PART XIIU.K. SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER IU.K. INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

[F1[F2Basis of taxation etc]]U.K.

Textual Amendments

F1Cross-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))

F2Ss. 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)

[F3432A Apportionment of income and gains.U.K.

[F4(1)[F5Subject to section 432B, this] section has effect [F6for 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 [F7or 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 [F9in accordance with the provisions of the 1992 Act],

are referable to any category of business.

[F10(1ZA)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.]

[F11(1A)If the company carries on only one category of business in the period—

[F12(a)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.]

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

[F14(a)basic life assurance and general annuity business,

(b)gross roll-up business, and

(c)PHI business.]

(3)Income [F15or losses] arising from, and gains or losses accruing on the disposal of, assets linked to any category of business [F16is] referable to that category of business.]

[F17(3A)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)F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F19(4A)Income [F20or losses] arising from, and gains or losses accruing on the disposal of, foreign [F21business] assets is referable to gross roll-up business.]

(5)There [F22is] referable to any category of business F23. . . the relevant fraction of any [F24income 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 [F25any category] of business.

[F26(6)For the purposes of subsection (5) above “the relevant fraction”, in relation to basic life assurance and general annuity business, is—

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) F27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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—

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—

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.]

[F28(7)For the purposes of subsections [F29(5), (6) [F30, (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 [F31(4A)] above, F32. . . [F33and]

(b)assets are directly referable to a category of business if income [F34and losses arising from the assets, and gains and losses accruing on the disposal of the assets, are] so referable by virtue of subsection (3) [F35or (4A)] above,[F36F37. . .

(c)F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]]

[F38(8)In [F39subsection (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 [F40(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; F41. . .

(b)F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F42This is subject to subsection (8ZA) below.]

[F43(8ZA)If for the purposes of subsection (8)(a) above either B or D is nil then, in [F44paragraph (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)F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8B)F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(9)F46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F47(9A)F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9B)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

F50(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4S. 432A(1)-(3) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(2)

F5Words in s. 432A(1) substituted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(2)(a)

F6Words in s. 432A(1) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 8(2)

F7Words in s. 432A(1)(a) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(2)(b)

F8Words in s. 432A(1)(a)(9B) substituted (1.12.2001 with effect in accordance with art. 1(2)(a) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), art. 52(1)(c)

F9Words in s. 432A(1)(b) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(2)(c)

F10S. 432A(1ZA)-(1ZC) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(3)

F12Words in s. 432A(1A) substituted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(4)

F13Words in s. 432A(2) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 8(4)

F14S. 432A(2)(a)-(c) substituted for s. 432A(2)(a)-(f) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(3) (with Sch. 7 Pt. 2)

F15Words in s. 432A(3) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(5)

F16Word in s. 432A(3) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(4) (with Sch. 7 Pt. 2)

F17S. 432A(3A) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(6)

F18S. 432A(4) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(5), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F19S. 432A(4A) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(6) (with Sch. 7 Pt. 2)

F20Words in s. 432A(4A) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(7)

F21Word in s. 432A(4A) substituted (with effect in accordance with Sch. 17 para. 10(6)(7) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 10(3)(a)

F22Word in s. 432A(5) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(7)(a) (with Sch. 7 Pt. 2)

F23Words in s. 432A(5) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(7)(b), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F24Words in s. 432A(5) substituted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(8)

F25Words in s. 432A(5)(6)(b)(i) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(3) (with Sch. 8 para. 55(2))

F26S. 432A(6)-(6C) substituted for s. 432A(6)-(6AA) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(8) (with Sch. 7 Pt. 2)

F27Words in s. 432A(6) omitted (with effect in accordance with Sch. 17 para. 19(5) of the repealing Act) by virtue of Finance Act 2008 (c. 9), Sch. 17 para. 19(3)(a)

F28S. 432A(7) substituted (with effect in accordance with Sch. 8 para. 57(1) of the amending Act) by Finance Act 1995 (c. 4), Sch. 8 para. 13(4) (with Sch. 8 para. 55(2))

