Explanatory Note
(This note is not part of the Regulations)
These Regulations modify legislation relating to the taxation of overseas life insurance companies. They are consequent to changes made in the Finance Act 2003 (c. 14), by the introduction of section 11AA of the Income and Corporation Taxes Act 1988 (c. 1), to the method of determining for the purposes of corporation tax the amount of profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom. The meaning of “permanent establishment” is given by section 148 of the Finance Act 2003. These Regulations have substituted this term in most of the places where previously there was a reference to a company’s “branch or agency”.
These Regulations omit categories of assets from section 440 of the Income and Corporation Taxes Act 1988 as modified where the company is an overseas life insurance company. In consequence these Regulations may have the effect of transferring assets from one category to another. Regulation 4 of these Regulations prevents any such transactions from being deemed to be a disposal and re-acquisition of assets for the purposes of corporation tax.
The Finance Act 2003 also made amendments to the provisions in the Finance Act 1989 (c. 26) relating to life assurance. These provisions are modified in their application to overseas life insurance companies by Schedule 8A to the Finance Act 1989. Regulation 6 amends Schedule 8A in consequence of the amendments made by the Finance Act 2003. Its effect is to limit references in the relevant provisions of the Finance Act 1989 to various amounts to only so much of those amounts as could be attributable to a company’s permanent establishment.
Paragraphs 31 and 32 of Schedule 33 to the Finance Act 2003 introduced interpretation provisions into, respectively, the Finance Act 1989 and the Taxation of Chargeable Gains Act 1992 (c. 12). These provisions give expressions also used in the relevant parts of those Acts the meaning they have in Chapter 1 of Part 12 of the Income and Corporation Taxes Act 1988. This has made some modifications to definitions given in the Finance Act 1989 and the Taxation of Chargeable Gains Act 1992 unnecessary, and these Regulations omit those superfluous modifications.