PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

F10F11Basis of taxation etc

Annotations:
Amendments (Textual)
F10

Cross-heading before s. 432 inserted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 51(2) (with Sch. 8 para. 55(2))

F11

Ss. 431G, 431H and preceding cross-heading substituted for s. 432 and preceding cross-heading (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 4 (with Sch. 8 Pt. 2)

F12C36431GCompany carrying on life assurance business

1

This section applies in relation to an insurance company which carries on life assurance business (whether or not it also carries on insurance business of any other kind).

2

Subject as follows, the profits of the life assurance business for any accounting period shall be charged to tax under the I minus E basis.

3

Where in the case of an insurance company for an accounting period either—

a

all of its life assurance business is reinsurance business and none of that business is of a type excluded from this subsection by regulations made by the Board, or

b

all, or substantially all, of its life assurance business is gross roll-up business,

the profits of that business for the accounting period shall be charged to tax F170under section 35 of CTA 2009 (charge on trade profits) and not otherwise.

4

Where—

a

the profits of the life assurance business of an insurance company for any accounting period are charged to tax under the I minus E basis, and

b

had those profits been charged to tax F171under section 35 of CTA 2009, a loss would have arisen to the company from that business for the period,

the loss (after being reduced in accordance with section 434A(2)(a)) may be F173relieved under section 37 of CTA 2010 or under Chapter 4 of Part 5 of that Act.

5

The application, in relation to the life assurance business of an insurance company, of any F172of the life assurance trade profits provisions is not to be taken—

a

to prevent the application of the I minus E basis in relation to that business of the company for any accounting period, or

b

to affect the operation of the I minus E basis in relation to the that business of the company for any accounting period except as specifically provided by the Corporation Tax Acts.

F13C37431HCompany carrying on life assurance business and other insurance business

1

This section applies in relation to an insurance company which carries on life assurance business and insurance business of any other kind.

2

For the purposes of the Corporation Tax Acts—

a

the life assurance business, and

b

the other insurance business,

are to be treated as separate businesses.

3

The profits of the other insurance business shall be charged to tax under F174section 35 of CTA 2009 (charge on trade profits) as the profits of a separate trade.

4

But subsection (3) above does not apply where that business is mutual business.

5

As to the profits of the life assurance business, see section 431G.

C1C2432 Separation of different F21categories of business.

1

M1Where an insurance company carries on life assurance business in conjunction with insurance business of any other F22category, the life assurance business shall, for the purposes of the Corporation Tax Acts, be treated as a separate business from any other F22category of business carried on by the company.

2

F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14432YAF1PHI business other than life assurance business — adjustment consequent on change in Insurance Prudential Sourcebook

1

This section applies in the case of—

a

a company which is a non-profit company, or

b

the non-profit fund of a company which is not a non-profit company,

if an amount F157 (“the relevant amount”) is shown in paragraph 4(12) of Appendix 9.4 to the periodical return for the company for F158a period of account which ends on or after 31st December 2006 F159 but before 1st January 2009 (a “relevant period of account”).

F1602

In computing profits of F166PHI business in accordance with the provisions applicable F168for the purposes of section 35 of CTA 2009 (charge on trade profits)—

a

X shall be added to the closing long term business provision of the company for the relevant period of account; and

b

XA shall be brought into account as a trading receipt of the company for each subsequent period of account until the total sum of the amounts so bought into account is equal to X (and if that total sum would otherwise exceed X, the excess shall be ignored).

2A

F164. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2B

X is—

a

where the relevant period of account ends before 1st April 2007, the whole of the relevant amount;

b

where the relevant period of account ends on or after 1st April 2007 but before 1st January 2008, two-thirds of the relevant amount;

c

where the relevant period of account ends on or after 1st January 2008, one-third of the relevant amount.

2C

XA is the amount found by applying the following formula—

Y12×Zmath

Here—

  • Y is the number of months of the period of account in question (part of a month being counted as a month); and

  • Z is—

  • (a) where X is the whole of the relevant amount, one-third of X;

  • (b) where X is two thirds of the relevant amount, one-half of X;

  • (c) where X is one third of the relevant amount, the whole of X.

