Income and Corporation Taxes Act 1988

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

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

(2) Subsection (1) above—

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

(b) M3 shall not apply to profits arising from pension business;

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

[F1 (ai) where the profits relate to contracts made on or after the day on which the Finance Act 1991 was passed, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £200 or of the granting of annuities of annual amounts exceeding £156;]

(i) where the profits relate to contracts made after [F2 31st August 1990 but before the day on which the Finance Act 1991 was passed], of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed [F3 £150] or of the granting of annuities of annual amounts exceeding £156;

[F4 (ia) where the profits relate to contracts made after 31st August 1987 but before 1st September 1990, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £100 [F5 or of the granting of annuities of annual amounts exceeding £156].]

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

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

[F6 (ca) shall not apply to so much of the profits arising from life or endowment business as is attributable to contracts for the assurance of gross sums made on or after 20th March 1991 and expressed at the outset not to be made in the course of tax exempt life or endowment business; and]

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

(3) M6 In determining for the purposes [F7 of [F8 subsection (2)(c)(ai), (i) or (ia)]] above the total premiums payable in any period of 12 months—

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

(b) so much of any premium as is charged on the ground that an exceptional risk of death [F9 or disability] is involved shall be disregarded;

and in applying the limit of £156 in [F10 subsection (2)(c)(ai), (i) or (ia)] above, any bonus or addition declared upon an annuity shall be disregarded.

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

[F11 (4A) Subsection (4B) below applies to contracts for the assurance of gross sums under tax exempt life or endowment business made after 31st August 1987 and before the day on which the Finance Act 1991 was passed.

(4B) Where the amount payable by way of premium under a contract to which this subsection applies is increased by virtue of a variation made in the period beginning with the day on which the Finance Act 1991 was passed and ending with 31st July 1992, the contract shall be treated for the purposes of subsection (2)(c) above as made at the time of the variation.]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[F12 (10A) Where at any time there is a transfer of the whole or part of the long term business of an insurance company to a friendly society in accordance with a scheme sanctioned by a court under section 49 of the M10 Insurance Companies Act 1982, any life or endowment business which relates to contracts included in the transfer [F13 , other than any to which subsection (11) or (12) below applied immediately before the transfer had effect,] shall not thereafter be tax exempt life or endowment business for the purposes of this Chapter.]

(11) M11 Where at any time a registered friendly society ceases by virtue of section 84 of the M12 Friendly Societies Act 1974 or by virtue of section 72 of the M13 Friendly Societies Act (Northern Ireland) 1970 (conversion into company) to be registered under that Act, any part of its life or endowment business consisting of business which—

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

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

shall [F14 continue to be exempt from corporation tax (whether on income or chargeable gains) on profits arising from it.]

(12) M14 For the purposes of the Corporation Tax Acts any part of a company’s business which continues to be tax exempt life or endowment business by virtue of subsection (11) above shall be treated as a separate business from any other business carried on by the company.

Textual Amendments

F1 S. 460(2)(ai) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(3)

F2 Words in s. 460(2)(c)(i) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(4)

F3 1990 s.49(1)(a).Previously

“£100”.

F4 1990 s.49(1)(b).

F5 Words in s. 460(2)(c)(ia) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(5)

F6 S. 460(2)(ca) substituted for the word "and" by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(6)

F7 1990 s.49(2).Previously

“of subsection 2(c)(i)”.

F8 Words in s. 460(3) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(7)(a)

F9 Words in s. 460(3)(b) inserted (retrospectively) by Finance Act 2003 (c. 14), s. 172(5)(6)

F10 Words in s. 460(3) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(7)(b)

F11 S. 460(4A)(4B) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 50, Sch. 9 para. 1(8)

F12 1990 s.48and Sch.9 para.6in relation to transfers of business on or after 1January 1990.

F13 Words in s. 460(10A) inserted (retrospectively for specified purposes, and otherwise with effect in accordance with Sch. 12 para. 6(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 12 paras. 1(2), 6(1)(3)

F14 Words in s. 460(11) substituted (retrospectively) by Finance Act 2007 (c. 11), Sch. 12 paras. 1(3), 6(1)

Marginal Citations

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

M2 Source—1970 s.333(1)

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

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

M5 Source—1970 s.332(2)(b)

M6 Source—1970 s.332(3); 1987 s.30(3)

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

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

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

M10 1982 c. 50.

M11 Source—1970 s.332(10); 1976 s.48(1)

M12 1974 c. 46.

M13 1970 c. 31 (N.I.).

M14 Source—1970 s.332(12)(a); 1976 s.48(1)