F29Words in s. 432A(7) substituted (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(a)

F30Words in s. 432A(7) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(a) (with Sch. 7 Pt. 2)

F31Words in s. 432A(7)(a) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(b) (with Sch. 7 Pt. 2)

F32Word at the end of s. 432A(7)(a) omitted (6.1.2006 with effect in accordance with art. 1 of the repealing S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(b)

F33Word at the end of s. 432A(7)(a) inserted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(9)(a)

F34Words in s. 432A(7)(b) substituted (with effect in accordance with Sch. 17 para. 17(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 17(9)(b)

F35Words in s. 432A(7)(b) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(9)(c) (with Sch. 7 Pt. 2)

F36S. 432A(7)(c) and preceding word inserted (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(4)(c)

F37S. 432A(7)(c) and preceding word omitted (with effect in accordance with Sch. 17 para. 17(12) of the repealing Act) by virtue of Finance Act 2008 (c. 9), Sch. 17 para. 17(9)(c)

F38S. 432A(8)-(8B) substituted for s. 432A(8) (6.1.2006 with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), art. 5(5)

F39Words in s. 432A(8) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(10) (with Sch. 7 Pt. 2)

F40Words in s. 432A(8)(a)(i) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(5)(a)

F41S. 432A(8)(b) and preceding word omitted (with effect in accordance with Sch. 17 para. 19(5) of the repealing Act) by virtue of Finance Act 2008 (c. 9), Sch. 17 para. 19(3)(b)

F42Words in s. 432A(8) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(5)(b)

F43S. 432A(8ZA) inserted (17.4.2007 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1(1), 4(6)

F44Words in s. 432A(8ZA) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(11) (with Sch. 7 Pt. 2)

F45S. 432A(8A)(8B) omitted (with effect in accordance with Sch. 17 para. 19(5) of the repealing Act) by virtue of Finance Act 2008 (c. 9), Sch. 17 para. 19(3)(c)

F46S. 432A(9) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 13(12), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F47S. 432A(9A)(9B) inserted (with effect in accordance with s. 109(10) of the amending Act) by Finance Act 2000 (c. 17), s. 109(6)

F48S. 432A(9A) repealed (with effect in accordance with Sch. 10 para. 17(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 10 para. 9(2)(b), Sch. 27 Pt. 2(10), Note

F49S. 432A(9B) repealed (with effect in accordance with Sch. 43 Pt. 3(12), Note 1 of the repealing Act) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F50S. 432A(10) repealed (27.7.1993 with effect in relation to accounting periods beginning on or after 1.1.1993) by 1993 c. 34, ss. 91(2)(a), 213, Sch. 23 Pt.III (8), Note

Modifications etc. (not altering text)

C1S. 432A modified (3.5.1994) by Finance Act 1994, (c. 9), s. 169, Sch. 18 para 1(4)

C3S. 432A applied (with effect in accordance with s. 105(1) of the affecting Act) by Finance Act 1996 (c. 8), Sch. 11 para. 3 (with Sch. 15)

C6S. 432A modified by Finance Act 1996 (c. 8), Sch. 11 para. 3A(5) (as inserted (with effect in accordance with s. 109(10) of the 2000 amending Act) by Finance Act 2000 (c. 17), s. 109(8))

C7S. 432A applied (with effect in accordance with Sch. 29 Pt. 14 of the affecting Act) by Finance Act 2002 (c. 23), Sch. 29 para. 138(2)(3)

C8S. 432A modified (12.8.2005 with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 9 (as amended by: S.I. 2007/2134, regs. 1(1)(2), 9; S.I. 2008/1937, regs. 1(1)(2), 6)

C9S. 432A excluded by Finance Act 1989 (c. 26), s. 83XA(14) (as inserted (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 2(1))

C10S. 432A(2) modified (with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(1), 10-12