3

F161. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

F161. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

In this section—

  • “long term business provision” has the same meaning as in F165Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008;

  • F163. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F163. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F162F1676

This section is subject to sections 82E and 82F of the Finance Act 1989 (treatment of transferors and transferees under insurance business transfer schemes) and those sections shall apply in relation to this section as if—

a

any reference in them to a provision of section 82D of that Act (treatment of profits: life assurance – adjustment consequent on change in Insurance Prudential Sourcebook) were a reference to the corresponding provision of this section,

F169b

the reference in section 82E(4) to life assurance business were a reference to PHI business, and

c

the reference in section 82E(7) to the life assurance trade profits provisions were a reference to the provisions applicable for the purposes of section 35 of CTA 2009.

F15432ZA Linked assets.

1

In this Chapter “linked assets” means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined F27 and in a case where only part of an asset is so identified, references to a linked asset are references to that part.

2

Linked assets shall be taken—

a

to be linked to F26long-term business of a particular category if the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category; and

b

to be linked solely to F26long-term business of a particular category if all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.

3

Where an asset is linked to more than one category of F26long-term business, a part of the asset shall be taken to be linked to each category; and references in this Chapter to assets linked (but not solely linked) to any category of business shall be construed accordingly.

4

Where subsection (3) above applies, the part of the asset linked to any category of business shall be a proportion determined as follows—

a

where in the records of the company values are shown for the asset in funds referable to particular categories of business, the proportion shall be determined by reference to those values;

b

in any other case the proportion shall be equal to F24the proportion A/B where—

A is the total of the linked liabilities of the company which are liabilities of the internal linked fund in which the asset is held and are referable to that category of business;

B is the total of the linked liabilities of the company which are liabilities of that fund.

5

For the purposes of sections 432A to F28432E—

a

income arising in any period from assets linked but not solely linked to a category of business,

b

gains arising in any period from the disposal of such assets, and

c

increases and decreases in the value of such assets,

shall be treated as arising to that category of business in the proportion which is the mean of the proportions determined under subsection (4) above at the beginning and end of the period.

F256

In this section—

  • F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.

7

In the case of a policy or contract the effecting of which constitutes a class of life assurance business the fact that it also constitutes F30PHI business shall be disregarded for the purposes of this section unless the benefits to be provided which constitute F30PHI business are to be determined by reference to the value of assets.

F2C3C4C5C6C7C10C11C13C14432A Apportionment of income and gains.

F311

F62Subject to section 432B, this section has effect F38for determining for the purposes of any provision of the Corporation Tax Acts in relation to any period for which an insurance company carries on business what parts of—

a

income F63or losses arising from the assets of the company’s F35long-term insurance fund, or

b

gains or losses accruing on the disposal of such assets F64in accordance with the provisions of the 1992 Act,

are referable to any category of business.

F651ZA

In subsection (1)(a) above “income” means—

a

income chargeable under F78Chapter 3 of Part 4 of CTA 2009 (profits of a property business) in respect of any separate UK property businesses treated as carried on by the company under section 432AA,

F79b

income chargeable under Chapter 3 of Part 4 of CTA 2009 in respect of distributions treated by F92section 548(5) of CTA 2010 as profits of a UK property business carried on by the company,

c

income chargeable under F80Chapter 3 of Part 4 of CTA 2009 in respect of any overseas property business treated as carried on by the company under section 432AA,

F81d

income chargeable under Chapter 2 of Part 10 of CTA 2009 (dividends of non-UK resident companies) or Chapter 6 of that Part (sale of foreign dividend coupons),

da

income chargeable under Chapter 7 of Part 10 of CTA 2009 (annual payments not otherwise charged) or Chapter 8 of that Part (income not otherwise charged) which arises from a source outside the United Kingdom,

e

distributions received by the company from companies resident in the United Kingdom,

f

credits in respect of any creditor relationships (within the meaning of F82Part 5 of CTA 2009) of the company,

g

credits in respect of any derivative contracts (within the meaning of F83Part 7 of CTA 2009) of the company,

h

any income of the company chargeable under F84Chapter 5 of Part 10 of CTA 2009 (distributions from unauthorised unit trusts) or Chapter 7 of that Part (annual payments not otherwise charged),

i

any credits brought into account by the company under F85Chapter 2 of Part 8 of CTA 2009 (intangible fixed assets), and

j

any income of the company chargeable under F86any provision to which F93section 1173 of CTA 2010 (miscellaneous charges) applies, other than profits of the company chargeable under section 436A (gross roll-up business).

