PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

F2F3Basis of taxation etc

Annotations:
Amendments (Textual)
F2

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))

F3

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)

F1C1C2C3C4C5C8C9C11C12432A Apportionment of income and gains.

F41

This section has effect F11for 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 arising from the assets of the company’s F8long-term insurance fund, or

b

gains or losses accruing on the disposal of such assets,

are referable to any category of business.

F121A

If the company carries on only one category of business in the period, all of the income and gains or losses referred to in subsection (1) above F22is 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.

C6C7C102

The categories of business referred to in F13subsections (1) and (1A) above are—

F23a

basic life assurance and general annuity business,

b

gross roll-up business, and

c

PHI business.

3

Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business F24is referable to that category of business.

4

F25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F264A

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

5

There F27is referable to any category of business F28. . . the relevant fraction of any income, gains or losses not directly referable to F5any category of business.

F296

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) if there has been a relevant reattribution, the mean of the opening and closing amounts of the shareholders' excess assets, 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.

F67

For the purposes of subsections F14(5), (6) F30, (6A) and (6B) 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 F31(4A) above, F15. . .

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) F32or (4A) above,F16 and

c

amounts are directly referable to basic life assurance and general annuity business if they fall within any of the following provisions—

i

sections F33. . . F39. . . 442A,

ii

section F3485(2C) or 85A of the Finance Act 1989.

F178

In F35subsection (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 F19(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; and

b

the amount of the shareholders' excess assets in relation to any period of account of the company is the amount equal to SXA — L27 where—

i

SXA is the aggregate amount of the assets shown in its non-participating funds which are attributed to its shareholders as a result of a relevant reattribution; and

ii

L27 is the amount (if any) shown in line 27 of Form 19 in its periodical return for the relevant period of account.

F20This is subject to subsection (8ZA) below.

F218ZA

If for the purposes of subsection (8)(a) above either B or D is nil then, in F36paragraph (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

In this section—

  • “non-participating funds” means accounts which relate exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus;

  • “reattribution” in relation to an insurance company which has an inherited estate, means the attribution of assets to shareholders' interests as a result of—

    1. a

      an agreement between the company and the relevant regulator as to the amount of that estate and its attribution between shareholders and policy holders; or

    2. b

      a decision of the company to specify and identify an amount of assets (otherwise than in connection with a transfer to the company's long-term insurance fund) as attributable only to shareholders' interests;

    a reattribution is “relevant” if it arises as a result of any of the following—

    1. a

      a transfer of business under—

      1. i

        section 49 of, or Schedule 2C to, the Insurance Companies Act 1982;

      2. ii

        an insurance business transfer scheme (within the meaning of section 431(2));

    2. b

      a scheme of arrangement under section 425 of the Companies Act 1985;

    3. c

      an order under section 68 of the Insurance Companies Act 1982;

    4. d

      a waiver under section 148 of the Financial Services and Markets Act 2000;

    5. e

      an amendment to the company's memorandum, articles of association or other instrument regulating the company.

8B

In subsection (8A) above—

  • “inherited estate” has the same meaning as it has in the F18Insurance Prudential Sourcebook; and

  • “relevant regulator” means the Financial Services Authority, the Treasury or the Secretary of State.

9

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

F99A

F38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9B

F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F710

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