Corporation Tax Act 2009

Treatment of deficit on basic life assurance and general annuity business U.K.

387 Treatment of deficit on basic life assurance and general annuity business: introduction U.K.

(1) Sections 388 to 391 apply instead of Chapter 16 (non-trading deficits) if a company has a non-trading deficit from its loan relationships for BLAGAB for any accounting period.

(2) In those sections “the deficit” and “the deficit period” mean that deficit and that period respectively.

388 Basic rule: deficit set off against income and gains of deficit period U.K.

(1) The basic rule is that the deficit must be set off against any income and gains of the deficit period which are referable to BLAGAB.

(2) The income and gains are reduced accordingly.

(3) Any such reduction is made before any expenses deduction under section 76 of ICTA (expenses of insurance companies).

389 Claim to carry back deficit U.K.

(1) If the deficit exceeds the income and gains for the deficit period referred to in section 388(1), the company may make a claim for the whole or part of the excess (“the claim amount”)—

(a) to be carried back for up to 3 accounting periods ending within the permitted period, and

(b) to be set off against the available profits of the company in those periods in accordance with subsection (2).

(2) The claim amount reduces the company's available profits in the most recent accounting period of the company, before any remainder reduces those in the next most recent accounting period and then those in the next most recent accounting period.

(3) For the meaning of “available profits”, see section 390.

(4) In this section and that section “permitted period” means the period of 12 months immediately before the deficit period.

(5) A claim under this section must be made—

(a) within the period of 2 years after the end of the deficit period, or

(b) within such further period as an officer of Revenue and Customs allows.

390 Meaning of “available profits” U.K.

(1) For the purposes of section 389 the available profits of the company for an accounting period are its BLAGAB non-trading loan relationships profits for the period (see subsection (4)), less the unused part of the relevant deductions for the period (see subsection (5)).

(2) If an accounting period ending within the permitted period begins before it, only a part of the amount which would otherwise be the available profit for that accounting period is available profit.

(3) That part is so much as is proportionate to the part of the accounting period in the permitted period.

(4) References in this section to a company's BLAGAB non-trading loan relationships profits for an accounting period are references to the amount (if any) which is chargeable to tax for that period under section 299 (charge to tax on non-trading profits) for the company's BLAGAB.

(5) The unused part of the relevant deductions for an accounting period is found as follows.

Step 1

Add together—

(a) so much of the expenses deduction for the period given by Step 8 in section 76(7) of ICTA (expenses of insurance companies) as is referable to BLAGAB, and

(b) so much of the sum of the deductions made in the case of the company in respect of [F1 qualifying charitable donations] for that period as is so referable.

Step 2

Add together—

(a) the total amounts so referable which could be applied for the period in making deductions as a result of section 76 of ICTA if the company's BLAGAB non-trading loan relationships profits for the period were disregarded, and

(b) the total amounts so referable which could be applied for the period in making deductions in respect of [F2 qualifying charitable donations] if those profits were disregarded.

Step 3

Subtract the amount found at Step 2 from the amount found at Step 1.

The result is the unused part of the relevant deductions for the accounting period.

(6) In the case of any claim under section 389, the reference in Step 1(a) in subsection (5) to the expenses deduction for an accounting period given by Step 8 in section 76(7) of ICTA and the reference in Step 2(a) in subsection (5) to the deduction for expenses as a result of section 76 of ICTA for an accounting period are references to the deduction for expenses that would have been made as a result of that section for that period on the assumptions in subsections (7) and (8).

(7) The first assumption is that no account is taken of—

(a) that claim, or

(b) any other claim under section 389 relating to a deficit for an accounting period after the deficit period.

(8) The second assumption is that all such adjustments are made as are required as a result of any sum having been carried back under the Corporation Tax Acts to the accounting period mentioned in subsection (5), otherwise than as a result of—

(a) the claim mentioned in subsection (6), or

(b) any such other claim as is mentioned in subsection (7)(b).

Textual Amendments

F1 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(2) (with Sch. 2)

F2 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(3) (with Sch. 2)

391 Carry forward of surplus deficit to next accounting period U.K.

(1) This rule applies if any of the deficit is not—

(a) set off against the income and gains referred to in section 388(1), or

(b) set off against the profits referred to in section 389(1) as the result of a claim under that section.

(2) That deficit must be carried forward to the accounting period immediately after the deficit period (“the next period”).

(3) Any deficit so carried forward is treated for the purposes of the Corporation Tax Acts (including sections 388 to 390) as expenses payable which—

(a) are referable to the next period, and

(b) are to be brought into account at Step 3 in section 76(7) of ICTA (expenses of insurance companies).