1ZB

In subsection (1)(a) above “losses” means—

a

losses in respect of any separate F87UK property businesses treated as carried on by the company under section 432AA,

b

losses in respect of any overseas property businesses treated as carried on by the company under that section,

c

debits in respect of any creditor relationships (within the meaning of F88Part 5 of CTA 2009) of the company,

d

debits in respect of any derivative contracts (within the meaning of F89Part 7 of CTA 2009) of the company,

e

any debits brought into account by the company under F90Chapter 3 of Part 8 of CTA 2009 (intangible fixed assets), and

f

any losses of the company computed in the same way as profits chargeable under F91any provision to which F94section 1173 of CTA 2010 applies, other than any losses of gross roll-up business.

1ZC

For determining as mentioned in subsection (1) above what parts of income or gains arising from the assets of the company's long-term insurance fund are referable to PHI business (to the extent that it would not be the case by virtue of subsections (1ZA) and (1ZB))—

a

“income” also includes profits shown in the technical account, and

b

“losses” also includes losses so shown.

F391A

If the company carries on only one category of business in the period—

F66a

all of the income and losses referred to in paragraph (a) of subsection (1) above, and

b

all of the gains and losses referred to in paragraph (b) of that subsection,

are referable to that category of business; but if the company carries on more than one category of business in the period, the following provisions shall apply.

C8C9C122

The categories of business referred to in F40subsections (1) and (1A) above are—

F48a

basic life assurance and general annuity business,

b

gross roll-up business, and

c

PHI business.

3

Income F67or losses arising from, and gains or losses accruing on the disposal of, assets linked to any category of business F49is referable to that category of business.

F683A

Amounts falling within—

a

section 442A,

b

section 85(2C) of the Finance Act 1989, or

c

section 85A of that Act,

are directly referable to basic life assurance and general annuity business.

4

F50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F514A

Income F69or losses arising from, and gains or losses accruing on the disposal of, foreign F70business assets is referable to gross roll-up business.

5

There F52is referable to any category of business F53. . . the relevant fraction of any F71income and losses referred to in paragraph (a) of subsection (1) above, and any gains and losses referred to in paragraph (b) of that subsection, not directly referable to F32any category of business.

F546

For the purposes of subsection (5) above “the relevant fraction”, in relation to basic life assurance and general annuity business, is—

AA+B+Cmath

where—

A is the aggregate of—

  • (a) the mean of the opening and closing liabilities of the basic life assurance and general annuity business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business,

  • (b) F72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

  • (c) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts;

B is the aggregate of—

  • (a) the mean of the opening and closing liabilities of the gross roll-up business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business, and

  • (b) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts; and

C is the aggregate of—

  • (a) the mean of the opening and closing liabilities of the PHI business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business, and

  • (b) the mean of the appropriate parts (that is, the parts relating to that category) of the opening and closing amounts of the free assets amounts.

6A

For the purposes of subsection (5) above “the relevant fraction”, in relation to gross roll-up business, is—

BA+B+Cmath

where A, B and C have the same meaning as in subsection (6) above.

6B

For the purposes of subsection (5) above “the relevant fraction”, in relation to PHI business, is—

CA+B+Cmath

where A, B and C have the same meaning as in subsection (6) above.

6C

But if the denominator found in accordance with subsection (6), (6A) or (6B) above is nil, the relevant fraction for the purposes of subsection (5) above in relation to the category of business in question is such fraction as is just and reasonable.

F337

For the purposes of subsections F41(5), (6) F55, (6A) and (6B) above—

a

income and losses referred to in paragraph (a) of subsection (1) above, and gains and losses referred to in paragraph (b) of that subsection, are directly referable to a category of business if referable to that category by virtue of subsection (3) or F56(4A) above, F42. . . F73and

b

assets are directly referable to a category of business if income F74and losses arising from the assets, and gains and losses accruing on the disposal of the assets, are so referable by virtue of subsection (3) F57or (4A) above,F43F75. . .

c

F75. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F448

In F58subsection (6) above—

a

“appropriate part”, in relation to the free assets amount, means—

i

where none (or none but an insignificant proportion) of the liabilities of the long-term business are with-profits liabilities, the part of that amount which bears to the whole the proportion A/B where—

A is the amount of the liabilities of the category of business in question F45(but taking that amount to be nil if it would otherwise be below nil);

B is the whole amount of the liabilities of the long-term business; and

ii

in any other case the part of the free assets amount which bears to the whole the proportion C/D where—

C is the amount of the with-profits liabilities of the category of business in question;

D is the whole amount of the with-profits liabilities of the long-term business; F76. . .

b

F76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46This is subject to subsection (8ZA) below.

