PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

Separation of different categories of business

F1432A Apportionment of income and gains.

F2(1)

This section has effect where in any period an insurance company carries on more than one category of business and it is necessary for the purposes of the Corporation Tax Acts to determine in relation to the period what parts of—

(a)

income arising from the assets of the company’s F3long-term insurance fund, or

(b)

gains or losses accruing on the disposal of such assets,

are referable to any category of business.

(2)

The categories of business referred to in subsection (1) above are—

(a)

pension business;

(b)

life reinsurance business;

(c)

overseas life assurance business;

F4(d)

basic life assurance and general annuity business; and

(f)

F5long-term business other than life assurance business.

(3)

Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business (apart from overseas life assurance business) shall be referable to that category of business.

(4)

Income arising from, and gains or losses accruing on the disposal of, assets of the overseas life assurance fund (and no other assets) shall be referable to overseas life assurance business.

(5)

There shall be referable to any category of business (apart from overseas life assurance business) the relevant fraction of any income, gains or losses not directly referable to F6any category of business.

(6)

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

(a)

the numerator is the aggregate of—

(i)

the mean of the opening and closing liabilities of the category, reduced F7(but not below nil) by the mean of the opening and closing F8net values of any assets directly referable to the category, and

(ii)

the mean of the appropriate parts of the opening and closing amounts of the investment reserve; and

F9(b)

the denominator is the aggregate of—

(i)

the numerator given by paragraph (a) above; and

(ii)

the numerators given by that paragraph in relation to the other categories of business.

F10(7)

For the purposes of subsections (5) and (6) above—

(a)

income, gains or losses are directly referable to a category of business if referable to that category by virtue of subsection (3) or (4) above, and

(b)

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

F11(8)

In subsection (6) above “appropriate part”, in relation to the investment reserve, means—

(a)

where none (or none but an insignificant proportion) of the liabilities of the F5long-term business are with-profits liabilities, the part of that reserve which bears to the whole the proportion A/B where—

A is the amount of the liabilities of the category of business in question;

B is the whole amount of the liabilities of the F5long-term business; and

(b)

in any other case, the part of that reserve 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 F5long-term business.

F12(9)

Where a company carries on overseas life assurance business—

(a)

references in this section to liabilities do not include liabilities of that business, and

(b)

the appropriate part of the investment reserve as defined by paragraph 4(2)(a) of Schedule 19AA shall be left out of account in determining that reserve for the purposes of this section.

F13(9A)

In this section and sections 432C and 432D “net value”, in relation to any assets, means the excess of the value of the assets over any liabilities which—

(a)

represent a F14loan relationship; and

(b)

are liabilities of an internal linked fund in which the assets are held;

and in this subsection “internal linked fund” has the same meaning as in section 432ZA.

(9B)

In this section—

“investment reserve”, in relation to an insurance company, means the excess of the value of the assets of the company’s F5long-term business over the aggregate of—

(a)

the liabilities of that business; and

(b)

any liabilities of the F3long-term insurance fund which represent a F15loan relationship;

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F17(10)

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