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;

• [F4 “foreign income dividends” shall be construed in accordance with Chapter VA of Part VI;]

• “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;

• [F5 “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;

• [F6 “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;

• [F7 “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 [F8 not resident in]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.

• [F9 “UK distribution income” has the meaning given by section 444D(4);]

• [F10 “policy holders’ fraction” and “shareholders’ fraction” shall be construed in accordance with section 89of the Finance Act 1989.]

• [F11 “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;]

[F12 (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 [F13 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) M7 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) M8 a scheme which is approved or is being considered for approval under Chapter I of Part XIV;

[F14 (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 F15 . . . 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) [F16 and falling within section 431AA](but no other benefits) are secured;

(e) any annuity contract F17 . . . which is entered into in substitution for a contract within paragraph (d) above [F18 and by means of which relevant benefits as defined by section 612(1) and falling within section 431AA (but no other benefits) are secured];

(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) [F19 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 S. 431(2): definitions inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(2)

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 S. 431(2): definition of "foreign income dividends" inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 4

F5 S. 431(2): definitions inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(2)

F6 S. 431(2): definitions inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(2)

F7 S. 431(2): definitions inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(2)

F8 S. 431(2): words in the definition of "overseas life insurance company" substituted (27.7.1993 as mentioned in s. 103(3)(4) of the amending Act) by 1993 c. 34, s. 103(1)(3)(4)

F9 S. 431(2): definition of "UK distribution income" inserted (27.7.1993 with effect in relation to accounting periods beginning after 31.12.1992) by 1993 c. 34, s. 99(2)(3)

F10 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.

F11 S. 431(2): definitions inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(2)

F12 S. 431(2A) inserted by Finance Act 1990 (c. 29), Sch. 6 para. 1(3)

F13 1990 s.41and Sch.6 para.1(4)on and after 1January 1990subject to the commencement provisions of paras.11and 12.

F14 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);”.

F15 Words in s. 431(4)(d) repealed (with effect in accordance with s. 143(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 143(2)(a), Sch. 26 Pt. 5(20), Note

F16 Words in s. 431(4)(d) inserted (with effect in accordance with s. 143(5) of the amending Act) by Finance Act 1994 (c. 9), s. 143(2)(b)

F17 Words in s. 431(4)(e) repealed (with effect in accordance with s. 143(5) of the repealing Act) by Finance Act 1994 (c. 9), s. 143(3)(a), Sch. 26 Pt. 5(20), Note

F18 Words in s. 431(4)(e) inserted (with effect in accordance with s. 143(5) of the amending Act) by Finance Act 1994 (c. 9). s. 143(3)(b)

F19 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 modifying S.I.) by S.I. 1992/1655, regs. 1, 5 (as amended (31.12.1993) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1993 (S.I. 1993/3111), regs. 1, 5, 6; and as further amended (19.3.1997) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1997 (S.I. 1997/471), regs. 1, 6)

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)