F478ZA

If for the purposes of subsection (8)(a) above either B or D is nil then, in F59paragraph (c) of the definition of A and paragraph (b) of the definitions of B and C in subsection (6) above, “appropriate part”, in relation to the free assets amount, means the part of that amount which bears to the whole such proportion as is just and reasonable.

8A

F77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8B

F77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F369A

F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9B

F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3410

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F16C29C31432AAF3UK property business or overseas property business

1

An insurance company F149is treated (despite sections 205 and 206 of CTA 2009) as carrying on separate UK property businesses or overseas property businesses, in accordance with the following rules.

2

The exploitation of land held as an asset of the company’s F145long-term insurance fund is treated as a separate business from the exploitation of land not so held.

3

F146. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C30C324

The exploitation of land held as an asset linked to any of the following categories of business is regarded as a separate business—

F147a

basic life assurance and general annuity business;

b

gross roll-up business; and

c

PHI business.

5

Accordingly, the exploitation of land held as an asset of the company’s F145long-term insurance fund otherwise than as mentioned in subsection F148. . . (4) is treated as a separate business from any other.

6

In this section “land” means any estate, interest or rights in or over land.

F16C33C34432AB Losses from F4UK property business or overseas property business.

1

This section applies to any loss arising in a F153UK property business or overseas property business.

2

F152. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1503

So far as a loss is referable to basic life assurance and general annuity business, it shall be treated for the purposes of section 76 as expenses payable which fall to be brought into account at Step 3 in subsection (7) of that section.

4

Where a company is treated under section 432AA as carrying on—

a

more than one F154UK property business, or

b

more than one overseas property business,

then, in relation to either kind of business, the reference in subsection (3) above to a loss referable to basic life assurance and general annuity business shall be construed as a reference to any aggregate net loss after setting the losses from those businesses which are so referable against any profits from those businesses that are so referable.

5

The provisions of F155Chapter 4 of Part 4 of CTA 2010 (loss relief: property losses) do not apply to a loss referable to life assurance business or any category of life assurance business.

6

F151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5C15C16C17C18C19432B Apportionment of receipts brought into account.

1

This section and F95sections 432C to F102432G have effect where it is necessary in accordance with section 83 of the Finance Act 1989 to determine what parts of any items F96brought into account, within the meaning of that section, are referable to life assurance business or F103gross roll-up business.

F972

Where for that purpose reference falls to be made to more than one account recognised for the purposes of that section, the provisions of sections 432C to F104432G apply separately in relation to each account.

3

F105Section 432C applies where the business with which an account is concerned (“the relevant business”) relates exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus; and F98sections 432E and 432F apply where the relevant business relates wholly or partly to other policies or contracts F106(and section 432G applies in either case).

F994

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1008

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8A

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8B

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8C

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8D

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8E

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8F

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8G

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10112

F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F108C20432CSection 432B apportionment: non-participating funds

1

This section specifies the extent to which the net amount is referable to life assurance business or to gross roll-up business.

2

In this section “the net amount” means the aggregate of the amounts brought into account—

a

as investment income,

b

as an increase in the value of assets, or

c

as other income,

less the aggregate of the amounts brought into account as a decrease in the value of assets.

3

To the extent that the net amount is attributable to—

a

assets linked to life assurance business, or

b

foreign F109business assets,

it is referable to life assurance business.

4

There is also referable to life assurance business the appropriate fraction of so much of the net amount as is not attributable to linked assets or foreign F109business assets.

5

For the purposes of subsection (4) above “the appropriate fraction” is—

AA+Bmath

where—

A is the mean of the opening and closing liabilities of the relevant business so far as referable to life assurance business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the aggregate of the mean of the opening and closing net values of assets linked to the relevant business so far as so referable and foreign F109business assets; and

B is the mean of the opening and closing liabilities of the relevant business so far as referable to PHI business, reduced (but not below nil) by the mean of the opening and closing net values of any assets linked to PHI business.

6

But if the denominator found in accordance with subsection (5) above is nil, the appropriate fraction for the purposes of subsection (4) above is such fraction as is just and reasonable.

7

To the extent that the net amount is attributable to—

a

assets linked to gross roll-up business, or

b

foreign F109business assets,

it is referable to gross roll-up business.

