41 1989 s.84and Sch.8 para.3(4),and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).Previously

“(4).”

F42 1989 s.84and Sch.8 paras.3(4), 4,respectively and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).

Modifications etc. (not altering text)

C16 S. 434 amended (27.7.1993) by 1993 c. 34, s. 78(6)(11)

C17 S. 434(2) restricted (retrospectively) by Finance (No. 2) Act 1992 (c. 48), s. 65(2)(a)(5)(6)

Marginal Citations

M15 Source—1970 s.308(1), (2)

M16 Source—1970 s.310(6)

M17 Source—1972 Sch.18 2(4); 1987 (No.2) s.75(1)(b)

M18 Source—1970 s.310(7); 1984 s.18(5)

M19 Source—1972 Sch.18 2(5)

[F43 434A Limitations on loss relief and group relief. U.K.

(1) In the case of a company carrying on life assurance business, no relief shall be allowable under Chapter II (loss relief) or Chapter IV (group relief) of Part X against the policy holders’ [F44 share] of the relevant profits for any accounting period.

(2) For the purposes of subsection (1) above, [F44 “the policy holders’ share of the relevant profits” has the same meaning as in section 88 of the Finance Act 1989.]]

Textual Amendments

F43 1989 s.84and Sch.8 paras.3(4), 4,respectively and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).

F44 1990 s.45(8).Previously

“fraction”

and

“the relevant profits of a company for an accounting period are the total profits of its life assurance business, less any deduction due under section 76, but before allowing any relief under Chapter II or Chapter IV of Part X”

respectively.

435 Taxation of gains reserved for policy holders and annuitants. U.K.

(1) M20 This section has effect in relation to any accounting period of an insurance company carrying on life assurance business and for the purposes of this section—

(a) the life assurance gains are such part of the amount to be included, in accordance with section 345,in the company’s total profits as is attributable to gains from investments held in connection with the company’s life assurance business;

(b) the policy holders’ share of the life assurance gains or of the relevant reliefs is such fraction thereof as is equal to the fraction of the profits of the company in respect of its life assurance business which, under section 433,is excluded from the computation of those profits or would be so excluded if the profits were computed in accordance with the provisions applicable to Case Iof Schedule D; and

(c) the relevant reliefs are such of the sums to be deducted from or set off against the company’s profits as are deducted from or set off against the life assurance gains.

(2) M21 Corporation tax charged on so much of the policy holders’ share of the life assurance gains as remains after setting against it the amounts referred to in subsection (3)(c)below shall be calculated on the basis of a rate of corporation tax of 30per cent.

(3) For the purposes of this section there shall be ascertained the policy holders’ share and the remainder (“the residual part”)of the life assurance gains and of the relevant reliefs; and—

(a) the residual part of the relevant reliefs shall be set against the residual part of those gains; and

(b) if the residual part of the relevant reliefs exceeds the residual part of those gains, the excess (or so much of it as does not, together with the policy holders’ share of the relevant reliefs, exceed the policy holders’ share of those gains)shall be added to the policy holders’ share of the relevant reliefs; and

(c) the policy holders’ share of the relevant reliefs, with any addition made under paragraph (b)above, shall be set against the policy holders’ share of the life assurance gains. F45

Textual Amendments

F45 Repealed by 1989 ss.84and 187and Schs.8 para.5and 17 Part IV,and subject to s.84(6)has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).

Marginal Citations

M20 Source—1974 s.26(1), (4)

M21 Source—1974 s.26(2), (3); 1987 (No.2) s.75(2), (3)

436 Annuity business and pension business: separate charge on profits. U.K.

(1) M22 Subject to the provisions of this section, profits arising to an insurance company from F46 . . . pension business shall be treated as income within Schedule D, and be chargeable under Case VI of that Schedule, and for that purpose—

(a) [F47 that business] shall be treated separately, and

(b) subject to paragraph (a) above, and to subsection (3) below, the profits therefrom shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(2) Subsection (1) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its ordinary life assurance business.

(3) M23 In making the computation referred to in subsection (1) above—

(a) [F48 sections 82 and 83 of the Finance Act 1989]shall apply with the necessary modifications and in particular with the omission of all references to policy holders (other than holders of policies referable to pension business) [F49 and of the words “tax or” in section 82(1)(a)];

(b) no deduction shall be allowed in respect of any expenses of management deductible under section 76; F50

(c) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from pension business F51 . . .in any previous accounting period or year of assessment;

(d) where the computation in question is of profits arising to an insurance company from pension business—

[F52 (i) group income so far as referable to pension business shall be deducted from the receipts to be taken into account,]

(ii) annuities shall be deductible notwithstanding section 337(2);

and the company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to pension business; and

(e) distributions which are not qualifying distributions shall not be taken into account where the computation in question is of the profits arising to an insurance company or overseas life insurance company from F53 . . . pension business.

(4) M24 Section 396 shall not be taken to apply to a loss incurred by a company on its F54 . . . pension business.

(5) M25 Nothing in section 128 or 399(1) shall affect the operation of this section.

Textual Amendments

F46 Words in s. 436(1) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, 123, Sch. 7 paras. 4(1)(a), 18, Sch. 19 Pt.V Note 3

F47 Words in s. 436(1)(a) substituted (for accounting periods beginning on or after 1. 1. 1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 4(1)(b), 18

F48 1989 s.84and Sch.8 para.6and, subject to s.84(6)deemed to have come into force on 14March 1989.Previously

“section 433”.

F49 1990 s.43(2).Subject to 1989 s.84(6)this amendment has effect with respect to accounting periods beginning on or after 1January 1990.

F50 Words repealed by 1989 ss.87(4)and 187and Sch.17 Part IVwith respect to accounting periods beginning on or after 1January 1990. (See 1989 s.87(5)in relation to straddling periods).

F51 Words in s. 436(3)(c) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 4(2)(a), 18 Sch. 19 Pt. V, Note 3

F52 1990 s.41and Sch.6 para.5on and after 1January 1990subject to the commencement provisions of paras.11and 12.Previously

“(i) group income shall be not be taken into account as part of those profits, and”.

F53 Words in s. 436(3)(e) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 4(2)(b), 18, Sch. 19 Pt. V, Note 3

F54 Words in s. 436(4) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 4(3), 18, Sch. 19 Pt. V, Note 3

Modifications etc. (not altering text)

C18 See also 1989 s.43—certain Sch.D computations involving emoluments.

Marginal Citations

M22 Source—1970 s.312(1); 1970(F) Sch.5 Part III 11(3)

M23 Source—1970 s.312(2), 314(5); 1970(F) Sch.5 Part III 11(6)(a)(b); 1972 Sch.18 5(1)(a)

M24 Source—1970 s.312(3); 1970(F) Sch.5 Part III 11(3)

M25 Source—1985 s.72(7)

437 General annuity business. U.K.

[F55 (1A) In the case of a company carrying on basic life assurance and general annuity business, the new annuities paid in any accounting period by the company shall be regarded as charges on income only to the extent that they do not exceed the income limit for that accounting period.

(1B) Subsection (1A) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business.

(1C) For the purposes of this section—

(a) “new annuity” means any annuity, so far as paid under a contract made by an insurance company in an accounting period beginning on or after 1st January 1992 and so far as referable to the company’s basic life assurance and general annuity business;

(b) “the income limit” for an accounting period of an insurance company is the difference between—

(i) the total amount of the new annuities paid by the company in that accounting period; and

(ii) the total of the capital elements contained in the new annuities so paid; and

(c) the capital element contained in an annuity shall be determined in accordance with Chapter V of Part XIV, but for this purpose—

(i) it is immaterial whether or not an annuitant claims any relief to which he is entitled under that Chapter; and

(ii) where, by virtue of subsection (2) of section 657, section 656 does not apply to an annuity, the annuity shall be treated as containing the capital element that it would have contained apart from that subsection.

(1D) In any case where—

(a) a payment in respect of an annuity is made by an insurance company under a group annuity contract made in an accounting period beginning before 1st January 1992,

(b) the company’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c) the company’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall be treated for the purposes of this section, other than this subsection, as if the group annuity contract had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1E) In any case where—

(a) a payment in respect of an annuity is made by a reinsurer under a reinsurance treaty made in an accounting period beginning before 1st January 1992,

(b) the reinsurer’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c) the reinsurer’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall, as respects the reinsurer, be treated for the purposes of this section, other than this subsection, as if the reinsurance treaty had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1F) In this section—

• “group annuity contract” means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

• “reinsurance treaty” means a contract under which one insurance company is obliged to cede, and another (in this section referred to as a “reinsurer”) to accept, the whole or part of a risk of a class or description to which the contract relates.]

F56 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F56 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F56 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F56 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) A company which is not resident in the United Kingdom but carries on through a branch or agency there any general annuity business shall not be entitled to treat any part of the annuities paid by it which are referable to that business as paid out of profits or gains brought into charge to income tax.

Textual Amendments

F55 S. 437(1A)-(1F) substituted (for accounting periods beginning on or after 1.1.1992) for s. 437(1) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 5, 18

F56 S. 437(2)-(5) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 4(4), 18, Sch. 19 Pt. V, Note 3

438 Pension business: exemption from tax. U.K.

(1) M26 Exemption from corporation tax shall be allowed in respect of income from, and chargeable gains in respect of, investments and deposits of so much of an insurance company’s life assurance fund and separate annuity fund, if any, as is referable to pension business.

(2) M27 The exemption from tax conferred by subsection (1) above shall not exclude any sums from being taken into account as receipts in computing profits or losses for any purpose of the Corporation Tax Acts.

(3) M28 Subject to subsection (6) below, the exclusion by section 208 from the charge to corporation tax of franked investment income shall not prevent such income being taken into account as part of the profits in computing under section 436 income from pension business.

(4) M29 If in the case of any company the income referred to in subsection (1) above includes a distribution in respect of which the company is entitled to a tax credit, the company may, subject to subsections (5) and (6) below, claim to have the amount of that credit paid to it.

(5) If the company is resident in the United Kingdom (so that the distribution and the tax credit in question constitute franked investment income of that company), no franked investment income comprising any tax credit which is paid under subsection (4) above shall, subject to subsection (6) below, be used under Chapter V of Part VI to frank the company’s distributions.

(6) M30 If for any accounting period there is, apart from this subsection, a profit arising to an insurance company from pension business and computed under section 436, and the company so elects as respects all or any part of its [F57 relevant] franked investment income arising in that period, being an amount of franked investment income not exceeding the amount of that profit, subsections (3) to (5) above shall not apply to the franked investment income to which the election relates.

[F58 (6A) In subsection (6) above “relevant franked investment income” means the shareholders’ share of franked investment income within subsection (1) above, and for this purpose “shareholders’ share” has the same meaning as for the purposes of section 89 of the Finance Act 1989.]

(7) An election under subsection (6) above shall be made by notice given to the inspector not later than two years after the end of the accounting period to which the election relates or within such longer period as the Board may by notice allow.

(8) M31 Nothing in sections 431(4)(c) or 643(2) of this Act or section [F59 271(1)(h) of the 1992 Act] shall be construed as affording relief in respect of any sums to be brought into account under this section.

Textual Amendments

F57 1990 s.45(9).

F58 1990 s.45(9).

F59 Words in s. 438(8) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(21) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C19 S. 438 amended (27.7.1993) by 1993 c. 34, s. 78(6)(11)

C20 S. 438(5) amended (27.7.1993) by 1993 c. 34, s. 78(7)

Marginal Citations

M26 Source—1970 s.314(1); 1970(F) Sch.5 Part III 11(3), (6)(c)

M27 Source—1970 s.314(2)

M28 Source—1970 s.314(3)(a); 1970(F) Sch.5 Part III 11(3)

M29 Source—1972 Sch.18 4(1), (2)

M30 Source—1970 s.314(4); 1970(F) Sch.5 Part III 11(3); 1972 Sch.18 4(2)

M31 Source—1987 (No.2) s.39(3)

Yn ddilys o 02/10/1992

[438A F60 Pension business: payments on account of tax credits and deducted tax. U.K.

Schedule 19AB shall have effect.]

Textual Amendments

F60 S. 438A inserted (2.10.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 49(1); S.I. 1992/1746, art.2

439 Restricted government securities. U.K.

[F61 (1) For the purposes of this Chapter restricted government securities shall be treated as linked solely to pension business.

(2) In this section]

“restricted government securities” means, subject to the following provisions of this section, government securities issued on the condition that, except in such circumstances as may be specified in the conditions of issue, they are to be held by insurance companies against and applied solely towards meeting pension business liabilities.

(6) M32 Subject to subsection (7) below, the following Treasury Stock, namely—

(a) 2 per cent. Index-linked Treasury Stock 1996;

(b) 2 per cent. Index-linked Treasury Stock 2006;

(c) 2 per cent. Index-linked Treasury Stock 2011;

are not restricted government securities for the purposes of this section.

(7) If any of the index-linked stock referred to in subsection (6) above was on 27th March 1982 held by an insurance company against and applied solely towards meeting the liabilities of the company’s pension business, then—

(a) M33 if and so long as the stock continues to be so held by that company, it shall continue to be treated as restricted government securities for the purposes of this section; and

(b) M34 if the stock ceases to be restricted government securities otherwise than by virtue of being actually disposed of or redeemed, on the day on which it so ceases the stock shall be deemed for the purposes of corporation tax, including (subject to subsection (8)below) F62 corporation tax on chargeable gains, to have been disposed of and immediately re-acquired at its market value on that date.

(8) M35 For the purposes of sections 67and 68of the 1979Act (gilt-edged securities)—

(a) in ascertaining the date on which securities were acquired, no account shall be taken of any deemed disposal and reacquisition resulting from subsection (7)(b)above; and

(b) so long as any index-linked stock continues, by virtue of subsection (7)(a)above, to be treated as restricted government securities for the purposes of this section, it shall be regarded as being stock of a different kind from the index-linked stock referred to in subsection (6)above which is not so treated. F62

Textual Amendments

F61 1990 s.41and Sch.6 para.7on and after 1January 1990subject to the commencement provisions of paras.11and 12.Previously

“(1) This section applies where for any accounting period—(a) any division falls to be made between the pension business and any other kind of long-term business of an insurance company, and (b) any of the income or gains or losses of the company for that period relate to restricted government securities; and where this section applies section 431(3) shall have effect subject to the provisions of this section. (2) All income, gains or losses of the company which relate to restricted government securities shall be referred to its pension business. (3) Where the division of the other income, gains or losses of the company is made by reference to the liabilities at any time in the accounting period which are referable to pension business or to two or more kinds of business including pension business, those liabilities shall be treated as reduced by the appropriate amount. (4) In subsection (3) above “the appropriate amount” means—(a) in a case in which the total liabilities of the company at the time in question which are referable to long-term business are less than the market value at that time of the investments and deposits held by the company relating to all such business, such proportion of the market value of the restricted government securities held by the company at that time as those liabilities bear to the market value of those investments and deposits, and (b) in any other case, the market value of the restricted government securities at that time. (5) In this section— “long-term business” has the same meaning as in section 1(1) of the Insurance Companies Act 1982;”.

F62 Repealed by 1990 s.132and Sch.19 Part IV.

Marginal Citations

M32 Source—1982 s.58(1), (3)

M33 Source—1982 s.58(4)

M34 Source—1982 s.58(5)

M35 Source—1982 s.58(6)

[F63 440 Transfers of assets etc. U.K.

(1) If at any time an asset (or a part of an asset) held by an insurance company ceases to be within one of the categories set out in subsection (4) below and comes within another of those categories, the company shall for the purposes of corporation tax be deemed to have disposed of and immediately re-acquired the asset (or part) for a consideration equal to its market value at that time.

(2) Where—

(a) an asset is acquired by a company as part of the transfer to it of the whole or part of the business of an insurance company (“the transfer”) in accordance with a scheme sanctioned by a court under section 49 of the M36 Insurance Companies Act 1982, and

(b) the asset (or part of it) is within one of the categories set out in subsection (4) below immediately before the acquisition and is within another of those categories immediately afterwards,

the transferor shall for the purposes of corporation tax be deemed to have disposed of and immediately re-acquired the asset (or part) immediately before the acquisition for a consideration equal to its market value at that time.

(3) Where, apart from this subsection, section [F64 171 or 173 the 1992 Act] (transfers within a group) would apply to a disposal or acquisition by an insurance company of an asset (or part of an asset) which, immediately before the disposal or (as the case may be) immediately after the acquisition, is within one of the categories set out in paragraphs (a) to (d) subsection (4) below, that section shall not apply to the disposal or acquisition.

(4) The categories referred to in subsections (1) to (3) above are—

[F65 (a) assets linked solely to basic life assurance and general annuity business;]

(b) assets linked solely to pension business;

(c) assets of the overseas life assurance fund;

(d) assets of the long term business fund not within any of the preceding paragraphs;

(e) other assets.

(5) In this section “market value” has the same meaning as in the [F66 1992] Act.]

Textual Amendments

F63 S. 440 substituted by Finance Act 1990 (c. 26, SIF 63:1), s. 41, Sch.6 para. 8on and after 1January 1990subject to the commencement provisions of paras.11and 12.But not to affect the operation of the original s.440before 20March 1990or of subs.(6)and (7)of that section in relation to the disposal of an asset which has not been deemed to be disposed of before the day of the disposal.

F64 Words in s. 440(3) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(22)(a) (with ss. 60, 101(1), 171, 201(3))

F65 S. 440(4)(a) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 6(1), 18

F66 Words in s. 440(5) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(22)(b) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C21 S. 440(1) excluded (25.7.1991) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 6(4)

C22 S. 440(2) modified (with effect in accordance with reg. 1 of the modifying S.I.) by The Friendly Societies (Taxation of Transfers of Business) Regulations 1995 (S.I. 1995/171), regs. 4, 5

C23 S. 440(4) modified (31.7.1992 with effect in accordance with reg. 1 of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655), regs. 1, 11(1), 12(1) (as amended (31.12.1993 with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), regs. 1(1), 5)

C24 See 1990 s.41and Sch.6 para.12(2)—subs.(d)omitted for period 1January 1990to 19March 1990inclusive.

C25 S. 440(4)(d) excluded (31.7.1992 with effect in accordance with reg. 1 of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655), regs. 1, 13 (as substituted (31.12.1993 with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), regs. 1(1), 9)

Marginal Citations

M36 1982 c. 50.

440A [F67 Securities. U.K.

(1) Subsection (2) below applies where the assets of an insurance company include securities of a class all of which would apart from this section be regarded for the purposes of corporation tax on chargeable gains as one holding.

(2) Where this subsection applies—

(a) so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies [F68 or annuity contracts] the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of [F69 basic life assurance and general annuity business] shall be treated for the purposes of corporation tax as a separate holding linked solely to that business,

(b) so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of pension business shall be treated for those purposes as a separate holding linked solely to that business,

(c) so many of the securities as are included in the overseas life assurance fund shall be treated for those purposes as a separate holding which is an asset of that fund,

(d) so many of the securities as are included in the company’s long term business fund but do not fall within any of the preceding paragraphs shall be treated for those purposes as a separate holding which is an asset of that fund (but not of any of the descriptions mentioned in those paragraphs, and

(e) any remaining securities shall be treated for those purposes as a separate holding which is not of any of the descriptions mentioned in the preceding paragraphs.

(3) Subsection (2) above also applies where the assets of an insurance company include securities of a class and apart from this section some of them would be regarded as a 1982 holding, and the rest as a new holding, for the purposes of corporation tax on chargeable gains.

(4) In a case within subsection (3) above—

(a) the reference in any paragraph of subsection (2) above to a separate holding shall be construed, where necessary, as a reference to a separate 1982 holding and a separate new holding, and

(b) the questions whether such a construction is necessary in the case of any paragraph and, if it is, how many securities falling within the paragraph constitute each of the two holdings shall be determined in accordance with paragraph 12 of Schedule 6 to the Finance Act 1990 and the identification rules applying on any subsequent acquisitions and disposals.

(5) Section [F70 105 of the 1992 Act] shall have effect where subsection (2) above applies as if securities regarded as included in different holdings by virtue of that subsection were securities of different kinds.

[F71 (6) In this section—

• “1982 holding” has the same meaning as in section 109 of the 1992 Act;

• “new holding” has the meaning as in section 104(3) of that Act ; and

• “securities” means shares, or securities of a company, and any other assets where they are of a nature to be dealt in without identifying the particular assets disposed or acquired.]

Textual Amendments

F67 See commentary text for s.440 (F588) above.

F68 Words in s. 440A(2)(a) inserted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 6(2)(a), 18

F69 Words in s. 440A(2)(a) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 6(2)(b), 18

F70 Words in s. 440A(5) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(23)(a) (with ss. 60, 101(1), 171, 201(3))

F71 S. 440A(6) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(23)(b) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C26 S. 440A(2) modified (31.7.1992 with effect in accordance with reg. 1 of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655), regs. 1, 14, 15 (as amended (31.12.1993 with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), regs. 1(1), 5)

C27 S. 440A(2) modified (31.7.1992 with effect in accordance with reg. 1 of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655), regs. 1, 16 (as substituted (31.12.1993 with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), regs. 1(1), 10)

C28 See 1990 s.41and Sch.6 para.12(2)—subs.(d)omitted for period 1January 1990to 19March 1990inclusive.

C29 See 1990 s.41and Sch.6 para.12(1), (3), (4), (6), (7)and (10)—application and commencement provisions for

“1982 holdings”

and

“new holdings”.

[F72 441 Overseas life assurance business. U.K.

(1) This section and section 441A shall apply for an accounting period of an insurance company resident in the United Kingdom if during the period the company carries on overseas life assurance business.

(2) Subject to the provisions of this section and section 441A, profits arising to the company from the overseas life assurance business shall be treated as income within Schedule D, and the chargeable under Case VI of that Schedule, and for that purpose—

(a) that business shall be treated separately, and

(b) subject to paragraph (a) above, the profits from it shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(3) Subsection (2) above shall not apply if the company is charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business.

