Finance Act 2007

Transfer schemes: taxing the transferor

4 (1) In ICTA, for sections 444AB and 444ABA substitute—

“444AB Transfer schemes transferring whole of business: transferor

(1) This section applies where an insurance business transfer scheme has effect to transfer the whole, or substantially the whole, of the long-term business of a person (“the transferor”) to another person (“the transferee”) and either or both of conditions A and B are met.

(2) Condition A is met if 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) Condition B is met if, immediately after the transfer date, the transferor—

(a) does not carry on long-term business, but

(b) holds any assets which, immediately before the transfer date, were assets of its long-term insurance fund (“retained assets”).

(4) If there are relevant non-transferred assets or retained assets (or both) the relevant amount in relation to them (see subsection (5) 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 relevant period of account (see subsection (6) below).

(5) Section 444ABA makes provision for the calculation of the relevant amount in relation to relevant non-transferred assets; and section 444ABB makes provision for its calculation in relation to retained assets.

(6) In this section and sections 444ABA to 444AC “the relevant period of account” means the period of account of the transferor ending (or treated by section 444AA as ending) immediately before the transfer date.

(7) See section 444AA for the meaning of “the transfer date” in this section.

444ABA Relevant non-transferred assets

(1) For the purposes of section 444AB the relevant amount in relation to assets that are relevant non-transferred assets is—

FVA - RVA

where—

• FVA is the fair value of the assets on the transfer date, and

• RVA is the recognised value of the assets.

(2) For the purposes of this section and section 444ABB—

(a) the recognised value of any assets which, immediately before the transfer date, are held by the transferor in a non-profit fund which is not a Form 14 line 51 fund is the relevant Form 13 value of those assets, and

(b) the recognised value of any other assets is the appropriate fraction of the relevant Form 13 value of those assets.

(3) For the purposes of subsection (2) above a non-profit fund is a Form 14 line 51 fund if an amount in respect of the fund is shown (or treated as shown) in line 51 of Form 14 in the periodical return of the transferor covering the relevant period of account.

(4) For the purposes of subsection (2) above the relevant Form 13 value of any assets is the value which is shown (or treated as shown) in respect of the assets in Form 13 in the periodical return of the transferor covering the relevant period of account (ignoring lines 91 to 99 of that Form).

(5) For the purposes of subsection (2)(b) above the appropriate fraction is—

where—

• A is the amount shown (or treated as shown) in line 51 of Form 14 in the periodical return of the transferor covering the relevant period of account in respect of the fund in which, immediately before the transfer date, the assets are held by the transferor, increased or reduced as mentioned in subsection (6) below, and

• B is the amount shown (or treated as shown) in line 89 of Form 13 in that periodical return in respect of that fund.

(6) The increase or reduction referred to in the definition of A in subsection (5) above is any increase or decrease deemed to be brought into account by section 83YA(3) or (4) of the Finance Act 1989 in respect of the fund for the relevant period of account.

(7) See section 444AA for the meaning of “the transfer date”, and section 444AB for the meaning of “the relevant period of account”, in this section.

444ABB Retained assets

(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.

444ABC Transfer scheme transferring part of business: transferor

(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—

FVA - BTO

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.”

(2) In section 432E(2A) of ICTA (apportionments: participating funds)—

(a) before “444AF(2)” insert “444AB, 444ABC,”, and

(b) after paragraph (a) insert—

“(aa) section 444AB or 444ABC of this Act;”.