8

There is also referable to gross roll-up business the relevant fraction of so much of the net amount as is not attributable to linked assets or foreign F109business assets.

9

For the purposes of subsection (8) above “the relevant fraction” is—

CC+Dmath

where—

C is the mean of the opening and closing liabilities of the relevant business so far as referable to gross roll-up business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the aggregate of the mean of the opening and closing net values of any assets linked to gross roll-up business and foreign F109business assets; and

D is the mean of the opening and closing liabilities of the relevant business so far as referable to basic life assurance and general annuity business or PHI business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets linked to either of those categories of business.

10

But if the denominator found in accordance with subsection (9) above is nil, the relevant fraction for the purposes of subsection (8) above is such fraction as is just and reasonable.

11

For the purposes of this section, so much of the net amount—

a

as is brought into account as other income in an internal linked fund of the company, and

b

as is not attributable to assets of that fund,

is to be treated as linked to a category of business to the same extent as income attributable to an asset of the fund would, by virtue of section 432ZA, be referable to that category of business.

F17432CAApportionment of asset value increase where line 51 amount decreases

1

This section applies where—

a

an insurance company is not a non-profit company in relation to a period of account (“the current period of account”),

b

in the case of any business with which an account of the company for the current period of account is concerned (“the relevant business”), an amount is a relevant brought into account amount for that period of account (see subsection (2)),

c

section 432C applies for determining the extent to which the relevant brought into account amount is referable to life assurance business or to gross roll-up business, and

d

the line 51 reduction condition is met (see subsection (3)).

2

An amount is a relevant brought into account amount for a period of account if—

a

it is brought into account as mentioned in subsection (2)(b) of section 83 of the Finance Act 1989 (increases in value of non-linked assets) for that period,

b

it is deemed to be brought into account for that period by subsection (2B) of that section in consequence of the transfer of non-linked assets, or

c

it is taken into account under subsection (2) of that section for that period by virtue of section 444AB as being the relevant amount in relation to non-linked assets.

3

The line 51 reduction condition is met if—

a

the amount shown in column 1 of line 51 of Form 14 of the company's periodical return in respect of the relevant business for the current period of account, is less than

b

the amount so shown for the period of account immediately before it;

and the amount of the difference is “the relevant reduction”.

4

Section 432C applies in relation to so much of the relevant brought into account amount as does not exceed the relevant reduction (“the affected amount”) as if it were brought into account as an increase in the value of assets in the case of the relevant business for the applicable appropriate period of account of the company.

5

A period of account is an “appropriate period of account” if it ended before the current period of account and—

a

the amount shown in column 1 of line 51 of Form 14 of the company's periodical return in respect of the relevant business for it, was more than

b

the amount so shown for the period of account immediately before it;

and the amount of the difference is “the relevant increase.”

6

The “applicable” appropriate period of account is the one which ended most recently (“the most recent appropriate period of account”).

7

But if the relevant increase in the case of the most recent appropriate period of account is less than the affected amount, the most recent appropriate period of account is the applicable appropriate period of account in relation to only so much of the affected amount as does not exceed that relevant increase.

8

In that case, the appropriate period of account which ended most recently before the most recent appropriate period of account is the applicable appropriate period of account in relation to so much of the remainder as does not exceed the relevant increase in the case of that appropriate period of account (and, where necessary, so on until the applicable appropriate period of account is established in relation to all of the affected amount or there are no more appropriate periods of account).

9

If the current period of account is not the first in relation to which this section has applied in the case of the business concerned, the amount of the relevant increase in the case of any appropriate period of account (“the period in question”) is to be treated as reduced by the relevant aggregate.

10

The “relevant aggregate” is the aggregate of so much of the affected amount for any period or periods of account earlier than the current period of account as was an amount to which section 432C applied as if it were brought into account as mentioned in subsection (4) for the period in question.

11

For the purposes of this section an insurance company which has elected under section 83YA(9) of the Finance Act 1989 (changes in value of assets brought into account: non-profit companies) to be treated as a non-profit company in relation to a period of account is to be regarded as a non-profit company in relation to the period of account.

F18432CBTransfers of business involving excess assets

1

This section applies where, under an insurance business transfer scheme, there is a transfer of long-term business—

a

from a non-profit fund of an insurance company (“the transferor”) which is not a non-profit company in relation to the relevant period of account,

b

to another insurance company (“the transferee”) to constitute or form part of a non-profit fund of the transferee (“the transferee's non-profit fund”),

(“the transfer”) and conditions A and B are met.