(4) In making the computation referred to in subsection (2) above—

(a) sections 82(1), (2) and (4) and 83 of the Finance Act 1989 shall apply with the necessary modifications and in particular with the omission of the words “tax or” in section 82(1)(a), and

(b) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from overseas life assurance business in any previous accounting period beginning on or after 1st January 1990.

(5) Section 396 shall not be taken to apply to a loss incurred by a company on overseas life assurance business.

(6) Nothing in section 128 or 399(1) shall affect the operation of this section.

(7) Notwithstanding section 337(2), there shall be deductible in computing the profits arising to a company from overseas life assurance business—

(a) interest payable by the company under a liability of the long term business, so far as referable to overseas life assurance business, and

(b) annuities payable by the company, so far as so referable.

(8) Gains accruing on the disposal by a company of assets of its overseas life assurance fund shall not be chargeable gains. ]]

Textual Amendments

F72 1990 s.42and Sch.7 para.3for accounting periods beginning on or after 1January 1990 (see para.10).Previously

“Foreign life assurance funds.441.—(1) Corporation tax under Cases IV and V on income arising from investments of the foreign life assurance fund of an insurance company shall be computed as in the case mentioned in section 65(4), that is to say, by reference to the amount of income received in the United Kingdom; and this subsection shall apply notwithstanding that that section relates only to income tax. (2) Where any of the following securities, namely—(a) securities issued by the Treasury with the condition that the interest thereon shall not be liable to income tax so long as it is shown, in manner directed by the Treasury, that the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom; or (b) securities issued by the Treasury with the condition that—(i) so long as the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom, the interest thereon shall be exempt from income tax, and (ii) so long as the securities are in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the United Kingdom, neither the capital thereof nor the interest thereon shall be liable to any taxation present or future; or (c) securities to which section 581 applies; for the time being form part of the investments of the foreign life assurance fund of an insurance company, the income arising from those securities, if applied for the purposes of that fund or reinvested so as to form part of that fund, shall not be liable to tax. (3) Where any income arising abroad from the investments of the foreign life assurance fund of an insurance company has been remitted to the United Kingdom and invested, as part of the investments of that fund, in any such securities as are mentioned in subsection (2) above, that income shall not be liable to tax and any tax paid thereon shall, if necessary, be repaid to the company on the making of a claim. (4) Any securities issued by the Treasury in pursuance of the power conferred by section 60(1) of the Finance Act 1940 with a modified form of the condition specified in subsection (2)(b) above shall, save in so far as the terms of the issue otherwise provide, be deemed for the purposes of subsections (2) and (3) above to be such securities as are mentioned in subsection (2) above. (5) Where income arising from the investments of the foreign life assurance fund of an insurance company has been relieved from tax in pursuance of the provisions of this section, a corresponding reduction shall be made—(a) in the relief granted under section 76 in respect of expenses of management; and (b) in any amount on which [in respect of general annuity business only (1989 s.84and Sch.8 para.7,and subject to s.84(6),has effect with respect to accounting periods beginning on or after 1January 1990 (including the 1990component period).)] the company is chargeable to tax by virtue of section 436. (6) In this section “foreign life assurance fund”—(a) means any fund representing the amount of the liability of an insurance company in respect of its life assurance business with policy holders and annuitants residing outside the United Kingdom whose proposals were made to, or whose annuity contracts were granted by, the company at or through a branch or agency outside the United Kingdom; and (b) where such a fund is not kept separately from the life assurance fund, means such part of the life assurance fund as represents the liability of the company under such policies and contracts, such liability being estimated in the same manner as it is estimated for the purpose of the company's periodical return. (7) Where this section has effect in relation to income arising from investments of any part of an insurance company's life assurance fund, it shall have the like effect in relation to chargeable gains accruing from the disposal of any such investments, and losses so accruing shall not be allowable losses. (8) For the purposes of this section, an offshore income gain accruing to an insurance company carrying on life assurance business shall, if it accrues in respect of investments held in connection with that business, be treated as if it were income from investments held in connection with that business. (9) Where any payment is made by the Export Credits Guarantee Department—(a) under any agreement entered into under arrangements made by the Secretary of State in pursuance of section 11 of the Export Guarantees and Overseas Investment Act 1978, and (b) in respect of any income—(i) which cannot be transferred to the United Kingdom, and (ii) which arises from investments of the foreign life assurance fund of an insurance company, then, to the extent of the payment, this section shall apply in relation to the income as if it had been received in the United Kingdom (and accordingly cannot be received again in the United Kingdom)”.

441A [F73 Section 441: distributions. U.K.

(1) Section 208 shall not apply to a distribution in respect of any asset of an insurance company’s overseas life assurance fund.

(2) Subject to subsection (3) below, an insurance company shall not be entitled under section 231 to a tax credit in respect of such a distribution.

(3) A company shall be entitled to such a tax credit if and to the extent that, were the recipient an individual resident in the territory in which the relevant branch or agency is situated, he would be entitled to the credit under arrangements having effect by virtue of section 788.

(4) For the purposes of subsection (3) above the relevant branch or agency, in the case of a tax credit in respect of a distribution, is—

(a) where the relevant asset is linked solely to overseas life assurance business—

(i) the branch or agency at or through which the company has effected policies or contracts the benefits under which are to be determined by reference to the value of the asset, or

(ii) in a case where there is more than one such branch or agency, the branches to which different parts of it are allocated by the company in accordance with subsection (5) below;

(b) subject to paragraph (a) above, where the management of the relevant asset is under the control of a person whose normal place of work is at a branch or agency, that branch or agency; and

(c) in any other case, the branch or agency to which it is allocated by the company.

(5) Where policies or contracts the benefits under which are to be determined by reference to the value of an asset within subsection (4)(a) above have been effected at or through more than one branch or agency, different parts of the asset shall be allocated to them so as to secure as far as practicable that the part allocated to each is proportionate to the part of the liabilities in respect of those benefits represented by liabilities under policies or contracts effected at or through it.

(6) Where the overseas life assurance business carried on at or through a branch or agency in a territory includes—

(a) reinsurance business which consists of the reinsurance of liabilities of a person resident in another territory, or

(b) retrocession business,

the amount of any tax credit in relation to which the branch or agency is the relevant branch or agency shall be reduced by the proportion which the liabilities of that reinsurance business bear to all the liabilities of the overseas life assurance business carried on at or through the branch or agency.

(7) Where a company is entitled to an amount of tax credit by virtue of this section the company may claim to have that amount paid to it.

(8) No franked investment income shall be used under Chapter V of Part VI of this Act to frank a company’s distributions if the tax credit (or any part of the tax credit) comprised in it is payable to the company under subsection (7) above.

Textual Amendments

F73 See commentary text for s. 441 (F589) above.

Modifications etc. (not altering text)

C30 S. 441A(8) amended (27.7.1993) by 1993 c. 34, s. 78(7)

442 Overseas business of U.K. companies. U.K.

(1) M37 Subsections (2) and (3) below apply where a company resident in the United Kingdom carries on insurance business outside the United Kingdom through a branch or agency and—

(a) that business, or part of it, together with the whole assets of the company used for the purposes of that business or part (or together with the whole of those assets other than cash), is transferred to a company not resident in the United Kingdom;

(b) the business or part is so transferred wholly or partly in exchange for shares, or for shares and loan stock, issued by the transferee company to the transferor company; and

(c) the shares so issued, either alone or taken together with any other shares in the transferee company already held by the transferor company, amount in all to not less than one quarter of the ordinary share capital of the transferee company.

(2) In making any computation in accordance with the provisions of this Act applicable to Case I of Schedule D of the profits or losses of the transferor company for the accounting period in which the transfer occurs, there shall be disregarded any profit or loss in respect of any asset transferred which, apart from this subsection, would fall to be taken into account in making that computation.

(3) Where by virtue of subsection (2) above any profit or loss is disregarded in making any computation otherwise than for the purposes of section 76(2) the profit or loss shall be treated for the purposes of the [F74 1992 Act]as a chargeable gain or allowable loss accruing to the transferor company on the transfer.

(4) Where at any time a company resident in the United Kingdom—

(a) which carries on insurance business wholly outside the United Kingdom, and

(b) the whole or part of whose ordinary share capital is beneficially owned by one or more companies resident in the United Kingdom,

ceases to be resident in the United Kingdom, the profits or losses of the company in respect of that business for the accounting period ending at that time shall be computed for tax purposes without regard to the whole, or, as the case may be, a corresponding part of any profit or loss in respect of any asset which, apart from this subsection, would fall to be calculated in accordance with section 100(1)(b) and taken into account in making that computation.

Textual Amendments

F74 Words in s. 442(3) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(24) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C31 S. 442(3) excluded (retrospectively) by Income and Corporation Taxes Act 1970 (c. 10), s. 269C(8) (as inserted (retrospectively) by Finance (No. 2) Act 1992 (c. 48), s.48)

Marginal Citations

M37 Source—1977 s.45(1)—(4); 1979(C) Sch.7

443 Life policies carrying rights not in money. U.K.

M38 Where any investments or other assets are or have been, in accordance with a policy issued in the course of life assurance business carried on by an insurance company, transferred to the policy holder on or after 6th April 1967, the policy holder’s acquisition of the assets, and the disposal of them to him, shall be deemed to be for a consideration equal to the market value of the assets for the purposes of computing income in accordance with Case I or VI of Schedule D.

Marginal Citations

M38 Source—1970 s.321(1)(b), (2)

444 Life policies issued before 5th August 1965. U.K.

(1) M39 This section applies in relation to policies of life assurance issued before 5th August 1965 by a company carrying on life assurance business, being policies which—

(a) provide for benefits consisting to any extent of investments of a specified description or of a sum of money to be determined by reference to the value of such investments, but

(b) do not provide for the deduction from those benefits of any amount by reference to tax chargeable in respect of chargeable gains.

(2) Where—

(a) the investments of the company’s life assurance fund, so far as referable to those policies, consist wholly or mainly of investments of the description so specified, and

(b) on the company becoming liable under any of those policies for any such benefits (including benefits to be provided on the surrender of a policy), a chargeable gain accrues to the company from the disposal, in meeting or for the purpose of meeting that liability, of investments of that description forming part of its life assurance fund, or would so accrue if the liability were met by or from the proceeds of such a disposal,

then the company shall be entitled as against the person receiving the benefits to retain out of those benefits a part not exceeding in amount or value corporation tax, at the rate specified in subsection (3) below, in respect of the chargeable gain referred to in paragraph (b) above, computed without regard to any amount retained under this subsection.

(3) The amount to be retained under subsection (2) above shall, subject to subsection (4) below, be computed by reference to the rate of corporation tax for the time being in force or, if no rate of corporation tax has yet been fixed for the financial year, the rate last in force.

(4) In so far as the chargeable gain represents or would represent a gain belonging or allocated to, or reserved for, policy holders, the amount to be retained shall be computed by reference to a rate of tax not exceeding 37.5 per cent.

Marginal Citations

M39 Source—1970 s.322

[F75 444A Transfers of business. U.K.

(1) Subject to the following provisions of this section, this section applies where there is a transfer of the whole or part of the long term business of an insurance company (“the transferor”) to another company (“the transferee”) in accordance with a scheme sanctioned by a court under section 49 of the M40 Insurance Companies Act 1982.

(2) Any expenses of management which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been deductible by the transferor under sections 75 and 76 in computing profits for an accounting period following the period which ends with the day on which the transfer takes place shall, instead, be treated as expenses of management of the transferee (and deductible in accordance with those sections, as modified in the case of acquisition expenses by section 86(6) to (9) of the Finance Act 1989 and in the case of expenses to which subsection (6) or (7) of section 87 of that Act applies by that subsection).

(3) Any loss which (assuming the transferor had continued to carry on the business transferred after the transfer)—

(a) would have been available under section 436(3)(c) to be set off against profits of the transferor for the accounting period following that which ends with the day on which transfer takes place, or

(b) where in connection with the transfer the transferor also transfers the whole or part of any overseas life assurance business, would have been so available under section 441(4)(b),

shall, instead, be treated as a loss of the transferee (and available to be set off against profits of the same class of business as that in which it arose).

(4) Where acquisition expenses are treated as expenses of management of the transferee by virtue of subsection (2) above, the amount deductible for the first accounting period of the transferee ending after the transfer takes place shall be calculated as if that accounting period began with the day after the transfer.

(5) Where the transfer is of part only of the transferor’s long term business, subsection (2) or (3) above shall apply only to such part of any amount to which it would otherwise apply as is appropriate.

(6) Any question arising as to the operation of subsection (5) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and transferee shall be entitled to appear and be heard or to make representations in writing.

(7) Subject to subsection (8) below, this section shall not apply unless the transfer is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to corporation tax.

(8) Subsection (7) above shall not affect the operation of this section in any case where, before the transfer, the Board have, on the application of the transferee, notified the transferee that the Board are satisfied that the transfer will be effected for bona fide commercial reasons and will not form part of any scheme or arrangements such as are mentioned in that subsection; and subsections (2) to (5) of section [F76 138 of the 1992 Act]shall have effect in relation to this subsection as they have effect in relation to subsection (1) of that section.]

Textual Amendments

F75 1990 s.48and Sch.9 para.4in relation to transfer of business on or after 1January 1990.

F76 Words in s. 444A(8) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(25) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C32 S. 444A(1) modified (with effect in accordance with reg. 1 of the amending Regulations) by The Friendly Societies (Taxation of Transfers of Business) Regulations 1995 (S.I. 1995/171), reg. 4(2)(b)

Marginal Citations

M40 1982 c. 50.

Yn ddilys o 01/05/1995

[F77 Classes of life assurance business] U.K.

Textual Amendments

F77 Ss. 431B-431F and cross-heading inserted (with effect in accordance with Sch. 8 paras. 55, 57 of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 2

431B Meaning of “pension business”. U.K.

(1) In this Chapter “pension business” means so much of a company’s life assurance business as is referable to contracts of the following descriptions or to the reinsurance of liabilities under such contracts.

(2) The descriptions of contracts are—

(a) any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to income tax in respect of relevant earnings (as defined in section 623(1) and (2)) from a trade, profession, vocation, office or employment carried on or held by him, being a contract approved by the Board under section 620 or a substituted contract within the meaning of section 622(3);

(b) any contract (including a contract of insurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme as defined in Chapter I of Part XIV, being a contract so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

(c) any contract made under approved personal pension arrangements within the meaning of Chapter IV of Part XIV;

(d) any annuity contract entered into for the purposes of—

(i) a scheme which is approved or is being considered for approval under Chapter I of Part XIV;

(ii) a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV; or

(iii) a fund to which section 608 applies,

being a contract which is made with the persons having the management of the scheme or fund, or those persons and a member of or contributor to the scheme or fund, and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(e) any annuity contract which is entered into in substitution for a contract within paragraph (d) above and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(f) any contract with the trustees or other persons having the management of a scheme approved under section 620 or, subject to subsection (5) below, of a superannuation fund which was approved under section 208 of the 1970 Act, being a contract which—

(i) was entered into for the purposes only of that scheme or fund or, in the case of a fund part only of which was approved under section 208, for the purposes only of that part of that fund, and

(ii) (in the case of a contract entered into or varied after 1st August 1956) is so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme or fund (or the relevant part of the fund).

(3) For the purposes of subsection (2)(d) and (e) above “relevant benefits” means relevant benefits as defined by section 612(1) which correspond—

(a) where subsection (2)(d)(i) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(i), with benefits that could be provided by a scheme approved under Chapter I of Part XIV;

(b) where subsection (2)(d)(ii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(ii), with benefits that could be provided by a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV;

(c) where subsection (2)(d)(iii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a fund falling within subsection (2)(d)(iii), with benefits that could be provided by a fund to which section 608 applies.

(4) For the purposes of subsection (3)(a), (b) or (c) above a hypothetical scheme or fund (rather than any particular scheme or fund), and benefits provided by a scheme or fund directly (rather than by means of an annuity contract), shall be taken.

(5) Subsection (2)(f) above shall not apply to a contract where the fund in question was approved under section 208 of the 1970 Act unless—

(a) immediately before 6th April 1980 premiums paid under the contract with the trustees or other persons having the management of the fund fell within section 323(4) of that Act (premiums referable to pension business); and

(b) the terms on which benefits are payable from the fund have not been altered since that time; and

(c) section 608 applies to the fund.

(6) In subsection (5) above “premium” includes any consideration for an annuity.

Modifications etc. (not altering text)

C33 S. 431B modified (23.3.1999 with effect in accordance with reg. 1 of the modifying S.I.) by The Insurance Companies (Capital Redemption Business) (Modification of the Corporation Tax Acts) Regulations 1999 (S.I. 1999/498), regs. 3, 6

Yn ddilys o 19/07/2007

[F78 431BA Meaning of “child trust fund business” U.K.

(1) In this Chapter “child trust fund business” means so much of a company's life assurance business as is referable to child trust fund policies (but not including the reinsurance of such business).

(2) In this section “child trust fund policy” means a policy of life insurance which is an investment under a child trust fund (within the meaning of the Child Trust Funds Act 2004).]

Textual Amendments

F78 Ss. 431BA, 431BB inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 8 (with Sch. 7 Pt. 2)

Yn ddilys o 19/07/2007

[F78 431BB Meaning of “individual savings account business” U.K.

(1) In this Chapter “individual savings account business” means so much of a company's life assurance business as is referable to individual savings account policies (but not including the reinsurance of such business).

(2) In this section “individual savings account policy” means a policy of life insurance which is an investment of a kind specified in regulations made by virtue of section 695(1) of ITTOIA 2005.]

Textual Amendments

F78 Ss. 431BA, 431BB inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 8 (with Sch. 7 Pt. 2)

431C Meaning of “life reinsurance business”. U.K.

(1) In this Chapter “life reinsurance business” means reinsurance of life assurance business other than pension business or business of any description excluded from this section by regulations made by the Board.

(2) Regulations under subsection (1) above may describe the excluded business by reference to any circumstances appearing to the Board to be relevant.

Modifications etc. (not altering text)

C34 S. 431C modified (with effect in accordance with reg. 1 of the affecting S.I.) by The Insurance Companies (Taxation of Reinsurance Business) Regulations 1995 (S.I. 1995/1730), reg. 11 (as amended by: S.I. 1996/1621, regs. 1, 5; S.I. 2003/2573, regs. 1(1)(2), 10; S.I. 2007/2087, regs. 1(1)(2), 6)

C35 S. 431C(1) modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 8

C36 S. 431C(1) modified (6.4.2005) by The Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680), regs. 1, 4, 6; S.I. 2004/3369, art. 2(1)

431D Meaning of “overseas life assurance business”. U.K.

(1) In this Chapter “overseas life assurance business” means life assurance business, other than pension business or life reinsurance business, which—

(a) in the case of life assurance business other than reinsurance business, is business with a policy holder or annuitant not residing in the United Kingdom, and

(b) in the case of reinsurance business, is—

(i) reinsurance of life assurance business with a policy holder or annuitant not residing in the United Kingdom, or

(ii) reinsurance of business within sub-paragraph (i) above or this sub-paragraph.

(2) Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is an individual if—

(a) the policy holder or annuitant is not beneficially entitled to the rights conferred by the policy or contract for the business, or

(b) any benefits under the policy or contract for the business are or will be payable to a person other than the policy holder or annuitant (or his personal representatives) or to a number of persons not including him (or them).

(3) For the purposes of subsection (2) above any nomination by a policy holder or annuitant of an individual or individuals as the recipient or recipients of benefits payable on death shall be disregarded.

(4) Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is not an individual.

(5) Subsections (2) and (4) above do not apply if—

(a) the rights conferred by the policy or contract for the business are held subject to a trust,

(b) the settlor does not reside in the United Kingdom, and

(c) each beneficiary is either an individual not residing in the United Kingdom or a charity.

(6) In subsection (5) above—

(a) “settlor” means the person, or (where more than one) each of the persons, by whom the trust was directly or indirectly created (and for this purpose a person shall, in particular, be regarded as having created the trust if he provided or undertook to provide funds directly or indirectly for the purposes of the trust or made with any other person a reciprocal arrangement for that other person to create the trust),

(b) “beneficiary” means any person who is, or will or may become, entitled to any benefit under the trust (including any person who may become so entitled on the exercise of a discretion by the trustees of the trust), and

(c) “charity” means a person or body of persons established for charitable purposes only;

and for the purpose of that subsection an individual who is a trustee (of any trust) shall not be regarded as an individual.

(7) Subsections (2) and (4) above do not apply if the policy or contract for the business was effected solely to provide benefits for or in respect of—

(a) persons all, or all but an insignificant number, of whom are relevant overseas employees, or

(b) spouses, widows, widowers, children or dependants of such persons.

(8) In subsection (7) above “relevant overseas employees” means persons who are not residing in the United Kingdom and are—

(a) employees of the policy holder or annuitant,

(b) employees of a person connected with the policy holder or annuitant, or

(c) employees in respect of whose employment there is established a superannuation fund to which section 615(3) applies;

and section 839 applies for the purposes of this subsection.

Modifications etc. (not altering text)

C37 S. 431D(2)-(8) excluded (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 55(2)(3),

C38 S. 431D(1) modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 8

431E Overseas life assurance business: regulations. U.K.

(1) The Board may by regulations make provision for giving effect to section 431D.

(2) Such regulations may, in particular—

(a) provide that, in such circumstances as may be prescribed, any prescribed issue as to whether business is or is not overseas life assurance business (or overseas life assurance business of a particular kind) shall be determined by reference to such matters (including the giving of certificates or undertakings, the giving or possession of information or the making of declarations) as may be prescribed,

(b) require companies to obtain certificates, undertakings, information or declarations from policy holders or annuitants, or from trustees or other companies, for the purposes of the regulations,

(c) make provision for dealing with cases where any issue such as is mentioned in paragraph (a) above is (for any reason) wrongly determined, including provision allowing for the imposition of charges to tax (with or without limits on time) on the insurance company concerned or on the policy holders or annuitants concerned,

(d) require companies to supply information and make available books, documents and other records for inspection on behalf of the Board, and

(e) make provision (including provision imposing penalties) for contravention of, or non-compliance with, the regulations.

