Income and Corporation Taxes Act 1988

[F3 432A Apportionment of income and gains. U.K.

[F4 (1) This section has effect [F5 for determining for the purposes of any provision of the Corporation Tax Acts in relation to any period for which an insurance company carries on business] what parts of—

(a) income arising from the assets of the company’s [F6 long-term insurance fund], or

(b) gains or losses accruing on the disposal of such assets,

are referable to any category of business.

[F7 (1A) If the company carries on only one category of business in the period, all of the income and gains or losses referred to in subsection (1) above [F8 is] referable to that category of business; but if the company carries on more than one category of business in the period, the following provisions shall apply.]

(2) The categories of business referred to in [F9 subsections (1) and (1A)] above are—

[F10 (a) basic life assurance and general annuity business,

(b) gross roll-up business, and

(c) PHI business.]

(3) Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business [F11 is] referable to that category of business.]

(4) F12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F13 (4A) Income arising from, and gains or losses accruing on the disposal of, foreign currency assets is referable to gross roll-up business.]

(5) There [F14 is] referable to any category of business F15 . . . the relevant fraction of any income, gains or losses not directly referable to [F16 any category] of business.

[F17 (6) For the purposes of subsection (5) above “the relevant fraction”, in relation to basic life assurance and general annuity business, is—

where—

A is the aggregate of—

• (a) the mean of the opening and closing liabilities of the basic life assurance and general annuity business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business,

• (b) if there has been a relevant reattribution, the mean of the opening and closing amounts of the shareholders' excess assets, and

• (c) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts;

B is the aggregate of—

• (a) the mean of the opening and closing liabilities of the gross roll-up business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business, and

• (b) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts; and

C is the aggregate of—

• (a) the mean of the opening and closing liabilities of the PHI business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business, and

• (b) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts.

(6A) For the purposes of subsection (5) above “the relevant fraction”, in relation to gross roll-up business, is—

where A, B and C have the same meaning as in subsection (6) above.

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

where A, B and C have the same meaning as in subsection (6) above.

(6C) But if the denominator found in accordance with subsection (6), (6A) or (6B) above is nil, the relevant fraction for the purposes of subsection (5) above in relation to the category of business in question is such fraction as is just and reasonable.]

[F18 (7) For the purposes of subsections [F19 (5), (6) [F20 , (6A) and (6B)]] above—

(a) income, gains or losses are directly referable to a category of business if referable to that category by virtue of subsection (3) or [F21 (4A)] above, F22 . . .

(b) 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 by virtue of subsection (3) [F23 or (4A)] above,[F24 and

(c) amounts are directly referable to basic life assurance and general annuity business if they fall within any of the following provisions—

(i) sections F25 . . . F26 . . . 442A,

(ii) section [F27 85(2C) or 85A] of the Finance Act 1989.]]

[F28 (8) In [F29 subsection (6)] above—

(a) “appropriate part”, in relation to the free assets amount, means—

(i) where none (or none but an insignificant proportion) of the liabilities of the long-term business are with-profits liabilities, the part of that amount which bears to the whole the proportion A/B where—

A is the amount of the liabilities of the category of business in question [F30 (but taking that amount to be nil if it would otherwise be below nil)];

B is the whole amount of the liabilities of the long-term business; and

(ii) in any other case the part of the free assets amount which bears to the whole the proportion C/D where—

C is the amount of the with-profits liabilities of the category of business in question;

D is the whole amount of the with-profits liabilities of the long-term business; and

(b) the amount of the shareholders' excess assets in relation to any period of account of the company is the amount equal to SXA — L27 where—

(i) SXA is the aggregate amount of the assets shown in its non-participating funds which are attributed to its shareholders as a result of a relevant reattribution; and

(ii) L27 is the amount (if any) shown in line 27 of Form 19 in its periodical return for the relevant period of account.

[F31 This is subject to subsection (8ZA) below.]

[F32 (8ZA) If for the purposes of subsection (8)(a) above either B or D is nil then, in [F33 paragraph (c) of the definition of A and paragraph (b) of the definitions of B and C in subsection (6)] above, “appropriate part”, in relation to the free assets amount, means the part of that amount which bears to the whole such proportion as is just and reasonable.]

(8A) In this section—

• “non-participating funds” means accounts which relate exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus;

• “reattribution” in relation to an insurance company which has an inherited estate, means the attribution of assets to shareholders' interests as a result of—

  (a)

  an agreement between the company and the relevant regulator as to the amount of that estate and its attribution between shareholders and policy holders; or

  (b)

  a decision of the company to specify and identify an amount of assets (otherwise than in connection with a transfer to the company's long-term insurance fund) as attributable only to shareholders' interests;

  a reattribution is “relevant” if it arises as a result of any of the following—

  (a)

  a transfer of business under—

  (i)

  section 49 of, or Schedule 2C to, the Insurance Companies Act 1982;

  (ii)

  an insurance business transfer scheme (within the meaning of section 431(2));

  (b)

  a scheme of arrangement under [F34 Part 26 of the Companies Act 2006];

  (c)

  an order under section 68 of the Insurance Companies Act 1982;

  (d)

  a waiver under section 148 of the Financial Services and Markets Act 2000;

  (e)

  an amendment to the company's memorandum, articles of association or other instrument regulating the company.

(8B) In subsection (8A) above—

• “inherited estate” has the same meaning as it has in the [F35 Insurance Prudential Sourcebook]; and

• “relevant regulator” means the Financial Services Authority, the Treasury or the Secretary of State.]

(9) F36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F37 (9A) F38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9B) F39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

F40 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F3 Ss. 432A-432E inserted by Finance Act 1990 (c. 29), Sch. 6 para. 4

F4 S. 432A(1)-(3) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(2)

F5 Words in s. 432A(1) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 8(2)

F6 Words in s. 432A(1)(a)(9B) substituted (1.12.2001 with effect in accordance with art. 1(2)(a) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 52(1)(c)

F7 S. 432A(1A) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 8(3)

F8 Word in s. 432A(1A) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(2) (with Sch. 7 Pt. 2)

F9 Words in s. 432A(2) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 8(4)

F10 S. 432A(2)(a)-(c) substituted for s. 432A(2)(a)-(f) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(3) (with Sch. 7 Pt. 2)

F11 Word in s. 432A(3) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(4) (with Sch. 7 Pt. 2)

F12 S. 432A(4) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(5), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F13 S. 432A(4A) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(6) (with Sch. 7 Pt. 2)

F14 Word in s. 432A(5) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(7)(a) (with Sch. 7 Pt. 2)

F15 Words in s. 432A(5) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(7)(b), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F16 Words in s. 432A(5)(6)(b)(i) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(3) (with Sch. 8 para. 55(2))

F17 S. 432A(6)-(6C) substituted for s. 432A(6)-(6AA) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(8) (with Sch. 7 Pt. 2)

F18 S. 432A(7) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(4) (with Sch. 8 para. 55(2))

F19 Words in s. 432A(7) substituted (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(a)

F20 Words in s. 432A(7) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(a) (with Sch. 7 Pt. 2)

F21 Words in s. 432A(7)(a) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(b) (with Sch. 7 Pt. 2)

F22 Word at the end of s. 432A(7)(a) omitted (6.1.2006 with effect in accordance with art. 1 of the repealing S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(b)

F23 Words in s. 432A(7)(b) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(c) (with Sch. 7 Pt. 2)

F24 S. 432A(7)(c) and preceding word inserted (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(c)

F25 Words in s. 432A(7)(c)(i) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(d), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F26 Words in s. 432A(7)(c)(i) omitted (13.8.2007 with effect in accordance with reg. 1(2) of the repealing S.I.) by virtue of The Insurance Companies (Overseas Life Assurance Business) (Excluded Business) (Amendment) Regulations 2007 (S.I. 2007/2086), regs. 1(1), 6(1)

F27 Words in s. 432A(7)(c)(ii) substituted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 5 (with Sch. 8 Pt. 2)

F28 S. 432A(8)-(8B) substituted for s. 432A(8) (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(5)

F29 Words in s. 432A(8) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(10) (with Sch. 7 Pt. 2)

F30 Words in s. 432A(8)(a)(i) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(5)(a)

F31 Words in s. 432A(8) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(5)(b)

F32 S. 432A(8ZA) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(6)

F33 Words in s. 432A(8ZA) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(11) (with Sch. 7 Pt. 2)

F34 Words in s. 432A(8A) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 9

F35 Words in s. 432A(8B) substituted (31.12.2006 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 5

F36 S. 432A(9) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(12), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F37 S. 432A(9A)(9B) inserted (with effect in accordance with s. 109(10) of the amending Act) by Finance Act 2000 (c. 17), s. 109(6)

F38 S. 432A(9A) repealed (with effect in accordance with Sch. 10 para. 17(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 10 para. 9(2)(b), Sch. 27 Pt. 2(10), Note

F39 S. 432A(9B) repealed (with effect in accordance with Sch. 43 Pt. 3(12), Note 1 of the repealing Act) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F40 S. 432A(10) repealed (27.7.1993 with effect in relation to accounting periods beginning on or after 1.1.1993) by 1993 c. 34, ss. 91(2)(a), 213, Sch. 23 Pt.III (8), Note

Modifications etc. (not altering text)

C1 S. 432A modified (3.5.1994) by Finance Act 1994, (c. 9), s. 169, Sch. 18 para 1(4)

C2 S. 432A modified by S.I. 1992/1655, regs. 6-8 (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, 7; and as further amended (10.8.1995) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1995 (S.I. 1995/1916), regs. 1, 5)

C3 S. 432A applied (with effect in accordance with s. 105(1) of the affecting Act) by Finance Act 1996 (c. 8), Sch. 11 para. 3 (with Sch. 15)

C4 S. 432A applied (19.3.1997) by Finance Act 1997 (c. 16), Sch. 12 para 19

C5 S. 432A 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), 9, 13 (as amended by: S.I. 2000/2710, regs. 1, 4; S.I. 2001/3629, arts. 1, 157, 165; S.I. 2001/3975, regs. 1, 4; S.I. 2003/23, regs. 1, 5, 6; S.I. 2004/822, regs. 1, 8, 9; S.I. 2005/2005, regs. 1, 6)

C6 S. 432A modified by Finance Act 1996 (c. 8), Sch. 11 para. 3A(5) (as inserted (with effect in accordance with s. 109(10) of the 2000 amending Act) by Finance Act 2000 (c. 17), s. 109(8))

C7 S. 432A applied (with effect in accordance with Sch. 29 Pt. 14 of the affecting Act) by Finance Act 2002 (c. 23), Sch. 29 para. 138(2)(3)

C8 S. 432A modified (12.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 9 (as amended by: S.I. 2007/2134, regs. 1(1)(2), 9; S.I. 2008/1937, regs. 1(1)(2), 6)

C9 S. 432A excluded by Finance Act 1989 (c. 26), s. 83XA(14) (as inserted (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 2(1))

C10 S. 432A(2) modified (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), 10-12

C11 S. 432A(2) modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 10

C12 S. 432A(2) modified (6.4.2005) by The Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680), regs. 1, 4, 8; S.I. 2004/3369, art. 2(1)