http://www.legislation.gov.uk/id/ukpga/1988/1

PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

F2F3Basis of taxation etc

Annotations:

Amendments (Textual)

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))

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)

F1 C1 C2 C3 C4 C5 C8 C9 C11 C12432A Apportionment of income and gains.

F41

F35Subject to section 432B, 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 F36or losses arising from the assets of the company’s F8long-term insurance fund, or

b

gains or losses accruing on the disposal of such assets F37in accordance with the provisions of the 1992 Act,

are referable to any category of business.

F381ZA

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

a

income chargeable under Schedule A in respect of any separate Schedule A businesses treated as carried on by the company under section 432AA,

b

income chargeable under Schedule A in respect of distributions treated by section 121(1)(a) of the Finance Act 2006 as profits of a Schedule A business carried on by the company,

c

income chargeable under Case V of Schedule D in respect of any overseas property business treated as carried on by the company under section 432AA,

d

other income of the company chargeable under Case V of Schedule D,

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 Chapter 2 of Part 4 of the Finance Act 1996) of the company,

g

credits in respect of any derivative contracts (within the meaning of Schedule 26 to the Finance Act 2002) of the company,

h

any income of the company chargeable under Case III of Schedule D in respect of annuities and other annual payments within paragraph (b) of Case III of Schedule D as substituted by section 18(3A),

i

any credits brought into account by the company under Part 3 of Schedule 29 to the Finance Act 2002 (intangible fixed assets), and

j

any income of the company chargeable under Case VI of Schedule D, 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 Schedule A 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 Chapter 2 of Part 4 of the Finance Act 1996) of the company,

d

debits in respect of any derivative contracts (within the meaning of Schedule 26 to the Finance Act 2002) of the company,

e

any debits brought into account by the company under Part 2 of Schedule 29 to the Finance Act 2002 (intangible fixed assets), and

f

any losses of the company computed in the same way as profits chargeable under Case VI of Schedule D, 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.

F121A

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

F39a

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.

C6 C7 C102

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

F21a

basic life assurance and general annuity business,

b

gross roll-up business, and

c

PHI business.

3

Income F40or losses arising from, and gains or losses accruing on the disposal of, assets linked to any category of business F22is referable to that category of business.

F413A

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

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

F244A

Income F42or losses arising from, and gains or losses accruing on the disposal of, foreign F43business assets is referable to gross roll-up business.

5

There F25is referable to any category of business F26. . . the relevant fraction of any F44income 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 F5any category of business.

F276

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

\frac{A}{A + B + C}

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) F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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—

\frac{B}{A + B + C}

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—

\frac{C}{A + B + C}

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) F28, (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 F29(4A) above, F15. . . F46and

b

assets are directly referable to a category of business if income F47and losses arising from the assets, and gains and losses accruing on the disposal of the assets, are so referable by virtue of subsection (3) F30or (4A) above,F16 F48. . .

c

F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F178

In F31subsection (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 F18(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; F49. . .

b

F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19This is subject to subsection (8ZA) below.

F208ZA

If for the purposes of subsection (8)(a) above either B or D is nil then, in F32paragraph (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

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

8B

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

9

F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F99A

F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9B

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

F710

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