(3) The regulations may—

(a) make different provision for different cases, and

(b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

Yn ddilys o 19/07/2007

[F79 431EA Meaning of “gross roll-up business” U.K.

In this Chapter “gross roll-up business” means business of any of the following kinds—

(a) pension business;

(b) child trust fund business;

(c) individual savings account business;

(d) life reinsurance business; and

(e) overseas life assurance business.]

Textual Amendments

F79 S. 431EA inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 10 (with Sch. 7 Pt. 2)

431F Meaning of “basic life assurance and general annuity business”. U.K.

In this Chapter “basic life assurance and general annuity business” means life assurance business (including reinsurance business) other than pension business, life reinsurance business or overseas life assurance business.

Modifications etc. (not altering text)

C39 S. 431F modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 9

C40 S. 431F modified (6.4.2005) by The Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680), regs. 1, 4, 7; S.I. 2004/3369, art. 2(1)

Yn ddilys o 01/05/1995

[F80 Separation of different categories of business] U.K.

Textual Amendments

F80 Cross-heading before s. 432 inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 51(2) (with Sch. 8 para. 55(2))

Yn ddilys o 19/07/2007

[F81 431G Company carrying on life assurance business U.K.

(1) This section applies in relation to an insurance company which carries on life assurance business (whether or not it also carries on insurance business of any other kind).

(2) Subject as follows, the profits of the life assurance business for any accounting period shall be charged to tax under the I minus E basis.

(3) Where in the case of an insurance company for an accounting period either—

(a) all of its life assurance business is reinsurance business and none of that business is of a type excluded from this subsection by regulations made by the Board, or

(b) all, or substantially all, of its life assurance business is gross roll-up business,

the profits of that business for the accounting period shall be charged to tax in accordance with Case I of Schedule D and not otherwise.

(4) Where—

(a) the profits of the life assurance business of an insurance company for any accounting period are charged to tax under the I minus E basis, and

(b) had those profits been charged to tax in accordance with Case I of Schedule D, a loss would have arisen to the company from that business for the period,

the loss (after being reduced in accordance with section 434A(2)(a)) may be set-off under section 393A or section 403(1).

(5) The application, in relation to the life assurance business of an insurance company, of any provision of Case I of Schedule D is not to be taken—

(a) to prevent the application of the I minus E basis in relation to that business of the company for any accounting period, or

(b) to affect the operation of the I minus E basis in relation to the that business of the company for any accounting period except as specifically provided by the Corporation Tax Acts.]

Textual Amendments

F81 Ss. 431G, 431H and preceding cross-heading substituted for s. 432 and preceding cross-heading (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 4 (with Sch. 8 Pt. 2)

Modifications etc. (not altering text)

C41 S. 431G modified by The Insurance Companies (Taxation of Reinsurance Business) Regulations 1995 (S.I. 1995/1730), reg. 12 (as amended (13.8.2007 with effect in accordance with reg. 1(2) of the amending S.I.) by The Insurance Companies (Taxation of Reinsurance Business) (Amendment) Regulations 2007 (S.I. 2007/2087), regs. 1(1), 8)

Yn ddilys o 19/07/2007

[F82 431H Company carrying on life assurance business and other insurance business U.K.

(1) This section applies in relation to an insurance company which carries on life assurance business and insurance business of any other kind.

(2) For the purposes of the Corporation Tax Acts—

(a) the life assurance business, and

(b) the other insurance business,

are to be treated as separate businesses.

(3) The profits of the other insurance business shall be charged to tax under Case I of Schedule D as the profits of a separate trade.

(4) But subsection (3) above does not apply where that business is mutual business.

(5) As to the profits of the life assurance business, see section 431G.]

Textual Amendments

F82 Ss. 431G, 431H and preceding cross-heading substituted for s. 432 and preceding cross-heading (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 4 (with Sch. 8 Pt. 2)

Modifications etc. (not altering text)

C42 S. 431H modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), reg. 7A (as inserted (14.8.2007 with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2007 (S.I. 2007/2134), regs. 1(1), 7; and as amended by S.I. 2008/1937, regs. 1(1)(2), 5)

Yn ddilys o 08/01/2007

[F83 432YA Long-term business other than life assurance business — adjustment consequent on change in Insurance Prudential Sourcebook U.K.

(1) This section applies in the case of—

(a) a company which is a non-profit company, or

(b) the non-profit fund of a company which is not a non-profit company,

if an amount (other than nil) is shown in paragraph 4(12) of Appendix 9.4 to the periodical return for the company for the first period of account which ends on or after 31st December 2006.

(2) In computing profits of long-term business which is not life assurance business in accordance with the provisions applicable to Case I of Schedule D an amount (“the relevant amount”) shall be added—

(a) to the closing long term business provision of the company for the first period of account which ends on or after 31st December 2006, and

(b) to the opening long term business provision of the company for the next period of account.

(3) The relevant amount is, subject to subsection (4), the amount by which B exceeds A. Here—

• A is the company's long term business provision in respect of business which is not life assurance business for the first period of account which ends on or after 31st December 2006, calculated after taking into account the company's ability to—

  (a)

  make provision for non-attributable expenses by reference to a homogeneous risk group instead of by reference to individual policies or contracts;

  (b)

  make provision for the voluntary discontinuance of policies or contracts using a prudent lapse rate assumption; and

  (c)

  set negative liabilities against positive liabilities (subject to overall liabilities not being less than nil);

  in accordance with the Insurance Prudential Sourcebook; and

• B is the company's long term business provision for that period of account in respect of business which is not life assurance business, calculated without taking into account the matters referred to in paragraphs (a) to (c) of the definition of A.

(4) In a case falling within subsection (1)(b)—

(a) the relevant amount shall be reduced (but not below nil) by so much (if any) of the amount shown in paragraph 4(12) of Appendix 9.4 to the periodical return as is reflected in column 1 of line 51 of the Form 14 for that period of account relating to the non-profit fund in question; and

(b) the references in subsection (3) to long term business provision and to liabilities are respectively to long term business provision and to liabilities relating to the non-profit fund in question.

(5) In this section—

• “long term business provision” has the same meaning as in Schedule 9A to the Companies Act 1985;

• “non-profit company” has the meaning given in section 83YA(8) of the Finance Act 1989; and

• “non-profit fund” has the same meaning as in the Insurance Prudential Sourcebook.]

Textual Amendments

F83 S. 432YA inserted (8.1.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment No. 2) Order 2006 (S.I. 2006/3387), arts. 1(1), 2

[F84 432ZA Linked assets. U.K.

(1) In this Chapter “linked assets” means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined.

(2) Linked assets shall be taken—

(a) to be linked to long term business of a particular category if the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category; and

(b) to be linked solely to long term business of a particular category if all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.

(3) Where an asset is linked to more than one category of long term business, a part of the asset shall be taken to be linked to each category; and references in this Chapter to assets linked (but not solely linked) to any category of business shall be construed accordingly.

(4) Where subsection (3) above applies, the part of the asset linked to any category of business shall be a proportion determined as follows—

(a) where in the records of the company values are shown for the asset in funds referable to particular categories of business, the proportion shall be determined by reference to those values;

(b) in any other case the proportion shall be equal to the proportion which the total of the linked liabilities of the company referable to that category of business bears to the total of the linked liabilities of the company referable to all the categories of business to which the asset is linked.

(5) For the purposes of sections 432A to 432F—

(a) income arising in any period from assets linked but not solely linked to a category of business,

(b) gains arising in any period from the disposal of such assets, and

(c) increases and decreases in the value of such assets,

shall be treated as arising to that category of business in the proportion which is the mean of the proportions determined under subsection (4) above at the beginning and end of the period.

(6) In this section “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.

(7) In the case of a policy or contract the effecting of which constitutes a class of life assurance business the fact that it also constitutes long term business other than life assurance business shall be disregarded for the purposes of this section unless the benefits to be provided which constitute long term business other than life assurance business are to be determined by reference to the value of assets.]

Textual Amendments

F84 S. 432ZA inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 11(2) (with Sch. 8 para. 55(2))

Yn ddilys o 31/07/1998

[F85 432AA Schedule A business or overseas property business. U.K.

(1) An insurance company is treated as carrying on separate Schedule A businesses, or overseas property businesses, in accordance with the following rules.

(2) The exploitation of land held as an asset of the company’s long term business fund is treated as a separate business from the exploitation of land not so held.

(3) The exploitation of land held as an asset of the company’s overseas life assurance fund is treated as a separate business from the exploitation of other land held as an asset of its long term business fund.

(4) The exploitation of land held as an asset linked to any of the following categories of business is regarded as a separate business—

(a) pension business;

(b) life reinsurance business;

(c) basic life assurance and general annuity business;

(d) long term business other than life assurance business.

(5) Accordingly, the exploitation of land held as an asset of the company’s long term business fund otherwise than as mentioned in subsection (3) or (4) is treated as a separate business from any other.

(6) In this section “land” means any estate, interest or rights in or over land.]

Textual Amendments

F85 Ss. 432AA, 432AB inserted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 5 para 39 (with Sch. 5 para. 73)

Modifications etc. (not altering text)

C43 S. 432AA modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 13A (as inserted (13.10.1999) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1999 (S.I. 1999/2636), regs. 1, 3)

C44 S. 432AA(4) modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 11

Yn ddilys o 31/07/1998

[F85 432AB Losses from Schedule A business or overseas property business. U.K.

(1) This section applies to any loss arising in a Schedule A business or overseas property business.

(2) A loss arising from any category of business mentioned in section 432A(2) shall be apportioned under that section in the same way as income.

(3) So far as a loss is referable to basic life assurance and general annuity business, it shall be treated as if it were an amount of expenses of management under section 76 disbursed for the accounting period in which the loss arose.

(4) Where a company is treated under section 432AA as carrying on—

(a) more than one Schedule A business, or

(b) more than one overseas property business,

then, in relation to either kind of business, the reference in subsection (3) above to a loss referable to basic life assurance and general annuity business shall be construed as a reference to any aggregate net loss after setting the losses from those businesses which are so referable against any profits from those businesses that are so referable.

(5) The provisions of section 392A or 392B (loss relief) do not apply to a loss referable to life assurance business or any category of life assurance business.

(6) Where a company is treated under section 432AA as carrying on—

(a) more than one Schedule A business, or

(b) more than one overseas property business,

and, in relation to either kind of business, there are losses and profits referable to business which is not life assurance business, those losses shall be set against those profits before being used under section 392A or 392B.]

Textual Amendments

F85 Ss. 432AA, 432AB inserted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 5 para 39 (with Sch. 5 para. 73)

Modifications etc. (not altering text)

C45 S. 432AB modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 13B (as inserted (13.10.1999) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1999 (S.I. 1999/2636), regs. 1, 3)

Yn ddilys o 08/04/2010

[F86 432CA Apportionment of asset value increase where line 51 amount decreases U.K.

(1) This section applies where—

(a) an insurance company is not a non-profit company in relation to a period of account (“the current period of account”),

(b) in the case of any business with which an account of the company for the current period of account is concerned (“the relevant business”), an amount is a relevant brought into account amount for that period of account (see subsection (2)),

(c) section 432C applies for determining the extent to which the relevant brought into account amount is referable to life assurance business or to gross roll-up business, and

(d) the line 51 reduction condition is met (see subsection (3)).

(2) An amount is a relevant brought into account amount for a period of account if—

(a) it is brought into account as mentioned in subsection (2)(b) of section 83 of the Finance Act 1989 (increases in value of non-linked assets) for that period,

(b) it is deemed to be brought into account for that period by subsection (2B) of that section in consequence of the transfer of non-linked assets, or

(c) it is taken into account under subsection (2) of that section for that period by virtue of section 444AB as being the relevant amount in relation to non-linked assets.

(3) The line 51 reduction condition is met if—

(a) the amount shown in column 1 of line 51 of Form 14 of the company's periodical return in respect of the relevant business for the current period of account, is less than

(b) the amount so shown for the period of account immediately before it;

and the amount of the difference is “the relevant reduction”.

(4) Section 432C applies in relation to so much of the relevant brought into account amount as does not exceed the relevant reduction (“the affected amount”) as if it were brought into account as an increase in the value of assets in the case of the relevant business for the applicable appropriate period of account of the company.

(5) A period of account is an “appropriate period of account” if it ended before the current period of account and—

(a) the amount shown in column 1 of line 51 of Form 14 of the company's periodical return in respect of the relevant business for it, was more than

(b) the amount so shown for the period of account immediately before it;

and the amount of the difference is “the relevant increase.”

(6) The “applicable” appropriate period of account is the one which ended most recently (“the most recent appropriate period of account”).

(7) But if the relevant increase in the case of the most recent appropriate period of account is less than the affected amount, the most recent appropriate period of account is the applicable appropriate period of account in relation to only so much of the affected amount as does not exceed that relevant increase.

(8) In that case, the appropriate period of account which ended most recently before the most recent appropriate period of account is the applicable appropriate period of account in relation to so much of the remainder as does not exceed the relevant increase in the case of that appropriate period of account (and, where necessary, so on until the applicable appropriate period of account is established in relation to all of the affected amount or there are no more appropriate periods of account).

(9) If the current period of account is not the first in relation to which this section has applied in the case of the business concerned, the amount of the relevant increase in the case of any appropriate period of account (“the period in question”) is to be treated as reduced by the relevant aggregate.

(10) The “relevant aggregate” is the aggregate of so much of the affected amount for any period or periods of account earlier than the current period of account as was an amount to which section 432C applied as if it were brought into account as mentioned in subsection (4) for the period in question.

(11) For the purposes of this section an insurance company which has elected under section 83YA(9) of the Finance Act 1989 (changes in value of assets brought into account: non-profit companies) to be treated as a non-profit company in relation to a period of account is to be regarded as a non-profit company in relation to the period of account.]

Textual Amendments

F86 S. 432CA inserted (with effect in accordance with s. 47(2)-(4) of the amending Act) by Finance Act 2010 (c. 13), s. 47(1)

Yn ddilys o 27/07/2010

[F87 432CB Transfers of business involving excess assets U.K.

(1) This section applies where, under an insurance business transfer scheme, there is a transfer of long-term business—

(a) from a non-profit fund of an insurance company (“the transferor”) which is not a non-profit company in relation to the relevant period of account,

(b) to another insurance company (“the transferee”) to constitute or form part of a non-profit fund of the transferee (“the transferee's non-profit fund”),

(“the transfer”) and conditions A and B are met.

(2) Condition A is that the fair value of the assets transferred by the transfer exceeds by an amount (“the chargeable excess”) the amount of the relevant liabilities transferred by the transfer.

For this purpose “relevant” liabilities are liabilities of a type shown (or treated as shown) in any of lines 14, 17, 21 to 23 and 31 to 38 of Form 14 of a periodical return of an insurance company.

(3) Condition B is that the main purpose, or one of the main purposes, of the transferor or the transferee (or both) in entering into any part of the transfer scheme arrangements is to secure a reduction in tax as a result of section 432C having effect in the case of the transferee, rather than the transferor, in relation to the business transferred by the transfer.

(4) The chargeable excess is to be brought into account by the transferor as mentioned in section 83(2)(b) of the Finance Act 1989 for the relevant period of account.

(5) Where there is no amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the first period of account of the transferee ending on or after the transfer date (“the first post-transfer period of account”), the chargeable excess is to be brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for the first post-transfer period of account.

(6) Where—

(a) there is an amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the first post-transfer period of account, and

(b) the amount so shown in column 1 of line 51 of Form 14 of the periodical return of the transferee for that period of account, or for any other period of account of the transferee ending after the transfer date, (an “affected period of account”) is less than the total chargeable excess amount,

the relevant amount is to be brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for the affected period of account.

(7) For this purpose “the relevant amount” is the amount by which—

(a) the amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the affected period of account, is less than

(b) the total chargeable excess amount less any amount brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for any earlier period of account by virtue of the operation of this section in relation to the transferee's non-profit fund.

(8) In subsections (6) and (7) “the total chargeable excess amount” means the aggregate of—

(a) the chargeable excess, and

(b) any amount which is the chargeable excess in relation to any other transfer of business to the transferee's non-profit fund.

(9) In this section “the relevant period of account” means—

(a) the period of account of the transferor ending immediately before the transfer date, or

(b) if no period of account of the transferor so ends, the period of account of the transferor covering the transfer date.

(10) In this section “the transfer scheme arrangements” means the insurance business transfer scheme and any relevant associated operations; and for this purpose “relevant associated operations” means—

(a) any other insurance business transfer scheme,

(b) any contract of reinsurance, or

(c) any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee,

which is effected in connection with the insurance business transfer scheme.

(11) In subsection (10)—

• “dependant”, and

• “insurance undertaking”,

have the same meaning as in the Insurance Prudential Sourcebook.

(12) In this section “the transfer date” means the date on which the insurance business transfer scheme takes effect.

(13) For the purposes of this section an insurance company which has elected under section 83YA(9) of the Finance Act 1989 (changes in value of assets brought into account: non-profit companies) to be treated as a non-profit company in relation to a period of account is to be regarded as a non-profit company in relation to the period of account.]

Textual Amendments

F87 S. 432CB inserted (with effect in accordance with s. 9(2) of the amending Act) by Finance (No. 2) Act 2010 (c. 31), s. 9(1)

[F88 432F Section 432B apportionment: supplementary provisions. U.K.

(1) The provisions of this section provide for the reduction of the amount determined in accordance with section 432E(3) (“the subsection (3) figure”) for an accounting period in which that amount exceeds, or would otherwise exceed, the amount determined in accordance with section 432E(2) (“the subsection (2) figure”).

(2) For each category of business in relation to which section 432E falls to be applied there shall be determined for each accounting period the amount (if any) by which the subsection (2) figure, after making any reduction required by section 432E(5), exceeds the subsection (3) figure (“the subsection (2) excess”).

(3) Where there is a subsection (2) excess, the amount shall be carried forward and if in any subsequent accounting period the subsection (3) figure exceeds, or would otherwise exceed, the subsection (2) figure, it shall be reduced by the amount or cumulative amount of subsection (2) excesses so far as not previously used under this subsection.

(4) Where in an accounting period that amount is greater than is required to bring the subsection (3) figure down to the subsection (2) figure, the balance shall be carried forward and aggregated with any subsequent subsection (2) excess for use in subsequent accounting periods.]

Textual Amendments

F88 S. 432F inserted (with effect in accordance with Sch. 8 para. 53 of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 17(3) (with Sch. 8 para. 55(2))

Modifications etc. (not altering text)

C46 S. 432F(1) modified (20.3.1997 with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(1), 15; and that modifying reg. 15 is omitted (8.4.2004 with effect in accordance with reg. 1 of the revoking S.I.) by virtue of S.I. 2004/822, reg. 11

Yn ddilys o 01/01/2005

[F89 432G Section 432B: apportionment of business transfer-in U.K.

(1) This section applies where an amount falls within section 83(2)(e) of the Finance Act 1989.

(2) Where—

(a) this section applies, and

(b) it is necessary in accordance with section 83 to determine what part of a business transfer-in is referable to life assurance business or any category of life assurance business,

a business transfer-in shall be apportioned to the categories of business of the transferee in the proportions which the amount of the liabilities transferred for each of those categories bear to the whole of the liabilities transferred.]

Textual Amendments

F89 S. 432G inserted (1.1.2005 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), art. 4

Yn ddilys o 01/05/1995

[F90 Miscellaneous provisions relating to life assurance business] U.K.

Textual Amendments

F90 Cross-heading before s. 434 inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 51(4) (with Sch. 8 para. 55(2))

Yn ddilys o 21/07/2009

[F91 434AZA Reduced loss relief for additions to non-profit funds U.K.

(1) Where this section applies in the case of a company carrying on life assurance business, relief allowable under section 393A or Chapter 4 of Part 10 in respect of losses incurred by the company in the life assurance business in an accounting period is reduced in accordance with section 434AZB.

(2) This section applies in the case of a company where—

(a) there has been a relevant addition to one or more non-profit funds in a period of account ending no later than the accounting period (“the relevant period of account”) (see subsection (3)),

(b) the company is not a non-profit company in relation to the relevant period of account and has not elected under subsection (9) of section 83YA of the Finance Act 1989 to be treated for the purposes of that section as if it were, and

(c) condition A or B is met,

and, if the relevant period of account is not the period of account ending with the accounting period (“the current period of account”), condition C is also met.

(3) For the purposes of subsection (2), there is a relevant addition to a non-profit fund in the relevant period of account if an amount is shown as a transfer from non-technical account in line 32 of the Form 58 of the non-profit fund in the periodical return for that period of account.

(4) Condition A is that there is a relevant book value election in relation to assets of a non-profit fund of the company.

(5) For the purposes of subsection (4), there is a relevant book value election in relation to assets of a non-profit fund if an amount is shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account.

(6) Condition B is that the company is party to arrangements the main purpose, or one of the main purposes, of which is to reduce the relevant admissible value of assets of a non-profit fund of the company, other than any structural assets.

(7) For the purposes of subsection (6) (and section 434AZB), the “relevant admissible value” means the value reflected in line 89 of Form 13 of the periodical return for the current period of account.

(8) Condition C is that the surplus arising since the last valuation shown in line 34 of the Form 58 of the non-profit fund, or any of the non-profit funds, in relation to which condition A or B is met in the periodical return for the current period of account is a negative amount.]

Textual Amendments

F91 Ss. 434AZA-434AZC inserted (with effect in accordance with Sch. 23 para. 3(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 23 para. 3(1)

Yn ddilys o 21/07/2009

[F91 434AZB Additions to non-profit funds: amount of loss reduction U.K.

(1) The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least—

(a) the amount of the loss,

(b) the amount specified in subsection (2), and

(c) the amount specified in subsection (4).

(2) The amount mentioned in subsection (1)(b) is—

(a) where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them,

(b) where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and

(c) where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b).

(3) In subsection (2)—

(a) “relevant amount”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and

(b) “relevant reduction”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced).

(4) The amount mentioned in subsection (1)(c) is—

(a) if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and

(b) otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to.]

Textual Amendments

F91 Ss. 434AZA-434AZC inserted (with effect in accordance with Sch. 23 para. 3(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 23 para. 3(1)

Yn ddilys o 21/07/2009

[F91 434AZC Sections 434AZA and 434AZB: supplementary U.K.

(1) For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund.

(2) Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return.

(3) In sections 434AZA and 434AZB—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

• “structural assets” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it).]

Textual Amendments

F91 Ss. 434AZA-434AZC inserted (with effect in accordance with Sch. 23 para. 3(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 23 para. 3(1)

[F92 434B Treatment of interest and annuities. U.K.

(1) Where the profits or losses arising to an insurance company from its life assurance business, or any class of life assurance business, fall to be computed for any purpose in accordance with the provisions of this Act applicable to Case I of Schedule D, section 337(2)(b) shall not prevent the deduction of any interest or annuity payable by the company under a liability of its long term business so far as referable to its life assurance business or any class of that business.

(2) Nothing in subsection (1) above or in section 338(2) shall be construed as preventing any such interest or annuity as is mentioned in subsection (1) above, so far as referable to the company’s basic life assurance and general annuity business, from being treated as a charge on income for the purposes of the computation of the profits or losses of that business otherwise than in accordance with Case I of Schedule D.]

Textual Amendments

F92 S. 434B inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 21(1) (with Sch. 8 para. 55(2))

[F93 434C Interest on repayment of advance corporation tax. U.K.

Section 826(1) applies in a case where a repayment falls to be made of advance corporation tax paid by a company carrying on life assurance business in respect of distributions made by it.

In relation to such a case the material date for the purposes of that section is that specified in subsection (2A) of that section.]

Textual Amendments

F93 S. 434C inserted (with effect in accordance with Sch. 8 paras. 54, 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 22 (with Sch. 8 para. 55(2))

[F94 434D Capital allowances: management assets. U.K.

(1) This section has effect with respect to the allowances and charges to be made under the 1990 Act in respect of “management assets”, that is, assets provided for use or used for the management of life assurance business carried on by a company.

(2) No allowances or charges shall be made under that Act in respect of expenditure on management assets except under Part II (machinery and plant).

(3) Where the company is charged to tax under section 441 in respect of the profits of its overseas life assurance business for an accounting period—

(a) any allowance falling to be made under Part II of the 1990 Act in respect of expenditure on the provision outside the United Kingdom of machinery or plant for use for the management of that business shall be given effect by treating it as an expense of the business for that period; and

(b) any charge in respect of such expenditure falling to be so made shall be given effect by treating it as a receipt of the business for that period;

and sections 73, 144 and 145 of the 1990 Act do not apply.

(4) Allowances and charges falling to be made under Part II of the 1990 Act in respect of expenditure in respect of management assets not falling within subsection (3) above shall be apportioned between the different classes of life assurance business carried on by the company.

The amount referable to any class of life assurance business shall be the relevant fraction of the amount of the allowance or charge, that is, the fraction of which—

(a)

the numerator is the mean of the opening and closing liabilities of the class of life assurance concerned, and

(b)

the denominator is the mean of the opening and closing liabilities of all the classes of life assurance business carried on by the company.

(5) Where the company is charged to tax under section 436, 439B or 441 in respect of the profits of its pension business, life reinsurance business or overseas life assurance business for an accounting period—

(a) any allowance falling to be made under Part II of the 1990 Act in respect of expenditure on the provision of machinery or plant for use for the management of that business shall be given effect by treating the relevant proportion of the allowance as an expense of that business for the purpose of calculating the Case VI profit for that period; and

(b) any charge in respect of such expenditure falling to be so made shall be given effect by treating the relevant proportion of the charge as a receipt of that business for that purpose.

(6) Where a company carries on basic life assurance and general annuity business and the profits arising from that business do not fall to be charged to tax in accordance with the provisions applicable to Case I of Schedule D—

(a) allowances falling to be given under Part II of the 1990 Act in respect of expenditure on management assets shall be treated as additional expenses of management within section 76; and

(b) any charge falling to be made under that Part in respect of such assets shall be chargeable to tax under Case VI of Schedule D.

(7) For the purposes of this section the purposes of the management of a business shall be taken to be those purposes expenditure on which would be treated as expenses of management within section 76.

(8) Expenditure to which this section applies shall not be taken into account otherwise than in accordance with this section.

This shall not be construed as preventing any allowance under Part II of the 1990 Act which falls to be given by virtue of this section from being taken into account—

(a)

in any computation of profits for the purposes of section 89(7) of the Finance Act 1989, or

(b)

in any computation for the purposes of section 76(2) of the tax that would have been paid if the company had been charged to tax under Case I of Schedule D in respect of its life assurance business.]

Textual Amendments

F94 Ss. 434D, 434E inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 23(1) (with Sch. 8 para. 55(2))

[F94 434E Capital allowances: investment assets. U.K.

(1) In this section “investment asset” means an asset held by a company for the purposes of its life assurance business otherwise than for the management of that business.

(2) The letting by a company of an investment asset shall be treated for the purposes of section 61 of the 1990 Act (machinery and plant on lease) as a letting otherwise than in the course of a trade.

(3) Any allowance under Part V of the 1990 Act (agricultural buildings, &c.) in respect of an investment asset shall be made by way of discharge or repayment of tax and shall be available primarily against agricultural income and income which is the subject of a balancing charge.

Effect shall be given to any balancing charge under that Part in respect of an investment asset by treating the amount on which the charge is to be made as agricultural income.

(4) Any allowance under the 1990 Act in respect of an investment asset shall be treated as referable to the category or categories of business to which income arising from the asset is or would be referable and shall be apportioned in accordance with section 432A in the same way as such income.

(5) No allowance under the 1990 Act in respect of an investment asset shall be taken into account—

(a) in computing the profits of any class of life assurance business under section 436, 439B or 441, or

(b) where the company is charged to tax in respect of its life assurance business under Case I of Schedule D, in computing the profits of that business.

(6) Where any allowance under the 1990 Act in respect of an investment asset falls to be taken into account (having regard to subsection (5) above), only such allowances as are referable to the company’s basic life assurance and general annuity business shall be given effect under section 145(1) of that Act, and then only against income referable to that business; and section 145(3) shall not apply.]

Textual Amendments

F94 Ss. 434D, 434E inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 23(1) (with Sch. 8 para. 55(2))

Yn ddilys o 19/07/2007

[F95 436A Gross roll-up business: separate charge on profits U.K.

(1) Profits arising to an insurance company from gross roll-up business—

(a) are to be treated as income within Schedule D, and

(b) are chargeable under Case VI of that Schedule.

(2) For that purpose—

(a) the gross roll-up business is to be treated separately, and

(b) the profits from it are to be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(3) In making that computation, sections 82 and 82B to [F96 83ZA] of the Finance Act 1989 apply with the necessary modifications.

(4) If in any accounting period an insurance company incurs a loss, to be computed on the same basis as the profits, arising from its gross roll-up business—

(a) the loss must be set off against the amount of any profits chargeable under this section for any subsequent accounting period, and

(b) accordingly, the amount of the company's profits so charged in any such accounting period is to be treated as reduced by the amount of the loss or so much of that amount as cannot be relieved under this section against profits of an earlier accounting period.

(5) Section 396 does not apply to a loss incurred by an insurance company on its gross roll-up business.

(6) No loss to which section 396 applies may be set off under subsection (4) above against the amount of any profits chargeable under this section.

(7) This section does not apply in relation to an insurance company for an accounting period if the profits of its long-term business for the accounting period are charged to tax under Case I of Schedule D.]

Textual Amendments

F95 Ss. 436A, 436B inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 25 (with Sch. 7 Pt. 2)

F96 S. 436A(3): "83ZA" substituted for "83AB" (with effect in accordance with Sch. 9 para. 17(2)(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 9 para. 12; S.I. 2008/379, art. 2

Modifications etc. (not altering text)

C47 S. 436A modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), reg. 13A (as inserted (14.8.2007 with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2007 (S.I. 2007/2134), regs. 1(1), 14)

Yn ddilys o 19/07/2007

[F95 436B Gains referable to gross roll-up business not to be chargeable gains U.K.

(1) Gains referable to gross roll-up business are not chargeable gains.

(2) For the purposes of this section “gains referable to gross roll-up business” means gains which—

(a) accrue to an insurance company on the disposal by it of assets of its long-term insurance fund, and

(b) are referable (in accordance with section 432A) to gross roll-up business.]

Textual Amendments

F95 Ss. 436A, 436B inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 25 (with Sch. 7 Pt. 2)

Yn ddilys o 19/03/1997

[F97 437A Meaning of “steep-reduction annuity” etc. U.K.

(1) For the purposes of section 437 an annuity is a steep-reduction annuity if—

(a) the amount of any payment in respect of the annuity (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives;

(b) the annuitant is entitled in respect of the annuity to payments of different amounts at different times; and

(c) those payments include a payment (“a reduced payment”) of an amount which is substantially smaller than the amount of at least one of the earlier payments in respect of that annuity to which the annuitant is entitled.

(2) Where there are different intervals between payments to which an annuitant is entitled in respect of any annuity, the question whether or not the conditions in subsection (1)(b) and (c) above are satisfied in the case of that annuity shall be determined by assuming—

(a) that the annuitant’s entitlement, after the first payment, to payments in respect of that annuity is an entitlement to payments at yearly intervals on the anniversary of the first payment; and

(b) that the amount to which the annuitant is assumed to be entitled on each such anniversary is equal to the annuitant’s assumed entitlement for the year ending with that anniversary.

(3) For the purposes of subsection (2) above an annuitant’s assumed entitlement for any year shall be determined as follows—

(a) the annuitant’s entitlement to each payment in respect of the annuity shall be taken to accrue at a constant rate during the interval between the previous payment and that payment; and

(b) his assumed entitlement for any year shall be taken to be equal to the aggregate of the amounts which, in accordance with paragraph (a) above, are treated as accruing in that year.

(4) In the case of an annuity to which subsection (2) above applies, the reference in section 437(1CB)(a) to the making of a reduced payment shall be construed as if it were a reference to the making of a payment in respect of that annuity which (applying subsection (3)(a) above) is taken to accrue at a rate that is substantially less than the rate at which at least one of the earlier payments in respect of that annuity is taken to accrue.

(5) Where—

(a) any question arises for the purposes of this section whether the amount of any payment in respect of any annuity—

(i) is substantially smaller than the amount of, or

(ii) accrues at a rate substantially less than,

an earlier payment in respect of that annuity, and

(b) the annuitant or, as the case may be, every annuitant is an individual who is beneficially entitled to all the rights conferred on him as such an annuitant,

that question shall be determined without regard to so much of the difference between the amounts or rates as is referable to a reduction falling to be made as a result of the occurrence of a death.

(6) Where the amount of any one or more of the payments to which an annuitant is entitled in respect of an annuity depends on any contingency, his entitlement to payments in respect of that annuity shall be determined for the purposes of section 437(1CA) to (1CC) and this section according to whatever (applying any relevant actuarial principles) is the most likely outcome in relation to that contingency.

(7) Where any agreement or arrangement has effect for varying the rights of an annuitant in relation to a payment in respect of any annuity, that payment shall be taken, for the purposes of section 437(1CA) to (1CC) and this section, to be a payment of the amount to which the annuitant is entitled in accordance with that agreement or arrangement.

(8) References in this section to a contingency include references to a contingency that consists wholly or partly in the exercise by any person of any option.]

Textual Amendments

F97 S. 437A inserted (with effect in accordance with s. 67(8) of the amending Act) by Finance Act 1997 (c. 16), s. 67(3)

Yn ddilys o 06/04/2001

[F98 438B Income or gains arising from property investment LLP U.K.

(1) Where an asset held by an insurance company as an asset of its long term business fund is held by the company as a member of a property investment LLP, the policy holders’ share of any income arising from, or chargeable gains accruing on the disposal of, the asset which—

(a) is attributable to the company, and

(b) would otherwise be referable by virtue of section 432A to pension business,

shall be treated for the purposes of the Corporation Tax Acts as referable to basic life assurance and general annuity business.

(2) For the purposes of this section the property business of the insurance company for the purposes of which the asset is held shall be treated as a separate business.

“Property business” means a Schedule A business or overseas property business.

(3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business, it shall be treated as carrying on such business if any income or chargeable gains of the company are treated as referable to the business by virtue of subsection (1) above.

(4) A company may be charged to tax by virtue of this section—

(a) notwithstanding section 439A, and

(b) whether or not the income or chargeable gains to which subsection (1) above applies is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.

(5) The policy holders’ share of income or chargeable gains to which subsection (1) above applies—

(a) shall not be treated as relevant profits for the purposes of section 88 of the Finance Act 1989 (corporation tax on policy holders’ fraction of profits), and

(b) shall not be treated as part of the BLAGAB profits for the purposes of section 88A of that Act (lower corporation tax rate on certain profits);

but the whole of the income or gains to which that subsection applies shall be chargeable to tax at the rate provided by section 88 of that Act.

(6) So far as income is brought into account as mentioned in section 83(2) of the Finance Act 1989, sections 432B to 432F (apportionment of receipts brought into account) have effect as if subsection (1) above did not apply.]

Textual Amendments

F98 Ss. 438B, 438C inserted (6.4.2001) by Finance Act 2001 (c. 9), s. 76, Sch. 25 para. 5

Yn ddilys o 06/04/2001

[F98 438C Determination of policy holders’ share for purposes of s.438B U.K.

(1) For the purposes of section 438B the policy holders’ share of any income or chargeable gains to which subsection (1) of that section applies is what remains after deducting the shareholders’ share.

(2) The shareholders’ share is found by applying to the whole the fraction—

where—

A is the amount of the profits of the company for the period which are chargeable to tax under section 436; and

B is an amount equal to the excess of—

(a) the amount taken into account as receipts of the company in computing those profits (apart from premiums and sums received by virtue of a claim under a reinsurance contract), over

(b) the amounts taken into account as expenses in computing those profits.

(3) Where there is no such excess as is mentioned in subsection (2) above, or where the profits are greater than any excess, the whole of the income or gains is treated as the shareholders’ share.

(4) Subject to that, where there are no profits none of the income or gains is treated as the shareholders’ share.]

Textual Amendments

F98 Ss. 438B, 438C inserted (6.4.2001) by Finance Act 2001 (c. 9), s. 76, Sch. 25 para. 5

[F99 439A Taxation of pure reinsurance business. U.K.

If a company does not carry on life assurance business other than reinsurance business, and none of that business is of a type excluded from this section by regulations made by the Board, the profits of that business shall be charged to tax in accordance with Case I of Schedule D and not otherwise.]

Textual Amendments

F99 S. 439A inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 26 (with Sch. 8 para. 55(2))

[F100 439B Life reinsurance business: separate charge on profits. U.K.

(1) Where a company carries on life reinsurance business and the profits arising from that business are not charged to tax in accordance with the provisions applicable to Case I of Schedule D, then, subject as follows, those profits shall be treated as income within Schedule D and be chargeable to tax under Case VI of that Schedule, and for that purpose—

(a) that business shall be treated separately, and

(b) subject to paragraph (a) above, the profits from it shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(2) Subsection (1) above does not apply to so much of reinsurance business of any description excluded from that subsection by regulations made by the Board.

Regulations under this subsection may describe the excluded business by reference to any circumstances appearing to the Board to be relevant.

(3) In making the computation referred to in subsection (1) above—

(a) sections 82(1), (2) and (4) and 83 of the Finance Act 1989 shall apply with the necessary modifications and in particular with the omission of the words “tax or” in section 82(1)(a),

(b) section 83(3) of that Act shall not apply, and

(c) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from life reinsurance business in any previous accounting period beginning on or after 1st January 1995.

(4) Section 396 shall not be taken to apply to a loss incurred by a company on life reinsurance business.

(5) Nothing in section 128 or 399(1) shall affect the operation of this section.

(6) Gains accruing to a company which are referable to its life reinsurance business shall not be chargeable gains.

(7) In ascertaining whether or to what extent a company has incurred a loss on its life reinsurance business, franked investment income and foreign income dividends shall be taken into account (notwithstanding anything in section 208) as part of the profits of that business.]

Textual Amendments

F100 S. 439B inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 27(1) (with Sch. 8 para. 55(2))

[F101 440B Modifications where tax charged under Case I of Schedule D. U.K.

(1) The following provisions apply where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D.

(2) Section 438 applies as if in subsections (6), (6B) and (6E) for the reference to any profit arising to the company and computed under section 436 there were substituted a reference to the profit that would arise on a computation under section 436 if the profits of the company’s life assurance business were not charged to tax under Case I of Schedule D.

(3) Section 440(1) and (2) apply as if the only categories set out in subsection (4) of that section were—

(a) assets of the long term business fund, and

(b) other assets.

(4) Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—

”(a) so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of long term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business, and

(b) any remaining securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph.”.

(5) Section 212(1) of the 1992 Act does not apply, but without prejudice to the bringing into account of any amounts deferred under section 213(1) or 214A(2) of that Act from any accounting period beginning before 1st January 1995.]

Textual Amendments

F101 S. 440B inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 28(1) (with Sch. 8 para. 55(2))

Yn ddilys o 19/07/2007

[F102 440C Modifications for change of tax basis U.K.

(1) Subsection (2) makes provision for a case where—

(a) subsection (4) of section 431G applies in relation to the profits of the life assurance business of an insurance company for any accounting period, but

(b) the profits of that business for a succeeding accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of subsection (3) of that section.

(2) The loss referred to in section 431G(4)(b) (less any loss for the same accounting period set off under section 436A for any intervening accounting period and any amount deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989) may be set off under section 393 against profits of that succeeding accounting period (without being reduced in accordance with section 434A(2)(a)).

(3) In determining whether any loss has been set off under section 436A for any intervening accounting period, or whether any amount has been deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989, losses of earlier accounting periods are to be assumed to be set off before those of later accounting periods.

(4) Subsection (5) makes provision for a case where—

(a) a loss arises to an insurance company for an accounting period for which the profits of its life assurance business fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3)(b),

(b) the profits of that business for a subsequent accounting period are charged to tax under the I minus E basis, and

(c) had those profits (instead) been charged to tax in accordance with Case I of Schedule D, any of that loss would have been available to be set off against them under section 393.

(5) The loss is to be treated for the purposes of the operation of section 436A in relation to the subsequent accounting period as if it were a loss arising from its gross roll-up business in the accounting period in which it arose.

(6) Subsections (7) and (8) make provision for a case where—

(a) the profits of the life assurance business of an insurance company for an accounting period are charged to tax under the I minus E basis,

(b) the profits of that business for its next accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and

(c) that prevents the giving of relief in accordance with section 86(8) of the Finance Act 1989 (acquisition expenses relieved in fractions under section 76).

(7) Any relief which would have been so given in—

(a) the next accounting period, or

(b) any subsequent accounting period for which the profits of the company's life assurance business continue to be charged to tax in accordance with Case I of Schedule D,

may be given by set-off against any gains treated as accruing under section 213(1) of the 1992 Act at the end of the accounting period.

(8) But if the profits of the company's life assurance business for a subsequent accounting period are charged to tax under the I minus E basis, any relief not previously given under subsection (7) is to be treated for the purposes of the operation of section 76 in relation to the first subsequent accounting period for which profits are so charged as if it were an amount which is to be relieved under that section by virtue of section 86(8) and (9) of the Finance Act 1989.]

Textual Amendments

F102 S. 440C inserted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 9 (with Sch. 8 Pt. 2)

Yn ddilys o 27/12/2007

[F103 440D Modifications in relation to BLAGAB group reinsurers U.K.

Schedule 19ABA (which makes modifications of this Act in relation to BLAGAB group reinsurers) shall have effect.]

Textual Amendments

F103 S. 440D inserted (27.12.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Taxation of Reinsurance Business) (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/3430), art. 3(2)

[F104 441B Treatment of UK land. U.K.

(1) This section applies to land in the United Kingdom which—

(a) is held by a company as an asset linked to the company’s overseas life assurance business, or

(b) is held by a company which is charged to tax under Case I of Schedule D in respect of its life assurance business as an asset by reference to the value of which benefits under any policy or contract are to be determined, where the policy or contract (or, in the case of a reinsurance contract, the underlying policy or contract) is held by a person not residing in the United Kingdom.

(2) Income arising from land to which this section applies shall be treated for the purposes of this Chapter as referable to basic life assurance and general annuity business.

(3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business it shall be treated as carrying on such business if any income of the company is treated as referable to such business by subsection (2) above.

(4) A company may be charged to tax by virtue of this section—

(a) notwithstanding section 439A, and

(b) whether or not the income to which subsection (2) above relates is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.

(5) In this section “land” has the same meaning as in Schedule 19AA.]

Textual Amendments

F104 S. 441B inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 32 (with Sch. 8 para. 55(2))

[F105 442A Taxation of investment return where risk reinsured. U.K.

(1) Where an insurance company reinsures any risk in respect of a policy or contract attributable to its basic life assurance and general annuity business, the investment return on the policy or contract shall be treated as accruing to the company over the period of the reinsurance arrangement and shall be charged to tax under Case VI of Schedule D.

(2) The Board may make provision by regulations as to the amount of investment return to be treated as accruing in each accounting period during which the reinsurance arrangement is in force.

(3) The regulations may, in particular, provide that the investment return to be treated as accruing to the company in respect of a policy or contract in any accounting period shall be calculated by reference to—

(a) the aggregate of the sums paid by the company to the reinsurer during that accounting period and any earlier accounting periods by way of premium or otherwise;

(b) the aggregate of the sums paid by the reinsurer to the company during that accounting period and any earlier accounting periods by way of commission or otherwise;

(c) the aggregate amount of the net investment return treated as accruing to the company in any earlier accounting periods, that is to say, net of tax at such rate as may be prescribed; and

(d) such percentage rate of return as may be prescribed.

(4) The regulations shall provide that the amount of investment return to be treated as accruing to the company in respect of a policy or contract in the final accounting period during which the policy or contract is in force is the amount, ascertained in accordance with regulations, by which the profit over the whole period during which the policy or contract, and the reinsurance arrangement, were in force exceeds the aggregate of the amounts treated as accruing in earlier accounting periods.

If that profit is less than the aggregate of the amounts treated as accruing in earlier accounting periods, the difference shall go to reduce the amounts treated by virtue of this section as arising in that accounting period from other policies or contracts, and if not fully so relieved may be carried forward and set against any such amounts in subsequent accounting periods.

(5) Regulations under this section—

(a) may exclude from the operation of this section such descriptions of insurance company, such descriptions of policies or contracts and such descriptions of reinsurance arrangements as may be prescribed;

(b) may make such supplementary provision as to the ascertainment of the investment return to be treated as accruing to the company as appears to the Board to be appropriate, including provision requiring payments made during an accounting period to be treated as made on such date or dates as may be prescribed; and

(c) may make different provision for different cases or descriptions of case.

(6) In this section “prescribed” means prescribed by regulations under this section.]

Textual Amendments

F105 S. 442A inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 34 (with Sch. 8 paras. 55(2), 57(2))

Modifications etc. (not altering text)

C48 S. 442A restricted (28.7.1995 with effect in accordance with reg. 1 of the affecting S.I.) by The Insurance Companies (Taxation of Reinsurance Business) Regulations 1995 (S.I. 1995/1730), regs. 9, 10

C49 S. 442A(1) modified (20.3.1997 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(1), 29

Yn ddilys o 19/02/2008

[F106 444AZA Transfers of life assurance business: Case VI losses of the transferor U.K.

(1) This section applies where—

(a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“the transferor”) to another (“the transferee”),

(b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in respect of that business under the I minus E basis,

(c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and

(d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).

(2) Any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits chargeable under section 436A (a “Case VI loss”) shall instead be treated as a loss of the transferee (a “Case I loss”) available to be set off against GRBP in relation to a period of account.

(3) For the purposes of subsection (2) above “GRBP”, in relation to a period of account, is—

where—

• P is the amount of such profits of the transferee's life assurance business for the period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable),

• GRBTL is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and

• TL is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.

(4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of any Case VI loss to which it would otherwise apply as is appropriate.

(5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.]

Textual Amendments

F106 Ss. 444AZA, 444AZB inserted (19.2.2008 with effect in accordance with art. 1(5) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 9

Yn ddilys o 19/02/2008

[F106 444AZB Transfers of life assurance business: Case I losses of the transferor U.K.

(1) This section applies where—

(a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“the transferor”) to another (“the transferee”),

(b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3),

(c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax under the I minus E basis, and

(d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).

(2) The relevant fraction of any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits of that business (a “Case I loss”) shall instead be treated as a loss of the transferee (a “Case VI loss”) available to be set off against the amount of such profits chargeable under section 436A for a period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable).

(3) For the purposes of subsection (2) above “the relevant fraction”, in relation to a period of account, is—

where—

• GRBTL is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and

• TL is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.

(4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of the amount of any Case I loss to which it would otherwise apply as is appropriate.

(5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.]

Textual Amendments

F106 Ss. 444AZA, 444AZB inserted (19.2.2008 with effect in accordance with art. 1(5) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 9

Yn ddilys o 10/07/2003

[F107 444AA Transfers of business: deemed periodical return U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer the whole of the long-term business of one person (“the transferor”).

(2) Where the last period covered by a periodical return of the transferor ends otherwise than immediately before the transfer, there is to be deemed for the purposes of corporation tax to be a periodical return of the transferor covering the period—

(a) beginning immediately after the last period ending before the transfer which is covered by an actual periodical return of the transferor, and

(b) ending immediately before the transfer,

containing such entries as would have been included in an actual periodical return of the transferor covering that period (and so making that period a period of account of the transferor).

(3) Where the last period covered by a periodical return of the transferor (whether or not by virtue of subsection (2) above) ends immediately before the transfer, there is to be deemed for the relevant purpose to be a periodical return of the transferor—

(a) covering the time of the transfer, and

(b) containing such entries as would have been included in an actual periodical return covering the time of the transfer,

(and so making the time of the transfer a period of account of the transferor for the relevant purpose).

(4) Where the last period covered by a periodical return of the transferor ends after the transfer, the periodical return covering that period is to be ignored for all purposes of corporation tax other than the relevant purpose.

(5) In this section “the relevant purpose” means determining for the purposes of section 83(2B) of the Finance Act 1989 whether a transfer is brought into account as part of total expenditure.

(6) For the purposes of this section “insurance business transfer scheme” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).]

Textual Amendments

F107 S. 444AA inserted (with effect in accordance with Sch. 33 para. 18(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 18(1)

Yn ddilys o 10/07/2003

[F108 444AB Transfers of business: charge on transferor retaining assets U.K.

(1) This section applies where, immediately after an insurance business transfer scheme has effect to transfer long-term business from one person (“the transferor”) to one or more others (“the transferee” or “the transferees”), the transferor—

(a) does not carry on long-term business, but

(b) holds assets which, immediately before the transfer, were assets of its long-term insurance fund.

(2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor during the accounting period beginning immediately after the day of the transfer.

(3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending with the day of the transfer, the taxable amount is the whole of the previously untaxed amount.

(4) Otherwise, the taxable amount is the non-BLAGAB fraction of the previously untaxed amount.

(5) The previously untaxed amount is the lesser of—

(a) the fair value of such of the assets held by the transferor immediately after the transfer as were assets of its long-term insurance fund immediately before the transfer, and

(b) the amount by which the fair value of the assets of the transferor’s long-term insurance fund immediately before the transfer exceeds the amount of the relevant pre-transfer liabilities.

(6) In subsection (5) above “fair value”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.

(7) Subject to subsection (8) below, the amount of the relevant pre-transfer liabilities is the aggregate of the amounts shown in column 1 of lines 14 and 49 of Form 14 in the periodical return of the transferor covering the period of account ending immediately before the transfer.

(8) If the amount of the liabilities transferred exceeds the value of the assets so transferred, as brought into account for the first period of account of the transferee (or any of the transferees) ending after the transfer, the amount of the relevant pre-transfer liabilities is the amount arrived at by deducting the excess from the aggregate of the amounts shown as mentioned in subsection (7) above.

(9) For the purposes of subsection (4) above the non-BLAGAB fraction of the previously untaxed amount is the fraction of which—

(a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and

(b) the denominator is the amount of the liabilities transferred.

(10) References in this section to assets held by the transferor after the transfer do not include any held on trust for the transferee or any of the transferees.

(11) For the purposes of this section “insurance business transfer scheme” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).]

Textual Amendments

F108 S. 444AB inserted (with effect in accordance with Sch. 33 para. 19(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 19(1)

Yn ddilys o 22/07/2004

[F109 444ABA Subsequent charge in certain cases within s.444AB U.K.

(1) This section applies where—

(a) section 444AB applies in relation to a transfer in the case of which there are retained liabilities, and

(b) in any accounting period of the transferor beginning after the day of the transfer there is a reduction in the amount of the retained liabilities occasioned otherwise than by the making of a payment in or towards their discharge.

(2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor in the accounting period in which the reduction occurs.

(3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending with the day of the transfer, the taxable amount is the whole amount of the reduction.

(4) Otherwise the taxable amount is the non-BLAGAB fraction of the amount of the reduction.

(5) The non-BLAGAB fraction of the amount of the reduction is the fraction of which—

(a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and

(b) the denominator is the amount of the liabilities transferred.

(6) Where in any accounting period of the transferor beginning after the transfer there is an increase in the amount of the retained liabilities, this section applies in relation to subsequent accounting periods of the transferor as if the amount of the retained liabilities were reduced by the amount of the increase.

(7) Where an amount is shown as post-transfer reduction liabilities in the transferor’s accounts for any accounting period beginning after the transfer, this section applies as if the amount of the retained liabilities at the end of that accounting period (and the beginning of the next) were increased by the amount so shown.

(8) In subsection (7) above “post-transfer reduction liabilities” means liabilities of the transferor to make payments to relevant persons which, in accordance with the terms of the insurance business transfer scheme, have arisen in consequence of a reduction in the amount of the retained liabilities at any time after the transfer.

(9) In subsection (8) above “relevant persons” means—

(a) if the transferor’s life assurance business immediately before the transfer was mutual business, persons who were policy holders or annuitants, or members of the transferor, at that time, and

(b) in any other case, persons who were policy holders or annuitants at that time.]

Textual Amendments

F109 S. 444ABA inserted (with effect in accordance with Sch. 7 para. 3(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 7 para. 3(1)

Yn ddilys o 16/12/2010

[F110 444ABAA Non-profit fund transferred assets U.K.

(1) For the purposes of section 444AB the relevant amount in relation to assets that are non-profit fund transferred assets is—

where—

FVA is the fair value of the assets on the transfer date,

ABTO is any amount brought into account in respect of the assets as a business transfer-out and shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor for the period of account of the transferor including the transfer date, and

TL is the amount of any non-profit fund transferred liabilities which are shown (or treated as shown) in any of lines 17, 21 to 23 and 31 to 38, but not in line 61, in Form 14 in the periodical return for the period of account of the transferor ending (or treated as ending by section 444AA) immediately before the transfer date or, if there is no period of account of the transferor so ending (or treated as so ending), the amount of any liabilities which would be so shown if one did.

(2) In subsection (1) “non-profit fund transferred liabilities” means such of the liabilities of the transferor's long-term insurance fund as are transferred from the transferor to the transferee by the insurance business transfer scheme and were, immediately before their transfer, liabilities of a non-profit fund of the transferor.

(3) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F110 S. 444ABAA inserted (with effect in accordance with s. 15(11) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), s. 15(10)

Yn ddilys o 19/07/2007

[F111 444ABB Retained assets U.K.

(1) For the purposes of section 444AB the relevant amount in relation to assets that are retained assets is the lesser of FVA and UTA, where—

(a) FVA is the fair value of the assets on the transfer date, and

(b) UTA is the amount by which the fair value of the assets of the long-term insurance fund of the transferor immediately before the transfer date exceeds the amount shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor covering the transfer date.

(2) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F111 Ss. 444AB-444ABC substituted for ss. 444AB, 444ABA (with effect in accordance with Sch. 9 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 9 para. 4(1); S.I. 2008/379, art. 2

Yn ddilys o 19/02/2008

[F112 444ABBA Transfers of business: election for transferee to pay tax of transferor U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“the transferor”) to another (“the transferee”).

(2) If the transferor and the transferee jointly elect, the transferee (and not the transferor) is chargeable to any amount of additional corporation tax to which the transferor would otherwise be chargeable by virtue of section 444AB(4) in relation to relevant non-transferred assets.

(3) An election under subsection (2) above—

(a) is to be irrevocable, and

(b) is to be made by notice to an officer of Revenue and Customs no later than the end of the period of 90 days beginning with the day following the transfer date,

and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer. Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.

(4) Where an election under subsection (2) above has been made, the transferor must inform the transferee of—

(a) the amount of any additional corporation tax to which the transferor considers the election to apply, and

(b) the day on which that tax is due and payable,

no later than the end of the period of 8 months beginning with the day following the transfer date.

(5) Tax chargeable on the transferee by virtue of an election under subsection (2) above—

(a) is due in accordance with section 59D of the Management Act M41 on the day on which it would have been due if no election had been made, and

(b) for the purposes of that section, is to be treated as tax payable by the transferor (and not as tax payable by the transferee).

(6) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F112 S. 444ABBA inserted (19.2.2008 with effect in accordance with art. 1(4) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 14

Marginal Citations

M41 1970 c. 9

Yn ddilys o 19/07/2007

[F113 444ABC Transfer scheme transferring part of business: transferor U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“the transferor”) to another person (“the transferee”) and the condition in subsection (2) below is met.

(2) That condition is that any of the assets of the transferor's long-term insurance fund which are transferred from the transferor to the transferee by the insurance business transfer scheme are not, immediately after their transfer—

(a) if the transferee is an insurance company, assets of the transferee's long-term insurance fund, or

(b) if the transferee is not an insurance company, assets of a with-profits fund of the transferee,

(“relevant non-transferred assets”).

(3) The relevant amount in relation to the relevant non-transferred assets (see subsection (4) below) is to be taken into account under section 83(2) of the Finance Act 1989 as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account covering the transfer date.

(4) The relevant amount in relation to the relevant non-transferred assets is—

where

FVA is the fair value of the assets on the transfer date, and

BTO is any amount brought into account in respect of the assets as a business transfer-out.

(5) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F113 Ss. 444AB-444ABC substituted for ss. 444AB, 444ABA (with effect in accordance with Sch. 9 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 9 para. 4(1); S.I. 2008/379, art. 2

Yn ddilys o 19/07/2007

[F114 444ABD Transferor's period of account including transfer U.K.

(1) Any profits representing the amount by which—

(a) the value of the liabilities transferred by an insurance business transfer scheme, exceeds

(b) the value of the assets transferred by the insurance business transfer scheme shown (or treated as shown) in line 32 of the periodical return of the transferor for the period of account of the transferor including the transfer date,

are to be taken into account as profits of that period of account.

(2) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F114 S. 444ABD inserted (with effect in accordance with Sch. 9 para. 17(4) of the amending Act) by Finance Act 2007 (c. 11), Sch. 9 para. 5

Yn ddilys o 10/07/2003

444AC Transfers of business: modification of s.83(2) FA 1989 U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“the transferor”) to another (“the transferee”).

(2) If—

(a) the element of the transferee’s line 15 figure representing the transferor’s long-term insurance fund, exceeds

(b) the amount of the liabilities to policy holders and annuitants transferred to the transferee,

the excess is not to be regarded as other income of the transferee for the purposes of section 83(2)(d) of the Finance Act 1989.

(3) In this section and section 444AD “the element of the transferee’s line 15 figure representing the transferor’s long-term insurance fund” means so much of—

(a) the amount which is brought into account by the transferee as other income in the period of account of the transferee in which the transfer takes place, as represents

(b) the assets transferred to the transferee.

Yn ddilys o 19/07/2007

[F115 444ACZA Transfer schemes transferring part of business: reduction in income of transferee U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“the transferor”) to another person (“the transferee”) and the condition in subsection (2) below is met.

(2) The condition is that the transferor did not carry on life assurance business that is mutual business during the period of account of the transferor covering the transfer date.

(3) The amount which (apart from this section) would be regarded as other income of the transferee for the purposes of section 83(2)(e) of the Finance Act 1989 for the period of account of the transferee which includes the transfer date is to be reduced by an amount equal to the transferred surplus.

(4) In subsection (4) above “the transferred surplus” means such part of the amount shown (or treated as shown) in line 13 of Form 14 in the periodical return of the transferor covering the last period of account of the transferor ending before the transfer date as it is just and reasonable to regard as being attributable to the transfer.

(5) See section 444AA for the meaning of “the transfer date” in this section.]

Textual Amendments

F115 Ss. 444AC, 444ACZA substituted for s. 444AC (with effect in accordance with Sch. 9 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 9 para. 6(1); S.I. 2008/379, art. 2

Yn ddilys o 20/07/2005

[F116 444ACA Transfers of business: transferor shares are assets of transferee's long-term insurance fund etc U.K.

(1) This section applies where an insurance business transfer scheme (see section 444AC(11)) has effect to transfer long-term business from one company (“the transferor”) to another (“the transferee”).

(2) If—

(a) immediately before the transfer, the assets of the long-term insurance fund of the transferee comprise or include relevant shares or an interest in such shares, and

(b) the fair value (see section 444AC(11)) of the relevant shares, or of that interest, is reduced (whether or not to nil) as a result of the transfer,

an amount equal to that reduction in fair value is to be taken into account under section 83(2) of the Finance Act 1989 as a receipt of the transferee of the period of account of the transferee in which the transfer takes place.

(3) But if—

(a) the assets transferred to the transferee under the transfer comprise or include assets (“the relevant assets”) which, immediately before the transfer,—

(i) were assets of the transferor, but

(ii) were not assets of the transferor's long-term insurance fund, and

(b) in respect of the transfer of the relevant assets, an amount is—

(i) brought into account by the transferee as other income of the transferee of the period of account of the transferee in which the transfer takes place, and

(ii) taken into account in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the transferee's life assurance business and any category of its life assurance business to which the amount is referable,

the amount taken into account under section 83(2) of the Finance Act 1989 by virtue of subsection (2) above shall be reduced (but not below nil) by an amount equal to the amount referred to in paragraph (b) above.

(4) In subsection (2) above “relevant shares” means—

(a) some or all of the shares in the transferor, or

(b) some or all of the shares in a company (whether or not an insurance company) which owns, directly or indirectly,—

(i) some or all of the shares in the transferor, or

(ii) an interest in some or all of those shares.

(5) In subsection (4) above “shares”, in relation to a company, includes any interests in the company possessed by members of the company.]

Textual Amendments

F116 S. 444ACA inserted (with effect in accordance with Sch. 9 para. 8(2) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 8(1)

Yn ddilys o 10/07/2003

444AD Transfers of business: modification of s.83(2B) FA 1989 U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“the transferor”) to another (“the transferee”).

(2) If the transferor and the transferee jointly elect, section 83(2B) of the Finance Act 1989 does not apply to the transferor by reason of the transfer as respects so much of the value of the assets to which it would otherwise so apply as does not exceed the amount specified in subsection (4) below.

(3) An election under subsection (2) above—

(a) is irrevocable, and

(b) is to be made by notice to an officer of the Board no later than the end of the period of 28 days beginning with the day following that on which the transfer takes place;

and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer.

Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.

(4) The amount referred to in subsection (2) above is the amount by which—

(a) the fair value of the assets of the long-term insurance fund of the transferee immediately after the transfer, is greater than

(b) the element of the transferee’s line 15 figure representing the transferor’s long-term insurance fund.

(5) In subsection (4) above “fair value”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.

Yn ddilys o 10/07/2003

444AE Transfers of business: modification of s.83ZA FA 1989 U.K.

(1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“the transferor”) to another (“the transferee”).

(2) If a contingent loan made to the transferor (within the meaning of subsection (1) of section 83ZA of the Finance Act 1989) is transferred to the transferee, that section has effect as if—

(a) the contingent loan had become repayable by the transferor immediately before the transfer, and

(b) the contingent loan were made to the transferee immediately after the transfer.

Yn ddilys o 19/07/2007

444AEA Transfer schemes: anti-avoidance rule U.K.

(1) This section applies where—

(a) as a result of the whole or any part of transfer scheme arrangements involving the transfer of long-term business from one person (“the transferor”) to another (“the transferee”) a Case I advantage is obtained by the transferor or the transferee (or by both), and

(b) the sole or main purpose, or one of the main purposes, of the whole or any part of the transfer scheme arrangements is the obtaining of that Case I advantage.

(2) In subsection (1) above “transfer scheme arrangements” means an insurance business transfer scheme (“the relevant transfer scheme”) together with any relevant associated operations.

(3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AEB), the amount of the transferor's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account of the transferor covering the transfer date.

(4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AEC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the first period of account of the transferee ending after the transfer date.

(5) In this section and sections 444AEB and 444AEC “relevant associated operations”, in relation to the relevant transfer scheme, means—

(a) any other insurance business transfer scheme,

(b) any contract of reinsurance,

(c) any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee, or

(d) any surplus-increasing transfer of assets,

which is effected in connection with the relevant transfer scheme.

(6) In subsection (5) above—

• “dependant” and “insurance undertaking” have the same meaning as in the Insurance Prudential Sourcebook, and

• “surplus-increasing transfer of assets” means a transfer of assets of the transferor's long-term insurance fund to the transferee which is not brought into account for any period of account of the transferee but increases the amount of total surplus shown in line 39 of Form 58 in any periodical return of the transferee.

(7) See section 444AA for the meaning of “the transfer date” in this section.

Yn ddilys o 19/07/2007

444AEB Case I advantage: transferor U.K.

(1) A Case I advantage is obtained by the transferor if—

(a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or

(b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.

(2) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—

(a) the amounts (if any) by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, and

(b) the amounts (if any) by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.

(3) This section applies to a period of account if it is—

(a) the period of account of the transferor covering the transfer date,

(b) any earlier period of account of the transferor, or

(c) where any relevant associated operations are effected in any later period of account, that period of account.

(4) In this section and section 444AEC “Case I profits” and “Case I losses” means profits and losses computed in accordance with the provisions of Case I of Schedule D.

(5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.

Yn ddilys o 19/07/2007

444AEC Case I advantage: transferee U.K.

(1) A Case I advantage is obtained by the transferee if—

(a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or

(b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.

(2) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—

(a) the amount by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, or

(b) the amount by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.

(3) This section applies to a period of account if it is—

(a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),

(b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or

(c) any intervening period of account.

(4) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses”, in this section.

Yn ddilys o 19/02/2008

[F117 444AECA Parts of transfer scheme arrangements: anti-avoidance rule U.K.

(1) This section applies where—

(a) as a result of any part of transfer scheme arrangements involving the transfer of long-term business from one person (“the transferor”) to another (“the transferee”) a Case I advantage is obtained by the transferor or the transferee (or by both), and

(b) the sole or main purpose, or one of the main purposes, of that part of the transfer scheme arrangements is the obtaining of that Case I advantage.

(2) In subsection (1) above “transfer scheme arrangements” has the same meaning as in section 444AEA.

(3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AECB), the amount of the transferor's Case I advantage (see subsection (3) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor—

(a) to the extent that the advantage is obtained by the transferor in the period of account covering the transfer date or any earlier period of account—

(i) for the period of account of the transferor ending (or treated as ending) immediately before the transfer date, or

(ii) where there is no such period, for the period of account of the transferor including the transfer date, and

(b) to the extent that the advantage is obtained by the transferor in any later period of account of the transferor in which any relevant associated operations are effected, for that later period of account.

(4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AECC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the period of account of the transferee in which the advantage is obtained by the transferee.

(5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.]

Textual Amendments

F117 Ss. 444AECA-444AECC inserted (19.2.2008 with effect in accordance with art. 1(4) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 22

Yn ddilys o 19/02/2008

[F117 444AECB Parts of transfer scheme arrangements: Case I advantage transferor U.K.

(1) A Case I advantage is obtained by the transferor if—

(a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or

(b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for any part of the transfer scheme arrangements.

(2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater or the Case I losses to be less than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.

(3) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—

(a) the amounts (if any) by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, and

(b) the amounts (if any) by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.

(4) This section applies to a period of account if it is—

(a) the period of account of the transferor covering the transfer date,

(b) any earlier period of account of the transferor, or

(c) where any relevant associated operations are effected in any later period of account, that period of account.

(5) In this section and section 444AECC “the relevant part of the arrangements” means, in relation to a Case I advantage, the part of the transfer scheme arrangements as a result of which the Case I advantage is obtained.

(6) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time”, in this section.]

Textual Amendments

F117 Ss. 444AECA-444AECC inserted (19.2.2008 with effect in accordance with art. 1(4) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 22

Yn ddilys o 19/02/2008

[F117 444AECC Parts of transfer scheme arrangements: Case I advantage transferee U.K.

(1) A Case I advantage is obtained by the transferee if—

(a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or

(b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for the any part of the transfer scheme arrangements.

(2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater, or the Case I losses to be less, than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.

(3) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—

(a) the amount by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, or

(b) the amount by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.

(4) This section applies to a period of account if it is—

(a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),

(b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or

(c) any intervening period of account.

(5) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations”, section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time” and section 444AECB for the meaning of “the relevant part of the arrangements”, in this section.]

Textual Amendments

F117 Ss. 444AECA-444AECC inserted (19.2.2008 with effect in accordance with art. 1(4) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), art. 22

Yn ddilys o 19/07/2007

444AED Clearance: no avoidance or group advantage U.K.

(1) Section 444AEA does not apply in relation to the transferor or the transferee if, on an application under this section, the Commissioners for Her Majesty's Revenue and Customs (“the HMRC Commissioners”) have given a notice under subsection (2) below.

(2) A notice under this subsection is a notice stating that the HMRC Commissioners are satisfied—

(a) that the obtaining of a Case I advantage by the applicant is not the sole or main purpose of the whole or any part of the transfer scheme arrangements, or

(b) that the transferor and the transferee are members of the same group of companies and that there is no advantage to the group arising from any Case I advantage obtained by the transferor or by the transferee.

(3) For the purposes of this section there is no advantage to a group arising from any Case I advantage obtained by the transferor or by the transferee if—

(a) as a result of transfer scheme arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group of companies, and

(b) the amount (or aggregate amount) of that increase is not less than the reduction in the liability to corporation tax of the transferor or the transferee (or both) arising from the obtaining of the Case I advantage.

(4) An application under this section must be in writing and contain particulars of the transfer scheme arrangements.

(5) The HMRC Commissioners may by notice require the applicant to provide further particulars in order to enable them to determine the application.

(6) A requirement may be imposed under subsection (5) above within 30 days of the receipt of the application or of any further particulars required under that subsection.

(7) If a notice under subsection (5) above is not complied with within 30 days or such longer period as the HMRC Commissioners may allow, they need not proceed further on the application.

(8) The HMRC Commissioners must give notice of their decision on an application under this section to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of that notice being complied with.

(9) If the HMRC Commissioners—

(a) give notice to the applicant under subsection (8) above that they are not satisfied as mentioned in subsection (2) above, or

(b) do not comply with subsection (8) above,

the applicant may require them to transmit the application to the Special Commissioners.

(10) A requirement under subsection (9) above must be imposed within 30 days of the giving of the notice or the failure to comply and must be accompanied by any notice given under subsection (5) above and further particulars provided pursuant to any such notice.

(11) Any notice given by the Special Commissioners has effect for the purposes of subsection (1) above as if it were given by the HMRC Commissioners.

(12) If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of the HMRC Commissioners or the Special Commissioners, any resulting notice that they are satisfied as mentioned in subsection (2) above is void.

(13) For the purposes of this section two companies are members of the same group of companies if they are for the purposes of Chapter 4 of Part 10.

Yn ddilys o 19/07/2006

[F118 Surpluses of mutual and former mutual businesses U.K.

Textual Amendments

F118 Ss. 444AF-444AL and preceding cross-heading inserted (with effect in accordance with Sch. 11 para. 5(2)-(14) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 5(1)

444AF Demutualisation surplus: life assurance business U.K.

(1) This section applies in relation to a period of account of an insurance company (“the relevant period”) if—

(a) at any time in the relevant period the company carries on life assurance business that is not mutual business,

(b) the company has an amount of undistributed demutualisation surplus for the relevant period (see subsection (7)), and

(c) there is a reduction in the amount of the company's unappropriated surplus over the relevant period (see section 444AI).

(2) Where this section applies in relation to the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund whichever of the following amounts is the smallest—

(a) the amount of the reduction mentioned in subsection (1)(c) above;

(b) the amount of the company's undistributed demutualisation surplus for the relevant period;

(c) the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).

(3) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—

(a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and

(b) for that purpose, any amount that falls to be determined in order to determine—

(i) whether that subsection applies in relation to any such separate revenue account, and

(ii) if so, the amount to be brought into account under that subsection in relation to that account,

shall be determined using only amounts or items which relate to the separate revenue account concerned.

(4) In applying subsection (2) above in relation to a revenue account or separate revenue account which—

(a) is recognised for the purposes of section 83 of that Act, and

(b) is one in relation to which sections 432C and 432D apply,

that subsection shall have effect as if for “smallest” there were substituted smaller and as if paragraph (c) were omitted.

(5) This section shall have effect—

(a) for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the company's life assurance business, and

(b) for the purposes of so computing the profits of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.

(6) But for the purposes mentioned in subsection (5)(b) above, this section and section 444AG have effect subject to the modification in section 444AH; and the Corporation Tax Acts have effect accordingly (so that there may, in particular, be a difference between—

(a) the amount deemed to be brought into account by virtue of subsection (2) above for a period of account for those purposes, and

(b) the amount so deemed to be brought into account for that period of account for the purposes mentioned in subsection (5)(a) above).

(7) For the purposes of this section, the undistributed demutualisation surplus of an insurance company for the relevant period is—

(a) an amount equal to (UDSP – AD + DTSI – DTSO); or

(b) if that amount is a negative amount, nil.

For this purpose—

• UDSP is the undistributed demutualisation surplus of the company for the period of account immediately preceding the relevant period,

• AD is any amount deemed under this section to be brought into account for the period of account immediately preceding the relevant period as an increase in the value of the assets of the company's long-term insurance fund,

• DTSI is the total amount of any demutualisation transfer surpluses accruing to the company during the relevant period (see section 444AG),

• DTSO is the total amount of any demutualisation transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).

444AG Section 444AF: “demutualisation transfer surplus” U.K.

(1) For the purposes of section 444AF and this section, a demutualisation transfer surplus accrues to an insurance company where—

(a) life assurance business is transferred to the company by a person (“the transferor”),

(b) after the transfer, the company carries on the transferred business otherwise than as mutual business, and

(c) the condition in subsection (2) below is satisfied in relation to the transfer.

(2) The condition is that—

(a) immediately before the transfer, the transferor carried on the transferred business as mutual business, or

(b) where paragraph (a) above does not apply, some or all of the transferred business was carried on by an insurance company as mutual business at a time on or after 1st January 1990 and before the transfer (“former mutual business”).

(3) The demutualisation transfer surplus accrues to the company on the date of the transfer.

(4) The amount of the demutualisation transfer surplus is given by subsection (5) or (6) below.

(5) Where subsection (2)(a) above applies, the amount of the demutualisation transfer surplus is—

(a) where the whole of the transferor's life assurance business was transferred to the company under the transfer, the aggregate of—

(i) the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer, and

(ii) the amount of any added surplus accruing to the company in connection with the transfer (see subsection (10));

(b) otherwise, a just and reasonable portion of that aggregate amount, having regard to how much of the transferor's life assurance business was transferred to the company under the transfer.

(6) Where subsection (2)(b) above applies, the amount of the demutualisation transfer surplus is—

(a) where the whole of the transferor's life assurance business was transferred to the company under the transfer and all of the transferred business is former mutual business, the former mutual surplus of the transferor on the transfer date (see subsection (7));

(b) otherwise, so much of that former mutual surplus as it is just and reasonable to attribute to the company, having regard in particular to—

(i) how much of the transferor's life assurance business was transferred to the company under the transfer, and

(ii) how much of the transferred business is former mutual business.

(7) For the purposes of subsection (6) above, the former mutual surplus of the transferor on the transfer date is—

(a) the amount given by subsection (8) below, or

(b) if less, the amount given by subsection (9) below.

(8) The amount given by this subsection is the total amount of any demutualisation transfer surpluses accruing to the transferor—

(a) on or after 1st January 1990, and

(b) on or before the date of the transfer.

(9) The amount given by this subsection is the lowest amount of unappropriated surplus of the transferor at the end of any period of account ending—

(a) on or after the date of the last occasion on which a demutualisation transfer surplus accrued to it as mentioned in subsection (8) above, and

(b) on or before the date of the transfer.

(10) For the purposes of this section, added surplus accrues to the company in connection with the transfer if—

(a) an amount of assets is received by the company in connection with the transfer, no later than six months after the date of the transfer,

(b) the amount is not brought into account by the company,

(c) the amount is added to the unappropriated surplus of the company, and

(d) the amount does not derive from any unappropriated surplus of the transferor;

and the amount of the added surplus is the amount referred to in paragraphs (a) to (d) above.

444AH Modification of section 444AG etc for Case VI businesses U.K.

(1) The modification in this section has effect for the purposes mentioned in section 444AF(5)(b) only.

(2) In relation to any demutualisation transfer surplus accruing to a company in a post-2002 period of account—

(a) the references in section 444AG(5) to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer shall be taken to be references to—

(i) the amount of that unappropriated surplus, or

(ii) if less, the unappropriated surplus of the transferor at the end of the period of account immediately preceding the first post-2002 period of account of the transferor; and

(b) the references in sections 444AF and 444AG to the amount of any demutualisation transfer surplus are to have effect accordingly.

(3) In this section “post-2002 period of account”, in relation to an insurance company, means a period of account of the company beginning on or after 1st January 2003 and ending on or after 9th April 2003.

444AI Section 444AF: “reduction in company's unappropriated surplus” U.K.

(1) For the purposes of section 444AF—

(a) there is a reduction in the amount of the company's unappropriated surplus over the relevant period if CUS is less than (OUS + TSI – TSO);

(b) the amount of that reduction is the amount by which CUS is less than (OUS + TSI – TSO).

(2) In this section—

• CUS is the amount of the company's unappropriated surplus at the end of the relevant period,

• OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,

• TSI is the total amount of any transfer surpluses accruing to the company during the relevant period (see subsections (3) to (7)),

• TSO is the total amount of any transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).

(3) For the purposes of this section, a transfer surplus accrues to an insurance company where life assurance business is transferred to the company by a person (“the transferor”).

(4) The transfer surplus accrues to the company on the date of the transfer.

(5) The amount of the transfer surplus is equal to so much of the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer as is transferred to the company under the transfer.

(6) But if, immediately before the transfer, the transferor carried on the transferred business as mutual business, the amount of the transfer surplus is the aggregate of—

(a) the amount given by subsection (5) above, and

(b) the amount of any added surplus accruing to the company in connection with the transfer.

(7) Subsection (10) of section 444AG applies for the purposes of subsection (6) above as it applies for the purposes of that section.

444AJ Sections 444AF and 444AK: “relevant receipts reduction” U.K.

(1) For the purposes of sections 444AF and 444AK, the amount of the company's relevant receipts reduction for the relevant period is to be calculated by—

(a) determining, in the case of each with-profits fund of the company, the amount given by subsection (2) or (6) below for the relevant period, and

(b) aggregating each of those amounts.

(2) The amount, in the case of a fund other than a policy holder participation fund, is—

(a) where the gross transfer to non-technical account for the fund for the relevant period (see subsections (3) and (4)) is greater than the post-policy holder surplus for the fund for the relevant period (see subsection (5)), the amount of the difference;

(b) otherwise, nil.

(3) In this section “the gross transfer to non-technical account” means the amount shown in line 13 of Form 58 for the fund.

(4) But if—

(a) there is a transfer from a with-profits fund of the company to another fund of the company (“the initial transfer”) which is shown in (or included in an amount shown in) line 14 of Form 58 for the with-profits fund,

(b) there is a transfer from a fund of the company (whether or not the other fund mentioned in paragraph (a) above) to the non-technical account which is shown in (or included in an amount shown in) line 13 of Form 58 for that fund, and

(c) the transfer to the non-technical account can reasonably be regarded as connected with the initial transfer,

the amount of the gross transfer to non-technical account for the relevant period given by subsection (3) above in the case of the with-profits fund is to be increased by the amount transferred to the non-technical account.

(5) In this section “post-policy holder surplus” means an amount equal to—

where—

SA is—

• (a) the amount shown in line 34 of Form 58 for the fund (surplus arising since last valuation), or

• (b) if that amount is a negative amount, nil;

TAP is the amount shown in line 46 of Form 58 for the fund (total allocated to policy holders).

(6) The amount, in the case of a policy holder participation fund, is—

(a) where TAP is greater than SA, the amount of the difference;

(b) otherwise, nil;

and for this purpose “SA” and “TAP” have the same meaning as in subsection (5) above.

(7) References in this section to Form 58 are references to that Form in the periodical return of the company for the relevant period.

(8) In this section “policy holder participation fund” means a fund in the case of which an amount equal to the amount shown in line 34 of Form 58 for the fund is allocated to policy holders for the relevant period.

444AK Mutual surplus: Case VI categories of life assurance business U.K.

(1) This section applies if at any time in a period of account of an insurance company (“the relevant period”)—

(a) the company carries on life assurance business as mutual business, and

(b) the company carries on one or more categories of life assurance business chargeable to tax under Case VI of Schedule D.

(2) If there is a reduction in the amount of the company's unappropriated surplus over the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund—

(a) the amount of that reduction, or

(b) if less, the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).

(3) But subsection (2) above shall have effect only for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits for the relevant period of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.

(4) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—

(a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and

(b) for that purpose, any amount that falls to be determined in order to determine—

(i) whether that subsection applies in relation to any such separate revenue account, and

(ii) if so, the amount to be brought into account under that subsection in relation to that account,

shall be determined using only amounts or items which relate to the separate revenue account concerned.

(5) In applying subsection (2) above in relation to a revenue account or separate revenue account which—

(a) is recognised for the purposes of section 83 of that Act, and

(b) is one in relation to which sections 432C and 432D apply,

that subsection shall have effect as if paragraph (b) and the word “or” before it were omitted.

(6) For the purposes of this section, there is a reduction in the amount of the company's unappropriated surplus over the relevant period if—

(a) CUS is less than OUS, and

(b) CUS is less than UUS.

(7) The amount of that reduction is—

(a) the amount by which CUS is less than OUS, or

(b) if OUS is greater than UUS, the amount by which CUS is less than UUS.

(8) In this section—

• CUS is the amount of the company's unappropriated surplus at the end of the relevant period,

• OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,

• UUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the first period of account of the company to begin on or after 1st January 2003 and to end on or after 9th April 2003.

444AL Interpretation of sections 444AF to 444AK U.K.

(1) This section applies for the purposes of sections 444AF to 444AK.

(2) References to mutual business, in relation to any time, include business which at that time is treated for the purposes of section 432E as mutual business.

(3) “Unappropriated surplus”, in relation to a period of account of an insurance company, means an unappropriated surplus on valuation as shown in the periodical return of the company for the period of account.

(4) References to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer are, where a period of account of the transferor does not end at that time, references to the unappropriated surplus on valuation that would have been shown in a periodical return of the transferor for that period had such a return been drawn up.]

Yn ddilys o 27/07/1993

[F119 Provisions applying in relation to overseas life insurance companies] U.K.

Textual Amendments

F119 S. 444B and cross heading inserted (27.7.1993) by 1993 c.34, s. 97(1)

F120 444B Modification of Act in relation to overseas life insurance companies. U.K.

Schedule 19AC (which makes modifications of this Act in relation to overseas life insurance companies) shall have effect.

Textual Amendments

F120 S. 444B and cross heading inserted (27.7.1993) by 1993 c. 34, s. 97(1)

[F121 444C Modification of section 440. U.K.

(1) Where the company mentioned in section 440(1) is an overseas life insurance company, section 440 shall have effect with the modifications in subsections (2) and (3) below.

(2) Subsection (4) shall be treated as if—

(a) paragraph (c) were omitted;

(b) in paragraphs (a), (b), (d) and (e), the words “UK assets” were substituted for the word “assets”; and

(c) at the end there were inserted the following paragraphs—

(f) section 11C assets;

(g) non-UK assets.”

(3) The following subsection shall be treated as inserted at the end of the section—

(6) For the purposes of this section—

(a) UK assets are—

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business;

(b) section 11C assets are assets—

(i) (in a case where section 11C (other than subsection (9)) applies) of the relevant fund, other than UK assets; or

(ii) (in a case where that section including that subsection applies) of the relevant funds, other than UK assets;

(c) non-UK assets are assets which are not UK assets or section 11C assets;

and any expression used in this subsection to which a meaning is given by section 11A has that meaning.”

(4) Where one or each of the companies mentioned in section 440(2) is an overseas life insurance company, section 440(2)(b) and (4) shall have effect as if for “categories”, in each place where the word occurs, there were substituted “paragraphs”.

(5) Where the transferor company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately before the acquisition, with the modifications in subsections (2) and (3) above.

(6) Where the acquiring company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately after the acquisition, with the modifications in subsections (2) and (3) above.]

Textual Amendments

F121 S. 444C inserted (27.7.1993 with effect as mentioned in s. 98(2)(3) of the ameding Act) by 1993 c. 34, s. 98(1)(2)(3)

[F122 444D Qualifying distributions, tax credits, etc. U.K.

(1) Subsection (2) below applies where—

(a) an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom; and

(b) the distribution (or part of the distribution)—

(i) would fall within paragraph (a), (aa) or (ab) of section 11(2) (as section 11(2) has effect by virtue of Schedule 19AC) but for the exclusion contained in that paragraph; and

(ii) is referable to life assurance business.

(2) Where this subsection applies the recipient shall be treated for the purposes of the Corporation Tax Acts as entitled to such a tax credit in respect of the distribution (or part of the distribution) as it would be entitled to under section 231 if it were resident in the United Kingdom.

(3) Where part only of a qualifying distribution would fall within paragraph (ab) of section 11(2) (as section 11(2) has effect by virtue of Schedule 19AC) but for the exclusion contained in that paragraph, the tax credit to which the recipient shall be treated as entitled by virtue of subsection (2) above is the proportionate part of the tax credit to which the recipient would be so treated as entitled in respect of the whole of the distribution.

(4) In this section “UK distribution income” means income of an overseas life insurance company which consists of a distribution (or part of a distribution) in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution (or part) and the amount of that credit).

(5) An overseas life insurance company may, on making a claim for the purpose, require that any UK distribution income for an accounting period shall for all or any of the purposes mentioned in subsection (6) below be treated as if it were a like amount of profits chargeable to corporation tax; and where it does so—

(a) the provisions mentioned in subsection (6) below shall apply to reduce the amount of the UK distribution income; and

(b) the company shall be entitled to have paid to it the amount of the tax credits comprised in the amount of UK distribution income which is so reduced.

(6) The purposes for which a claim may be made under subsection (5) above are those of—

(a) the setting of trading losses against total profits under section 393A(1);

(b) the deduction of charges on income under section 338 or paragraph 5 of Schedule 4;

(c) the deduction of expenses of management under section 76;

(d) the setting of certain capital allowances against total profits under section 145(3) of the 1990 Act.

(7) Subsections (3), (4) and (8) of section 242 shall apply for the purposes of a claim under subsection (5) above as they apply for the purposes of a claim under that section.]

Textual Amendments

F122 S. 444D inserted (27.7.1993 with effect for the accounting period beginning after 31.12.1992) by 1993 c. 34, s. 99(1)(3)

[F123 444E Income from investments attributable to BLAGAB, etc. U.K.

(1) In computing the income from the investments of an overseas life insurance company attributable to the basic life assurance and general annuity business of the branch or agency in the United Kingdom through which the company carries on life assurance business, any interest, dividends and other payments whatsoever to which section 48 or 123(4) extends shall be included notwithstanding the exemption from tax conferred by those sections.

(2) Where in computing the income referred to in subsection (1) above any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so that it bears to the amount of relief which would be granted apart from this subsection the same proportion as the amount of that income excluding that interest bears to the amount of that income including that interest.]

Textual Amendments

F123 S. 444E inserted (27.7.1993 with effect for the accounting periods beginning after 31.12.1992) by 1993 c. 34, s. 100(1)(3)

Yn ddilys o 29/04/1996

[F124 Equalisation reserves U.K.

Textual Amendments

F124 Ss. 444BA-444BD and preceding cross-heading inserted (29.4.1996) by Finance Act 1996 (c. 8), s. 166, Sch. 32 para. 1

444BA Equalisation reserves for general business. U.K.

(1) Subject to the following provisions of this section and to sections 444BB to 444BD, the rules in subsection (2) below shall apply in making any computation, for the purposes of Case I or V of Schedule D, of the profits or losses for any accounting period of an insurance company whose business has at any time been or included business in respect of which it was required, by virtue of section 34A regulations, to maintain an equalisation reserve.

(2) Those rules are—

(a) that amounts which, in accordance with section 34A regulations, are transferred into the equalisation reserve in respect of the company’s business for the accounting period in question are to be deductible;

(b) that amounts which, in accordance with any such regulations, are transferred out of the reserve in respect of the company’s business for that period are to be treated as receipts of that business; and

(c) that it must be assumed that all such transfers as are required by section 34A regulations to be made into or out of the reserve in respect of the company’s business for any period are made as required.

(3) Where an insurance company having any business in respect of which it is required, by virtue of section 34A regulations, to maintain an equalisation reserve ceases to trade—

(a) any balance which exists in the reserve at that time for the purposes of the Tax Acts shall be deemed to have been transferred out of the reserve immediately before the company ceases to trade; and

(b) that transfer out shall be deemed to be a transfer in respect of the company’s business for the accounting period in which the company so ceases and to have been required by section 34A regulations.

(4) Where—

(a) an amount is transferred into an equalisation reserve in respect of the business of an insurance company for any accounting period,

(b) the rule in subsection (2)(a) above would apply to the transfer of that amount but for this subsection,

(c) that company by notice in writing to an officer of the Board makes an election in relation to that amount for the purposes of this subsection, and

(d) the notice of the election is given not more than two years after the end of that period,

the rule mentioned in subsection (2)(a) above shall not apply to that transfer of that amount and, instead, the amount transferred (the “unrelieved transfer”) shall be carried forward for the purposes of subsection (5) below to the next accounting period and (subject to subsection (6) below) from accounting period to accounting period.

(5) Where—

(a) in accordance with section 34A regulations, a transfer is made out of an equalisation reserve in respect of an insurance company’s business for any accounting period,

(b) the rule in subsection (2)(b) above would apply to the transfer but for this subsection, and

(c) the accounting period is one to which any amount representing one or more unrelieved transfers has been carried forward under subsection (4) above,

that rule mentioned in subsection (2)(b) above shall not apply to that transfer except to the extent (if any) that the amount of the transfer exceeds the aggregate of the amounts representing unrelieved transfers carried forward to that period.

(6) Where in the case of any company—

(a) any amount representing one or more unrelieved transfers is carried forward to an accounting period in accordance with subsection (4) above, and

(b) by virtue of subsection (5) above the rule in subsection (2)(b) above does not apply to an amount representing the whole or any part of any transfer out of an equalisation reserve in respect of the company’s business for that period,

the amount mentioned in paragraph (a) above shall not be carried forward under subsection (4) above to the next accounting period except to the extent (if any) that it exceeds the amount mentioned in paragraph (b) above.

(7) To the extent that any actual or assumed transfer in accordance with section 34A regulations of any amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes—

(a) the rule in subsection (2)(a) above shall not apply to that transfer; and

(b) the making of that transfer shall be disregarded in determining, for the purposes of the Tax Acts, whether and to what extent there is subsequently any requirement to make a transfer into or out of the reserve in accordance with section 34A regulations;

and this subsection applies irrespective of whether the insurance company in question is a party to the arrangements.

(8) For the purposes of this section the transfer of an amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes to the extent that the arrangements to which it is attributable are arrangements—

(a) the sole or main purpose of which is, or

(b) the sole or main benefit accruing from which might (but for subsection (7) above) be expected to be,

the reduction by virtue of this section of any liability to tax.

(9) Where—

(a) any transfer made into or out of an equalisation reserve maintained by an insurance company is made in accordance with section 34A regulations in respect of business carried on by that company over a period (“the equalisation period”), and

(b) parts of the equalisation period are in different accounting periods,

the amount transferred shall be apportioned for the purposes of this section between the different accounting periods in the proportions that correspond to the number of days in the equalisation period that are included in each of those accounting periods.

(10) The Treasury may by regulations provide in relation to any accounting periods ending on or after 1st April 1996 for specified transitional provisions contained in section 34A regulations to be disregarded for the purposes of the Tax Acts in determining how much is required, on any occasion, to be transferred into or out of any equalisation reserve in accordance with the regulations.

(11) In this section and sections 444BB to 444BD “section 34A regulations” means regulations made under section 34A of the M42 Insurance Companies Act 1982 (equalisation reserves in respect of general business).

Modifications etc. (not altering text)

C50 S. 444BA modified (23.12.1996 with effect in accordance with reg. 1 of the modifying S.I.) by The Insurance Companies (Reserves) (Tax) Regulations 1996 (S.I. 1996/2991), regs. 4-12

Marginal Citations

M42 1982 c. 50.

444BB Modification of s. 444BA for mutual or overseas business and for non-resident companies. U.K.

(1) The Treasury may by regulations make provision modifying section 444BA so as, in cases mentioned in subsection (2) below—

(a) to require—

(i) sums by reference to which the amount of any transfer into or out of an equalisation reserve falls to be computed, or

(ii) the amount of any such transfer,

to be apportioned between different parts of the business carried on for any period by an insurance company; and

(b) to provide for the purposes of corporation tax for the amounts taken to be transferred into or out of an equalisation reserve to be computed disregarding any such sum or, as the case may be, any such part of a transfer as is attributed, in accordance with the regulations, to a part of the business described for the purpose in the regulations.

(2) Those cases are cases where an insurance company which, in accordance with section 34A regulations, is required to make transfers into or out of an equalisation reserve in respect of any business carried on by that company for any period is carrying on, for the whole or any part of that period—

(a) any business the income and gains of which fall to be disregarded in making a computation of the company’s profits in accordance with the rules applicable to Case I of Schedule D, or

(b) any business by reference to which double taxation relief is afforded in respect of any income or gains.

(3) Section 444BA shall have effect (subject to any regulations under subsection (1) above) in the case of an equalisation reserve maintained by an insurance company which—

(a) is not resident in the United Kingdom, and

(b) carries on business in the United Kingdom through a branch or agency,

only if such conditions as may be prescribed by regulations made by the Treasury are satisfied in relation to that company and in relation to transfers into or out of that reserve.

(4) Regulations under this section prescribing conditions subject to which section 444BA is to apply in the case of any equalisation reserve maintained by an insurance company may—

(a) contain conditions imposing requirements on the company to furnish the Board with information with respect to any matters to which the regulations relate, or to produce to the Board documents or records relating to any such matters; and

(b) provide that, where any prescribed condition is not, or ceases to be, satisfied in relation to the company or in relation to transfers into or out of that reserve, there is to be deemed for the purposes of the Tax Acts to have been a transfer out of that reserve of an amount determined under the regulations.

(5) Regulations under this section may—

(a) provide for apportionments under the regulations to be made in such manner, and by reference to such factors, as may be specified or described in the regulations;

(b) make different provision for different cases;

(c) contain such supplementary, incidental, consequential and transitional provision as the Treasury may think fit;

(d) make provision having retrospective effect in relation to accounting periods beginning not more than one year before the time when the regulations are made;

and the powers conferred by this section in relation to transfers into or out of any reserve shall be exercisable in relation to both actual and assumed transfers.

(6) In this section “double taxation relief” means—

(a) relief under double taxation arrangements which takes the form of a credit allowed against corporation tax, or

(b) unilateral relief under section 790(1) which takes that form;

and “double taxation arrangements” here means arrangements having effect by virtue of section 788.

444BC Modification of s. 444BA for non-annual accounting etc. U.K.

(1) The Treasury may by regulations make provision modifying the operation of section 444BA in relation to cases where an insurance company has, for the purpose of preparing the documents it is required to prepare for the purposes of section 17 of the M43 Insurance Companies Act 1982, applied for any period an accounting method described in paragraph 52 or 53 of Schedule 9A to the M44 Companies Act 1985 (accounting on a non-annual basis).

(2) Subsection (5) of section 444BB applies for the purposes of this section as it applies for the purposes of that section.

Marginal Citations

M43 1982 c. 50.

M44 1985 c. 6.

444BD Application of s. 444BA rules to other equalisation reserves. U.K.

(1) The Treasury may by regulations provide for section 444BA to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to any equivalent reserves as it has effect in relation to equalisation reserves maintained by virtue of section 34A regulations.

(2) For the purposes of this section a reserve is an equivalent reserve if—

(a) it is maintained, otherwise than by virtue of section 34A regulations, either—

(i) by an EC company carrying on business in the United Kingdom through a branch or agency, or

(ii) in respect of any insurance business (within the meaning of the Insurance Companies Act 1982) which is carried on outside the United Kingdom by a company resident in the United Kingdom;

and

(b) the purpose for which, or the manner in which, it is maintained is such as to make it equivalent to an equalisation reserve maintained by virtue of section 34A regulations.

(3) For the purposes of this section a reserve is also an equivalent reserve if it is maintained in respect of any credit insurance business in accordance with requirements imposed either—

(a) by or under any enactment, or

(b) under so much of the law of any territory as secures compliance with the requirements of Article 1 of the credit insurance directive (equalisation reserves for credit insurance).

(4) Without prejudice to the generality of subsection (1) above, the modifications made by virtue of that subsection may—

(a) provide for section 444BA to apply in the case of an equivalent reserve only where such conditions as may be specified in the regulations are satisfied in relation to the company maintaining the reserve or in relation to transfers made into or out of it; and

(b) contain any other provision corresponding to any provision which, in the case of a reserve maintained by virtue of section 34A regulations, may be made under sections 444BA to 444BC.

(5) Subsections (4) and (5) of section 444BB shall apply for the purposes of this section as they apply for the purposes of that section.

(6) Without prejudice to the generality of section 444BB(5), the transitional provision which by virtue of subsection (5) above may be contained in regulations under this section shall include—

(a) provision for treating the amount of any transfers made into or out of an equivalent reserve in respect of business carried on for any specified period as increased by the amount by which they would have been increased if no transfers into the reserve had been made in respect of business carried on for an earlier period; and

(b) provision for excluding from the rule in section 444BA(2)(b) so much of any amount transferred out of an equivalent reserve as represents, in pursuance of an apportionment made under the regulations, the transfer out of that reserve of amounts in respect of which there has been no entitlement to relief by virtue of section 444BA(2)(a).

(7) In this section—

• “credit insurance business” means any insurance business falling within general business class 14 of Schedule 2 to the M45 Insurance Companies Act 1982 that is not reinsurance business;

• “the credit insurance directive” means Council Directive 87/343/EEC of 22nd June 1987 amending, as regards credit insurance and suretyship insurance, First Directive 73/239 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance; and

• “EC company” has the same meaning as in the M46 Insurance Companies Act 1982.]

Marginal Citations

M45 1982 c. 50.

M46 1982 c. 50.

Provisions applying only to overseas life insurance companies U.K.

445 Charge to tax on investment income. U.K.

(1) M47 Any income of an overseas life insurance company from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any), wherever received, shall, to the extent provided in this section, be deemed to be profits comprised in Schedule D and shall be charged to corporation tax under Case III of Schedule D.

(2) M48 In subsection (1) above “income” shall not include—

(a) distributions which are not qualifying distributions or income attributable to offshore income gains; or

(b) annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3).

(3) M49 Qualifying distributions received from companies resident in the United Kingdom shall be brought into account under this section notwithstanding their exclusion from the charge to corporation tax.

(4) M50 A portion only of the income from the investments of the life assurance fund (excluding the pension fund and general annuity fund, if any) shall be charged in accordance with subsection (1) above, and for any accounting period that portion shall be determined by the formula—

where—

• A is the total income from those investments for that period;

• B is the average of the liabilities for that period to policy holders resident in the United Kingdom and to policy holders resident abroad whose proposals were made to the company at or through its branch or agency in the United Kingdom; and

• C is the average of the liabilities for that period to all the company’s policy holders;

but any reference in this subsection to liabilities does not include liabilities in respect of general annuity and pension business.

(5) M51 For the purposes of subsection (4) above the average of any liabilities for an accounting period shall be taken as one half of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

(6) For the purposes of this section the liabilities of an insurance company attributable to any business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return. F125

(7) Section 73 shall not apply to tax in respect of income to which subsection (1) above applies.

(8) In the case of an overseas life insurance company—

(a) M52 in computing for the purposes of this section the income from the investments of the life assurance fund of the company, any interest, dividends and other payments whatsoever to which section 48 or 123(4) extends shall be included notwithstanding the exemption from tax conferred by those sections respectively; and

(b) where in computing that income any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so as to bear to the amount of relief which would be granted but for the provisions of this paragraph the same proportion as the amount of that income, excluding that interest, bears to the amount of that income including that interest.

Textual Amendments

F125 Repealed by 1990 s. 132 and Sch. 19 Part IV

Modifications etc. (not altering text)

C51 See 1970(M) s.31(3)—appeals under s.445to go to Special Commissioners.

Marginal Citations

M47 Source—1970 s.316(1); 1970(F) Sch.5 Pt.III 11(6)(d)

M48 Source—1970 s.316(1A); 1972 Sch.18 5(1)(b); 1985 Sch.23 20(1), Sch.25 8

M49 Source—1970 s.316(2), 1972 Sch.18 5(2)

M50 Source—1970 s.316(3); 1970(F) Sch.5 Pt.III 11(6)(d)(e)

M51 Source—1970 s.316(4)—(6)

M52 Source—1970 s.328(3).

446 Annuity business. U.K.

(1) M53 Nothing in the Corporation Tax Acts shall prevent the qualifying distributions of companies resident in the United Kingdom from being taken into account as part of the profits in computing, under section 436, the profits arising from pension business F126 . . . to an overseas life insurance company.

F127 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F127 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F128 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F126 Words in s. 446(1) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 7(1)(a), 18, Sch. 19 Pt. V, Note 3

F127 S. 446(2)(3) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 para. 7(1)(b), Sch. 19 Pt. V, Note 3

F128 S. 446(4) repealed by Finance Act 1990 (c. 29, SIF 63:1), s. 132, Sch. 19 Pt. IV.

Marginal Citations

M53 Source—1970 s.318(1), 1970(F) Sch.5 Part III 11(3); 1972 Sch.18 5(2).

447 Set-off of income tax and tax credits against corporation tax. U.K.

(1) M54 For the purposes of subsection (3) of section 11 as it applies to life insurance companies, the amount of the income tax referred to in that subsection which shall be available for set-off under that subsection in an accounting period shall be limited in accordance with subsections [F129 (2) and (4)] below.

(2) If the company is chargeable to corporation tax for an accounting period in accordance with section 445 in respect of the income from the investments of its life assurance fund, the amount of income tax available for set-off against any corporation tax assessed for that period on that income shall not exceed an amount equal to income tax at the basic rate on the portion of income from investments which is chargeable to corporation tax by virtue of subsection (4) of that section.

F130 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) M55 Where an overseas life insurance company receives a distribution in respect of which it is entitled to a tax credit the company may claim to have that credit set off against any corporation tax assessed on the company under section 445 F131 . . . for the accounting period in which the distribution is received, but the restriction in [F132 subsection (2)] above on the amount of income tax that may be set off against corporation tax so assessed shall apply to the aggregate of that income tax and of the tax credit that can be so set off by virtue of this subsection.

Textual Amendments

F129 Words in s. 447(1) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 7(2), 18

F130 S. 447(3) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 7(3), 18, Sch. 19 Pt. V, Note 3

F131 Words in s. 447(4) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 7(4)(a), 18, Sch. 19 Pt.V, Note 3

F132 Words in s. 447(4) substituted (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 7(4)(b), 18

Marginal Citations

M54 Source—1970 s.319; 1971 Sch.6 39

M55 Source—1972 Sch.18 6

448 Qualifying distributions and tax credits. U.K.

(1) M56 Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and relief in respect of the distribution is not available or is not claimed under arrangements specified in an Order in Council made under section 788, the overseas life insurance company shall be deemed for the purposes of sections 76(3) and (4), 434(8), 436, 438 and 445 to 447 to be entitled to such a tax credit in respect of the distribution as it would be entitled to under section 231 if it were resident in the United Kingdom; and accordingly the distribution shall be treated for the purposes of those provisions as representing income equal to the aggregate of the amount or value of the distribution and the amount of that credit.

(2) Where under subsection (1) above an overseas life insurance company is deemed to be entitled to a tax credit in respect of a distribution, it may claim to have the income represented by the distribution set, subject to subsection (3) below, against its profits chargeable to tax under section 436 or against its income chargeable to tax in accordance with section 445 or partly against the one and partly against the other; but to the extent that any income is so set the tax credit included in it shall not be payable and shall not be set against corporation tax under section 447(4).

(3) The amounts that an overseas life insurance company may by virtue of subsection (2) above set against profits or income of any description shall not exceed the amount of the profits or income of that description and shall be further limited as follows—

F133 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the amount set against profits from pension business shall not exceed such of its income referable to that business as is represented by distributions in respect of which the company is deemed to be entitled to a tax credit by virtue of this section, and shall not reduce any other income.

(4) Where by virtue of a set-off under this section income or profits of any description are reduced by any amount, that amount shall be left out of account in determining the amount of income tax which is available for set-off against corporation tax under section 11(3).

(5) A claim under this section in respect of a distribution shall not prevent the making of a subsequent claim for relief in respect of that distribution under arrangements specified in an Order in Council made under section 788; but where such a subsequent claim is made the claim under this section shall be deemed never to have been made, and no adjustment (whether by additional assessments or otherwise) to which the subsequent claim gives rise shall be out of time if it is made within 12 months after the making of the subsequent claim.

Textual Amendments

F133 S. 448(3)(a) repealed (for accounting periods beginning on or after 1.1.1992) by Finance Act 1991 (c. 31, SIF 63:1), ss. 48, 123, Sch. 7 paras. 7(5), 18, Sch. 19 Pt.V, Note 3

Marginal Citations

M56 Source—1973 s.40(2)—(6)

449 Double taxation agreements. U.K.

(1) M57 This section applies to an overseas life insurance company if, by virtue of arrangements specified in an Order in Council made under section 788, no charge to corporation tax under Case III of Schedule D arises under section 445 in respect of any income of the company from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any).

(2) For the purposes of section 242 so much of any relevant distributions as is received in any year of assessment by an overseas life insurance company to which this section applies in respect of the portion of the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any) attributable to the business of its branch or agency in the United Kingdom shall be deemed to be franked investment income of that company, and accordingly the company may make a claim under subsection (1) of section 242 for any of the purposes specified in subsection (2) of that section.

(3) In subsection (2) above “relevant distributions” means distributions in respect of which the company receiving them is entitled to a tax credit.

Marginal Citations

M57 Source—1970 s.320; 1972 Sch.18 5(2); 1970(F) Sch.5 Part III 6(d)

Underwriters U.K.

450 Assessment, set-off of losses and reinsurance. U.K.

(1) M58 Income tax, for any year of assessment, on the profits or gains arising from a member’s underwriting business or from assets forming part of a premiums trust fund shall be computed on the profits or gains of that year of assessment; but for this purpose and all other purposes of the Income Tax Acts—

(a) the profits or gains arising in any year of assessment from a member’s underwriting business shall be taken to be those arising in the corresponding underwriting year; and

(b) the profits or gains arising from assets forming part of a premiums trust fund shall be taken to be those allocated under the rules or practice of Lloyd’s to the corresponding underwriting year.

[F134 (2) The aggregate for any year of assessment of—

(a) the profits or gains arising to a member from his underwriting business; and

(b) the profits or gains arising to him from assets forming part of a premiums trust fund,

shall be chargeable to tax under Case I of Schedule D; but nothing in this subsection shall affect the manner in which the amount of those profits or gains is to be computed.

(2A) Schedule 19A shall have effect with respect to the assessment and collection of tax charged under Case I of Schedule D in accordance with this section.]

(3) M59 Relief under section 380 in respect of a loss sustained by a member in his underwriting business in any year of assessment shall not be given under subsection (2) of that section but may, if the member so claims and he was a member in the preceding year of assessment, be given against his income for that preceding year, so far as it cannot be given against the income for the year in which the loss was sustained and can be given after any relief for a loss sustained in that preceding year.

(4) M60 In any case where a member has taken out an insurance against losses in his underwriting business—

(a) any premium paid by him on that insurance shall be deducted as an expense in computing the profits or gains arising from that business; and

[F135 (b) any insurance money payable to him under that insurance in respect of a loss shall be taken into account as a trading receipt in computing those profits or gains for the year of assessment which corresponds to the underwriting year in which the loss arose;]

[F136 (5) Subsection (5A) below applies where—

(a) in accordance with the rules or practice of Lloyd’s, and in consideration of the payment of a premium, one member agrees with another to meet liabilities arising from the latter’s business for an underwriting year so that the accounts of the business for that year may be closed; and

(b) the member by whom the premium is payable is a continuing member, that is, a member not only of the syndicate as a member of which he is liable to pay the premium (“the reinsured syndicate”) but also of the syndicate as a member of which the other member is entitled to receive it (“the reinsurer syndicate”).

(5A) In any case where this subsection applies—

(a) in computing for the purposes of income tax the profits or gains of the continuing member’s business as a member of the reinsured syndicate, the amount of the premium shall be deductible as an expense of his only to the extent that it is shown not to exceed a fair and reasonable assessment of the value of the liabilities in respect of which it is payable; and

(b) in computing for those purposes the profits or gains of his business as a member of the reinsurer syndicate, those profits or gains shall be reduced by an amount equal to any part of a premium which, by virtue of paragraph (a) above, is not deductible as an expense of his as a member of the reinsured syndicate;

and the assessment referred to above shall be taken to be fair and reasonable only if it is arrived at with a view to producing the result that a profit does not accrue to the member to whom the premium is payable but that he does not suffer a loss.]

(6) M61 The cost of acquisition and the consideration for the disposal of assets forming part of a premiums trust fund shall be left out of account in computing the profits or gains or losses of a member’s underwriting business for the purposes of Schedule D (and accordingly shall not be excluded for the purposes of capital gains tax under section [F137 37 or 39 of the 1992] Act).

Textual Amendments

F134 1988(F) s.58(1) (which also amends 1973 s.39and Sch.16for 1986-87and 1987-88).Previously

“(2) Income tax on the profits or gains arising to a member from assets forming part of a premiums trust fund may be assessed on the underwriting agent through whom his business is carried on.”.

F135 1988(F) s.59(1)for 1988-89and subsequent years. Previously

“(b) any insurance money paid to him under that insurance shall be taken into account as a trading receipt in computing those profits or gains for the year of assessment for which the premium was allowed as a deduction.”.And see 1988(F) s.59for amendments to 1973 Sch.16 para.4for 1985-86to 1987-88.

F136 1988(F) s.60(1), (3)in relation to premiums payable for underwriting years ending in 1988-89or subsequent years. Previously

“(5) Where, in accordance with the rules or practice of Lloyd's, and in consideration of the payment of a premium, one member agrees with another to meet liabilities arising from the latter's business for an underwriting year so that the accounts of the business for that year may be closed—(a) in computing for the purposes of income tax the profits or gains of his business, the amount of the premium shall be deductible as an expense of the member by whom it is payable only to the extent that it is shown not to exceed a fair and reasonable assessment of the value of the liabilities in respect of which it is payable; and (b) any part of a premium which, by virtue of paragraph (a) above, is not deductible as an expense of the member by whom it is payable, shall be disregarded in computing for the purposes of income tax the profits or gains of the business of the member to whom it is payable; and the assessment referred to above shall be taken to be fair and reasonable only if it is arrived at with a view to producing the result that a profit does not accrue to the member to whom the premium is payable but that he does not suffer a loss. This subsection has effect in relation to premiums payable in connection with the closing of the accounts of a member's business for an underwriting year ending in the year of assessment 1985-86 or any later year of assessment.”.And see 1988(F) s.60for amendments to 1987 (No.2) s.70for 1985-86to 1987-88.

F137 Words in s. 450(6) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290(1), Sch. 10 para. 14(26) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C52 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M58 Source—1973 Sch.16 2

M59 Source—1973 Sch.16 3

M60 Source—1973 Sch.16 4

M61 Source—1973 Sch.16 5; 1979(C) Sch.7.

451 Regulations. U.K.

(1) The Board may by regulations provide—

[F138 (a) for the assessment and collection of tax charged in accordance with section 450 (so far as not provided for by Schedule 19A);

(aa) for making, in the event of any changes in the rules or practice of Lloyd’s, such amendments of that Schedule as appear to the Board to be expedient having regard to those changes;]

(b) M62 for modifying the provisions of section 450 in relation to syndicates continuing for more than two years after the end of an underwriting year;

(c) for giving credit for foreign tax.

[F139 (1A) Regulations under subsection (1) above may make provision [F140 with respect to any year or years of assessment; and the year (or any of the years) may be the one in which the regulations are made or any year falling before or after the year.].]

[F141 (1B) But the regulations may not make provision with respect to any year of assessment which precedes the next but one preceding the year of assessment in which the regulations are made.]

(2) M63 The Treasury may by regulations modify any of the provisions specified in paragraphs (a) to (c) below in their application to companies permitted by the Council of Lloyd’s to act as underwriting agents at Lloyd’s—

(a) section 11 of the Management Act (return of profits);

(b) section 87A of that Act (interest on overdue corporation tax); and

(c) section 10(1) of this Act.

(3) Regulations under subsection (2) above shall not have effect with respect to accounting periods ending on or before such day, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of that subsection.

(4) M64 Regulations made under paragraph 17(1)(b) of Schedule 16 to the Finance Act 1973 which are in force immediately before the coming into operation of this Act shall continue in force notwithstanding the repeal of that paragraph by this Act, and shall be deemed to have been made under this section.

Textual Amendments

F138 1988(F) s.61(1)(b)for 1988-89and subsequent years. And see 1988(F) s.61(4)for amendments to 1973 Sch.16 para.17(1)(a).

F139 1988(F) s.61(1)(c)for 1988-89and subsequent years.

F140 1989 s.92(1).Previously

“with respect to the year of assessment next but one preceding the year of assessment in which they are made”.

F141 1989 s.92(2).

Modifications etc. (not altering text)

C53 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

C54 For regulations see Part III Vol.5

Marginal Citations

M62 Source—1973 Sch.16 17(1)(a), (c), (e)

M63 Source—1987 (No.2) Sch.6, 8

M64 Source—1973 Sch.16 17(1)(b)

452 Special reserve funds. U.K.

(1) M65 If in the case of Lloyd’s—

(a) arrangements are made for the setting up in relation to each underwriting member of such a special reserve fund as is referred to in the following provisions of this section and sections 453 to 456; and

(b) the arrangements comply with the requirements of this section and sections 453 to 455, are approved by the Board and are certified by the Secretary of State to be in the public interest;

then, subject to section 456(4), the provisions of this section and sections 453 to 456 relating to taxation shall have effect in relation to any underwriting member.

(2) M66 The arrangements must provide for the setting up, in relation to the underwriter, of a special reserve fund vested in trustees who have control over it and power to invest the capital thereof and to vary the investments.

(3) Where part of the business of the underwriter is carried on through an underwriting agent and part is not so carried on, or where different parts of his business are carried on through different underwriting agents, the arrangements may provide for separate special reserve funds being constituted in relation to the different parts of his business.

(4) The arrangements must provide—

(a) M67 for the income arising from the investments of the underwriter’s special reserve fund or funds being held on trust for the underwriter, his personal representatives or assigns; and

(b) M68 that, on the underwriter ceasing to carry on his business, the capital of his special reserve fund or funds, so far as not required for giving effect to the requirements of section 453, shall be paid over to the underwriter or his personal representatives or assigns.

(5) M69 The arrangements must be such as to secure that if, for an underwriting year corresponding to a year of assessment during the whole or any part of which the underwriter continues to carry on his business (subject to section 456(4)), the underwriter makes a profit from his business, he has the right to make, into his special reserve fund or funds, payments (“permissible payments”) the gross amount of which is not in the aggregate greater than £7,000 or 50 per cent. of the profit, whichever is the less, or such less sum as may be specified in the arrangements.

(6) M70 The amount of any permissible payment shall be notified to the inspector not later than 12 months after the date at which the accounts of the business for that underwriting year are deemed by the Board to be closed for the purposes of the arrangements, and no permissible payment shall be made more than 30 days after the date on which the inspector has notified his agreement in writing or, if later, 30 days after the expiration of those 12 months.

(7) M71 Where the underwriter carries on his business during part only of the year of assessment referred to in subsection (5) above, the maximum gross amount of the permissible payments shall be reduced by the application thereto of the proportion which the part of that year of assessment for which he is entitled to profits from the business bears to a full year.

(8) M72 In subsection (5) above “profit” means a profit computed in the manner in which the profits or gains of the business of the underwriting year in question would fall to be computed under [F142 in accordance with section 450] if—

(a) income arising from the investments forming part of the premiums trust fund of the underwriterF143 his special reserve fund or funds and any other fund required or authorised by the rules of Lloyd’s or required by the underwriting agent through whom the business or any part thereof is carried on, to be kept in connection with the business fell to be taken into account; and

(b) all shares of the profits of the business and all charges related to those profits or to the income mentioned in paragraph (a) above, being shares and charges payable to persons other than the underwriter and not otherwise taken into account, fell to be deducted.

[F144 In paragraph (a) above “income” includes—

(a)

annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3),

(b)

amounts treated as income chargeable to tax by virtue of paragraph 4 of Schedule 4, and

(c)

F145 amounts treated as income chargeable to tax by virtue of paragraph 5 of Schedule 11 to the Finance Act 1989].

Textual Amendments

F142 1988(F) s.61(1)(d)for 1988-89and subsequent years. Previously

“Case I of Schedule D”.

F143 Repealed by 1988(F) s.61(1)(d)for 1988-89and subsequent years.

F144 1989 s.96(1)on and after 14March 1989in relation to certain deep discount securities and deep gain securities. Previously

“In paragraph (a) above “income” includes annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3).”

F145 See 1988(F) s.61(2)for amendment of 1970 Sch.10 para.7(3)for 1986-87and 1987-88.

Modifications etc. (not altering text)

C55 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M65 Source—1970 Sch.10 1

M66 Source—1970 Sch.10 5

M67 Source—1970 Sch.10 6

M68 Source—1970 Sch.10 10

M69 Source—1970 Sch.10 7(1), (2)

M70 Source—1970 Sch.10 7(1)(a); 1973 Sch.16 8, 10

M71 Source—1970 Sch.10 7(1)(b)

M72 Source—1970 Sch.10 7(3)

453 Payments into premiums trust fund on account of losses. U.K.

(1) M73 The arrangements must be such as to secure that, if it is certified that the underwriter has sustained a loss in his business for an underwriting year subsequent to that which corresponds to the first year of assessment to which section 452(5) applies, there shall be made into his premiums trust fund, out of the capital of his special reserve fund or funds, payments the gross amount of which is equal in the aggregate to the certified amount of the loss.

(2) If the capital of the underwriter’s special reserve fund or funds, reduced by so much thereof as represents sums paid into it or them as a consequence of a profit for a year later than the year of the loss, is less than the net amount of the payments required to be made by subsection (1) above, those payments shall be reduced so that the net amount thereof is equal to the capital of the fund or funds as so reduced.

(3) In this section—

M74 (a) “loss” means a loss computed in the manner in which the profits or gains of the business of the underwriting year in question would fall to be computed under section 452(8); and

(b) where, under any arrangement between the underwriter and another person which provides for the sharing of losses, any amount is paid to the underwriter by that person as that person’s share of a loss for that year, the loss (as so computed) shall be reduced by that amount.

(4) In this section “certified” means certified by a certificate of the inspector, but—

(a) no certificate shall be given by the inspector until 30 days have elapsed from the date on which he has given notice to the underwriter or his personal representatives stating his intention to give a certificate and stating the amount which he proposes to specify as the amount of the loss;

(b) the underwriter or his personal representatives may, on giving notice to the inspector within that 30 day period, appeal to the Special Commissioners;

(c) where notice is so given by the underwriter or his personal representatives, the inspector shall not without the consent of the underwriter or his personal representatives give any certificate until after the hearing of the appeal; and

(d) on the hearing of the appeal, the Special Commissioners may direct the inspector not to give a certificate or to give it with such an amount specified as the amount of the loss as may be specified in the direction.

(5) M75 The arrangements may authorise the making of payments pursuant to subsection (1) above on a provisional basis before the amount of the loss has been finally ascertained and certified by the inspector.

(6) The amount so withdrawn shall not exceed such proportion of the estimated loss as may be specified in the arrangements.

(7) When the amount of the loss has been certified by the inspector such adjustments shall be made by repayment to the underwriter’s special reserve fund or funds, or by further withdrawal of sums for payment into the underwriter’s premiums trust fund, as will secure that the net amount withdrawn from the underwriter’s special reserve fund or funds in respect of the loss is that required pursuant to subsection (1) above; and no tax consequences shall ensue on the withdrawal of sums in respect of a loss until the amount of the loss has been so certified and any such adjustments have been made.

Modifications etc. (not altering text)

C56 ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M73 Source—1970 Sch.10 8(1)

M74 1970 Sch.10 8(2), (3)

M75 Source—1970 Sch.10 9

454 Income tax consequences on payments into and out of special reserve fund. U.K.

(1) M76 Where such a payment as is mentioned in section 452(5) is made into a special reserve fund of an underwriter by reason of the making by him of a profit for an underwriting year—

(a) subject to subsection (2) below, the payment shall be deemed to be an annual payment chargeable to income tax by way of deduction and payable and paid in the year of assessment corresponding to that underwriting year; and

(b) the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.

(2) M77 Subsection (1)(a) above—

(a) shall not reduce any income other than income derived from the underwriter’s underwriting business or from any deposit made or assets held on trust in connection with that business; and

(b) subject to paragraph (a) above, shall reduce income other than investment income before reducing investment income.

(3) M78 Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter into a premiums trust fund of his by reason that he has sustained a loss for an underwriting year then, subject to section 453(7)—

(a) the payment shall be deemed for all income tax purposes—

(i) to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and

(ii) to have been payable and paid to the underwriter; and

(iii) to have been payable and paid to him on the last day of the year of assessment corresponding to that underwriting year or, if he ceased to carry on his business before that day, on the last day on which he carried on his business; and

(b) the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted for the year of assessment in which the payment is so deemed to have been payable and paid.

(4) M79 Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter by reason that he has sustained a loss, relief in respect of the loss shall, so far as possible, be given by treating the loss as reducing the income represented by the payment.

(5) M80 Where the underwriter ceases to carry on his business before his death and under so much of the arrangements as gives effect to section 452(4)(b) a sum is paid to him or his personal representatives or assigns—

(a) the payment shall be deemed for all income tax purposes—

(i) to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and

(ii) to have been payable and paid to the underwriter; and

(iii) to have been payable and paid to him on the last day on which he carried on his business; and

(b) the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.

(6) M81 Neither the arrangements, nor any disposition, trust, covenant, agreement or arrangement entered into for the purposes of the arrangements, shall be treated as included in the expression “settlement” for the purposes of Chapter III or IV of Part XV.

Modifications etc. (not altering text)

C57 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M76 Source—1970 Sch.10 11(1)(a), (b)

M77 Source—1970 Sch.10 11(1), (ii); 1973 Sch.16 8, 11

M78 Source—1970 Sch.10 11(2)

M79 Source—1970 Sch.10 11(2A); 1973 Sch.16 8, 12

M80 Source—1970 Sch.10 11(3)

M81 Source—1970 Sch.10 11(4)

455 Income tax consequences on death of underwriter. U.K.

(1) M82 In this section “the lower limit” means the limit which would be imposed by section 452(5) if the words “£5,000 or 35 per cent. of that profit, whichever is the less” stood in that subsection in place of the words “£7,000 or 50 per cent. of that profit, whichever is the less.”.

(2) Where an underwriter dies while carrying on his business and, after giving effect to the requirements of section 453, his special reserve fund or funds include an amount which represents an excess in the payments made into the fund or funds for any underwriting year over the lower limit—

(a) he shall be deemed for all income tax purposes to have received in the year of assessment corresponding to that underwriting year a payment of that amount—

(i) which was an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax, and

(ii) which was payable in the year of assessment in which it is deemed to have been paid, and

(b) the payment (to that actual amount) shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which tax has been duly deducted.

(3) Where, to give effect to the requirements of section 453 as to the meeting of a loss, any withdrawal was made at any time from the capital of the underwriter’s special reserve fund or funds, the amount withdrawn shall be regarded for the purposes of subsection (2) above—

(a) as having been met out of payments made into the fund or funds for underwriting years before that in which the loss was incurred, and as having been met before any withdrawal to meet a loss for a later underwriting year; and

(b) as having been met out of so much of the payments made for any underwriting year as was not in excess of the lower limit, rather than out of such part of the payments made for any underwriting year as was in excess of the lower limit; and

(c) subject to that, as having been met out of payments in excess of the lower limit for a later year rather than out of payments in excess of the lower limit for an earlier year;

and, where payments have been made into the underwriter’s special reserve fund or funds for any underwriting year in excess of the lower limit, his fund or funds shall be deemed at all subsequent times to include an amount representing that excess except to the extent that any withdrawal is, under the provisions of this subsection, to be regarded as having been met out of that amount.

(4) Any tax chargeable by virtue of this section shall be assessed and charged upon the underwriter’s personal representatives and tax so charged shall be a debt due from and payable out of his estate; and, notwithstanding section 34(1) of the Management Act (which requires assessments to be made not later than six years after the end of the year to which they relate), assessments in respect of tax so chargeable may be made at any time not later than three years after the end of the year of assessment in which the underwriter died.

(5) References in this section to payments made into a special reserve fund or funds for any underwriting year are references to payments made, as described in section 452(5), by reference to the profits made for that underwriting year.

Modifications etc. (not altering text)

C58 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289, (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M82 Source—1970 Sch.10 12

456 Unearned income, variation of arrangements and cancellation of approval etc. U.K.

(1) M83 So much of an underwriter’s income as is attributable to payments from his special reserve fund or to such an excess as is mentioned in section 455 shall (so far as remaining after allowing for any relief by which it is reduced) be treated as unearned income if, but only if, his income from his underwriting business falls to be so treated.

(2) Where, as a result of a change in the circumstances in which an underwriting business is carried on, an underwriter’s income from the business falls to be treated as unearned income, the change shall be disregarded for the purposes of subsection (1) above except to the extent that the special reserve fund represents payments made into it after the change; and for this purpose any amount withdrawn after the change to give effect to the requirements of section 453 shall, so far as possible and notwithstanding section 455(3), be regarded as having been met by payments into the fund made after the change.

(3) M84 The arrangements may from time to time be varied with the consent of the Board and the Secretary of State.

(4) M85 If, after giving notice of their intention so to do to the Council of Lloyd’s, the Board or the Secretary of State cancel the approval or certificate which they have or he has given with respect to the arrangements, section 452(5) to (9) shall not apply, in the case of any underwriter, to any year of assessment after the year of assessment in which the approval or certificate is cancelled.

Modifications etc. (not altering text)

C59 Ss. 450-456 applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 209(1), 289 (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M83 Source—1970 Sch.10 12A, 1973 Sch.16 8, 13

M84 Source—1970 Sch.10 13.

M85 Source—1970 Sch.10 14(b)

457 Interpretation of sections 450 to 456. U.K.

(1) M86 In sections 450 to 456—

• “arrangements” means any such arrangements as are referred to in section 452(1);

• “business”, in relation to an underwriter, means his underwriting business as a member of Lloyd’s, whether carried on personally or through an underwriting agent, and does not include any other business carried on by him, and in particular, where he is himself an underwriting agent, does not include his business as such an agent;

• “member” means an underwriting member of Lloyd’s;

• “net amount” and “gross amount”, in relation to any payment, mean respectively the sum actually paid and the sum which, after deduction of income tax, is equal to the sum actually paid;

• “premiums trust fund” means such a trust fund as is referred to in section 83 of the M87 Insurance Companies Act 1982;

• “underwriting year” means the calendar year.

(2) For the purpose of construing any reference in sections 450 to 456 to the year of assessment which corresponds to an underwriting year or to the underwriting year which corresponds to a year of assessment, an underwriting year and a year of assessment shall be deemed to correspond to each other if the underwriting year ends in the year of assessment.

Modifications etc. (not altering text)

C60 See—1988 Sch.4 para.18—application of definition to underwriter's deep discount securities.1989 Sch.10 para.18—deep discount securities.1990 Sch.10 para.18—convertible securities.

C61 See—1988 Sch.4 para.18—application of definition to underwriter's deep discount securities.1989 Sch.10 para.18—deep discount securities.1990 Sch.10 para.18—convertible securities.

Marginal Citations

M86 Source—1970 Sch.10 16; 1973 Sch.16 1, 14; 1987 Sch.15 2(22)

M87 1982 c. 50.

Capital redemption business U.K.

458 Capital redemption business. U.K.

(1) M88 Where any person carries on capital redemption business in conjunction with business of any other class, the capital redemption business shall, for the purposes of the Corporation Tax Acts (including the provisions about corporation tax on chargeable gains) and the Income Tax Acts, be treated as a separate business from any other class of business carried on by that person.

(2) In ascertaining whether and to what extent any person has incurred a loss on his capital redemption business for the purposes of section 380 or sections 393 and [F146 393A(1)]—

(a) any profits derived from investments held in connection with the capital redemption business (including franked investment income of a company resident in the United Kingdom) shall be treated as part of the profits of that business, and

(b) in determining whether any, and if so what, relief can be given under section 385(4) in the case of capital redemption business, the loss which may be carried forward under subsection (1) of that section shall be similarly computed.

(3) In this section “capital redemption business” means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby, in return for one or more premiums paid to the insurer, a sum or a series of sums is to become payable to the insured in the future.

(4) This section shall not apply to any capital redemption business in so far as it consists of carrying out contracts of insurance effected before 1st January 1938.

Textual Amendments

F146 Words in s. 458(2) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 16

Modifications etc. (not altering text)

C62 S. 458 amended (27.7.1993) by 1993 c. 34, s. 78(6)(11)

Marginal Citations

M88 Source—1970 s.324

Yn ddilys o 29/04/1996

[F147 458A Capital redemption business: power to apply life assurance provisions. U.K.

(1) The Treasury may by regulations provide for the life assurance provisions of the Corporation Tax Acts to have effect in relation to companies carrying on capital redemption business as if capital redemption business were, or were a category of, life assurance business.

(2) Regulations under this section may provide that the provisions applied by the regulations are to have effect as respects capital redemption business with such modifications and exceptions as may be provided for in the regulations.

(3) Regulations under this section may—

(a) make different provision for different cases;

(b) include such incidental, supplemental, consequential and transitional provision (including provision modifying provisions of the Corporation Tax Acts other than the life assurance provisions) as the Treasury consider appropriate; and

(c) include retrospective provision.

(4) In this section references to the life assurance provisions of the Corporation Tax Acts are references to the following—

(a) the provisions of this Chapter so far as they relate to life assurance business or companies carrying on such business; and

(b) any other provisions of the Corporation Tax Acts making separate provision by reference to whether or not the business of a company is or includes life assurance business or any category of insurance business that includes life assurance business.

(5) In this section “capital redemption business” has the same meaning as in section 458.]

Textual Amendments

F147 S. 458A inserted (29.4.1996) by Finance Act 1996 (c. 8), s. 168(3)