2

Condition A is that the fair value of the assets transferred by the transfer exceeds by an amount (“the chargeable excess”) the amount of the relevant liabilities transferred by the transfer.

For this purpose “relevant” liabilities are liabilities of a type shown (or treated as shown) in any of lines 14, 17, 21 to 23 and 31 to 38 of Form 14 of a periodical return of an insurance company.

3

Condition B is that the main purpose, or one of the main purposes, of the transferor or the transferee (or both) in entering into any part of the transfer scheme arrangements is to secure a reduction in tax as a result of section 432C having effect in the case of the transferee, rather than the transferor, in relation to the business transferred by the transfer.

4

The chargeable excess is to be brought into account by the transferor as mentioned in section 83(2)(b) of the Finance Act 1989 for the relevant period of account.

5

Where there is no amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the first period of account of the transferee ending on or after the transfer date (“the first post-transfer period of account”), the chargeable excess is to be brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for the first post-transfer period of account.

6

Where—

a

there is an amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the first post-transfer period of account, and

b

the amount so shown in column 1 of line 51 of Form 14 of the periodical return of the transferee for that period of account, or for any other period of account of the transferee ending after the transfer date, (an “affected period of account”) is less than the total chargeable excess amount,

the relevant amount is to be brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for the affected period of account.

7

For this purpose “the relevant amount” is the amount by which—

a

the amount shown in relation to the transferee's non-profit fund in column 1 of line 51 of Form 14 of the periodical return of the transferee for the affected period of account, is less than

b

the total chargeable excess amount less any amount brought into account by the transferee as mentioned in section 83(2) of the Finance Act 1989 as a decrease in the value of non-linked assets for any earlier period of account by virtue of the operation of this section in relation to the transferee's non-profit fund.

8

In subsections (6) and (7) “the total chargeable excess amount” means the aggregate of—

a

the chargeable excess, and

b

any amount which is the chargeable excess in relation to any other transfer of business to the transferee's non-profit fund.

9

In this section “the relevant period of account” means—

a

the period of account of the transferor ending immediately before the transfer date, or

b

if no period of account of the transferor so ends, the period of account of the transferor covering the transfer date.

10

In this section “the transfer scheme arrangements” means the insurance business transfer scheme and any relevant associated operations; and for this purpose “relevant associated operations” means—

a

any other insurance business transfer scheme,

b

any contract of reinsurance, or

c

any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee,

which is effected in connection with the insurance business transfer scheme.

11

In subsection (10)—

  • “dependant”, and

  • “insurance undertaking”,

have the same meaning as in the Insurance Prudential Sourcebook.

12

In this section “the transfer date” means the date on which the insurance business transfer scheme takes effect.

13

For the purposes of this section an insurance company which has elected under section 83YA(9) of the Finance Act 1989 (changes in value of assets brought into account: non-profit companies) to be treated as a non-profit company in relation to a period of account is to be regarded as a non-profit company in relation to the period of account.

F6432D Section 432B apportionment: value of non-participating funds.

F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F8C21C23C24C25C26432ESection 432B apportionment: participating funds.

F1211

The part of the net amount which is referable to life assurance business or to gross roll-up business is—

a

the amount determined in accordance with subsections (2) and (2A) below, or

b

if greater, the amount determined in accordance with subsection (3) below.

1A

In this section “the net amount” means the aggregate of the amounts brought into account—

a

as investment income,

b

as an increase in the value of assets, or

c

as other income,

less the aggregate of the amounts brought into account as a decrease in the value of assets.

2

For the purposes of subsection (1) above there shall be determined the amount which is such as to secure—

a

F111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

F112. . . that

CS-CAS=(S-AS)×CASASmath

where—

  • S is the surplus of the relevant business;

  • AS is so much of that surplus as is allocated to persons entitled to the benefits provided for by the policies or contracts to which the relevant business relates;

  • CAS is so much of the surplus so allocated as is attributable to policies or contracts of life assurance business or of gross roll-up business; and

  • CS is so much of the surplus of the relevant business as would remain if the relevant business were confined to F122life assurance business or to gross roll-up business.

