Finance Act 1989

88 Corporation tax: policy holders’ [F1 share] of profits. U.K.

(1) Subject to subsection (2) F2 ... below, in the case of a company carrying on life assurance business, the rate of corporation tax chargeable for any financial year on

[F3 (a) the policy holders’ share of the relevant profits for any accounting period, or

(b) where the business is mutual business, the whole of those profits,

shall] be deemed to be the rate at which income tax at the [F4 savings rate] is charged for the year of assessment which begins on 6th April in the financial year concerned.

F5 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F6 (3) For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the income and gains of the company’s life assurance business reduced by the aggregate amount of—

[F7 (aa) amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996,] [F8 and

( a) the [F9 expenses] deduction given by Step 8 in [F10 section 76(7)] of the Taxes Act 1988.]]

[F11 (3A) In subsection (3) above “income and gains of the company’s life assurance business” means the aggregate of—

(a) income and chargeable gains referable [F12 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business, F13 ... [F14 and]

F15 (aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15 (ab) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15 (ac) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F16 (b) profits of the company chargeable under Case VI of Schedule D under section 436A of the Taxes Act 1988 (gross roll-up business) ]

(3B) In subsection (3A)(a) above (and section 89(1B) below) “chargeable gains referable [F17 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business”, in relation to an accounting period, means the chargeable gains so far as [F18 so referable] accruing to the company in the accounting period after deducting—

(a) any allowable losses so referable accruing to the company in the accounting period, and

(b) so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.]

(4) In determining for the purposes of section 13 of the Taxes Act 1988 (small companies’ relief) the profits and basic profits (within the meaning of that section) of an accounting period of a company carrying on life assurance business, the policy holders’ [F19 share] of the company’s relevant profits for that period[F20 , or where the business is mutual business the whole of those profits,] shall be left out of account.

(5) This section has effect with respect to the profits of a company for accounting periods beginning on or after 1st January 1990 (including the 1990 component period); and, for this purpose, the profits of the 1990 component period shall be taken to be that portion of the profits of the straddling period which the length of the 1990 component period bears to the length of the straddling period.

Textual Amendments

F1 Word in s. 88 heading substituted (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 15(3)

F2 Words in s. 88(1) repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(2)(a), Sch. 43 Pt. 3(12)

F3 Words in s. 88(1) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(1)(10)

F4 Words in s. 88(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 279 (with Sch. 2)

F5 S. 88(2) repealed (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 15(2), Sch. 27 Pt. 2(8) (with Sch. 8 Pt. 2)

F6 S. 88(3) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 21(2) (with Sch. 8 paras. 55(2), 57(1))

F7 S. 88(3)(aa) inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 56 (with savings in Ch. II, ss. 80-105 of Pt. IV)

F8 Words in s. 88(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 45(2)

F9 Word in s. 88(3)(a) substituted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 15(3) (with Sch. 8 Pt. 2)

F10 Words in s. 88(3) substituted (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), 9(b)

F11 S. 88(3A)(3B) inserted (with effect in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(1)

F12 Words in s. 88(3A)(a) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(a)

F13 Word in s. 88(3A)(a) repealed (with effect in accordance with Sch. 11 Pt. 2(10) Note 4 of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 11 Pt. 2(10)

F14 Word in s. 88(3A)(a) inserted (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), arts. 1, 8(2)(a)

F15 S. 88(3A)(aa)-(ac) omitted (with effect in accordance with art. 1 of the amending S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), arts. 1, 8(2)(b)

F16 S. 88(3A)(b) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 58 (with Sch. 7 Pt. 2)

F17 Words in s. 88(3B) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(b)

F18 Words in s. 88(3B) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)

F19 Word in s. 88(4) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

F20 Words in s. 88(4) inserted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

Modifications etc. (not altering text)

C1 S. 88(3A)(a)(3B) modified (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), 32 (as amended by S.I. 2007/2134, regs. 1(1), 25)

C2 S. 88(3A)(a) modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 39A (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 33)