2A

In a case where F113an amount or amounts are taken into account under subsection (2) of section 83 of the Finance Act 1989 by virtue of subsection (2B) of that section F114or by virtue of section F123. . . F116F124444AB, F134. . . F125444AEA,F135444AECA, 444AF(2) or 444AK(2) of this Act, the amount determined under subsection (2) above is increased by—

CASAS×RPmath

where—

CAS and AS have the same meanings as in subsection (2) above; and

F115RP is the amount or the aggregate of the amounts taken into account under subsection (2) of section 83 of the Finance Act 1989 by virtue of any of the following provisions—

  1. a

    subsection (2B) of that section;

  2. aa

    F126section 444AB F136. . . of this Act;

  3. ab

    F127section 444AEA F137or 444AECA of this Act;

  4. b

    F123. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  5. c

    F117subsection (2) of section 444AF of this Act (and see subsections (5) and (6) of that section);

  6. d

    subsection (2) of section 444AK of this Act (but only for the purposes mentioned in subsection (3) of that section).

3

For the purposes of subsection (1) above there shall also be determined the aggregate of—

a

the applicable percentage of what is left of the mean of the opening and closing liabilities of the relevant business so far as referable to the category of business concerned F118(but taking that mean to be nil if it would otherwise be below nil) after deducting from it the mean of the opening and closing values of any assets of the relevant business F110linked to that category of business F128F140. . . , and

b

the part of the net amount F129. . . that is attributable to assets F110linked to that category of business F130F138. . . .

C224

F119Subject to subsection (4A) below, for the purposes of subsection (3) above “the applicable percentage”, in any case, F131is—

AB×100math

where—

A is so much of the net amount as is brought into account in respect of the relevant business less such part of it as is attributable to linked assets F141. . . ; and

B is the mean of the opening and closing liabilities of the relevant business reduced by the mean of the opening and closing values of any assets of the relevant business which are linked assets F139. . . .

F1204A

If the mean of the opening and closing liabilities of the relevant business reduced by the opening and closing values of any assets of the relevant business which are linked assets F132F142. . . is nil then, for the purposes of subsection (3) above, “the applicable percentage” is such percentage as is just and reasonable.

5

F133. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

F133. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19C28432F Section 432B apportionment: supplementary provisions.

C271

The provisions of this section provide for the reduction of the amount determined in accordance with section 432E(3) (“the subsection (3) figure”) for an accounting period in which that amount exceeds, or would otherwise exceed, the amount determined in accordance with section 432E(2) (“the subsection (2) figure”).

2

F143. . . There shall be determined for each accounting period the amount (if any) by which the subsection (2) figure F144. . . exceeds the subsection (3) figure (“the subsection (2) excess”).

3

Where there is a subsection (2) excess, the amount shall be carried forward and if in any subsequent accounting period the subsection (3) figure exceeds, or would otherwise exceed, the subsection (2) figure, it shall be reduced by the amount or cumulative amount of subsection (2) excesses so far as not previously used under this subsection.

4

Where in an accounting period that amount is greater than is required to bring the subsection (3) figure down to the subsection (2) figure, the balance shall be carried forward and aggregated with any subsequent subsection (2) excess for use in subsequent accounting periods.

F20F156C35432GSection 432B apportionment: business transfers-in

1

There is referable to the life assurance business of the transferee the appropriate fraction of the amount brought into account as a business transfer-in and of any amount taken into account as profits under section 444ABD(1).

2

For the purposes of subsection (1) above “the appropriate fraction” is—

LABLTLmath

where—

LABL is the amount of the liabilities transferred that are referable to the life assurance business (but is nil if it would otherwise be below nil); and

TL is the whole of the liabilities transferred.

3

But if the amount of the liabilities transferred is nil, the appropriate fraction for the purposes of subsection (1) above is such fraction as is just and reasonable.

4

There is referable to the gross roll-up business of the transferee the relevant fraction of the amount brought into account as a business transfer-in and of any amount taken into account as profits under section 444ABD(1).

5

For the purposes of subsection (4) above “the relevant fraction” is—

GRBLTLmath

where—

GRBL is the amount of the liabilities transferred that are referable to the gross roll-up business (but is nil if it would otherwise be below nil); and

TL has the same meaning as in subsection (2) above.

6

But if the amount of the liabilities transferred is nil, the relevant fraction for the purposes of subsection (4) above is such fraction as is just and reasonable.

F9433 Profits reserved for policy holders and annuitants.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .