Income and Corporation Taxes Act 1988

[F1 755A Treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business. U.K.

(1) This section applies in any case where—

(a) an amount (“the apportioned profit") of a controlled foreign company’s chargeable profits for an accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company");

(b) the UK company carries on life assurance business in that one of its accounting periods (“the relevant accounting period") in which ends the accounting period of the controlled foreign company; and

(c) the property or rights which represent the UK company’s relevant interest in the controlled foreign company constitute to any extent assets of the UK company’s [F2 long-term insurance fund].

(2) Subsections (3) and (4) below apply if, in the case of the relevant accounting period, the UK company is [F3 charged to tax under the I minus E basis in respect of ] life assurance business.

(3) Where this subsection applies, the “appropriate rate” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 in relation to the policy holders’ part of any BLAGAB apportioned profit shall be—

(a) if a single rate of tax under section [F4 88(1)] of the M1 Finance Act 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the relevant accounting period, that rate; or

(b) if more than one such rate of tax is applicable in relation to the relevant accounting period, the average of those rates over the whole of that period.

(4) Where this subsection applies, the “appropriate rate” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 shall be nil in relation to so much of the apportioned profit as is referable to [F5 gross roll-up business carried on by the UK company.]

[F6 (4A) In any case where—

(a) paragraph 4 of Schedule 26 to this Act applies to a dividend received by the UK company, and

(b) but for this subsection, subsection (4) of section 804B of this Act would apply to that dividend,

the amount of credit for foreign tax in respect of that dividend shall be treated, for the purposes of that section, as wholly attributable to basic life assurance and general annuity business.]

(5) If, in the case of the relevant accounting period, the UK company is charged to tax under [F7 section 35 of CTA 2009 (charge on trade profits)] in respect of its profits from life assurance business, the “appropriate rate” for the purposes of—

(a) section 747(4)(a), and

(b) paragraph 1 of Schedule 26,

shall be nil in relation to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of its [F2 long-term insurance fund].

(6) If, in the case of the relevant accounting period,—

(a) the UK company is [F3 charged to tax under the I minus E basis in respect of ] life assurance business,

(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company, and

(c) the apportioned profit is to any extent referable to [F8 gross roll-up business],

so much of the creditable tax so apportioned as is attributable to the apportioned profit so far as so referable shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.

(7) If, in the case of the relevant accounting period,—

(a) the UK company is charged to tax under [F9 section 35 of CTA 2009] in respect of its profits from life assurance business, and

(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company,

so much of the creditable tax so apportioned as is attributable to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of the UK company’s [F2 long-term insurance fund] shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.

(8) Any set off under paragraph 1 F10 . . . of Schedule 26 against the UK company’s liability to tax under section 747(4)(a) in respect of the apportioned profit shall be made against only so much of that liability as is attributable to the eligible part of the apportioned profit.

(9) F11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) For the purposes of this section, the “eligible part" of the apportioned profit is any BLAGAB apportioned profit, other than the policy holders’ part.

[F12 (11) For the purposes of this section the policy holders' part of any BLAGAB apportioned profit is—

(a) where subsection (11A) below applies, the whole of that profit, and

(b) in any other case, the relevant fraction (within the meaning of subsection (11B) below) of that profit.

(11A) This subsection applies if—

(a) the UK company’s life assurance business is mutual business,

(b) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is equal to all those profits, or

(c) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is more than its BLAGAB profits for that period.

(11B) The relevant fraction for the purposes of subsection (11)(b) above is the fraction arrived at by dividing—

(a) the policy holders' share of the UK company’s relevant profits for the relevant accounting period, by

(b) the UK company’s BLAGAB profits for that period.

[F13 (11BA) But where the BLAGAB profits for the relevant accounting period are nil, the relevant fraction—

(a) if there are [F14 section 35 profits] of the accounting period in respect of its life assurance business, is nil, and

(b) otherwise, is such fraction as is just and reasonable;

and for this purpose there are [F14 section 35 profits] if there are profits computed in accordance with the [F15 life assurance trade profits provisions] after making adjustments in respect of losses in accordance with section 85A(4) of the Finance Act 1989.]

(11C) In subsections (11A) and (11B) above—

(a) references to the policy holders' share of the UK company’s share of the relevant profits are to be construed in accordance with sections 88(3) and 89 of the Finance Act 1989, F16 . . .

(b) F16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(12) In this section—

• “BLAGAB apportioned profit” means so much of the apportioned profit as is referable to basic life assurance and general annuity business carried on by the UK company;

• F17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) For the purposes of this section, the part of the apportioned profit which is referable to—

[F18 (a) basic life assurance and general annuity business, or

(ba) gross roll-up business,]

carried on by the UK company is the part which would have been so referable under section 432A had the apportioned profit been a dividend paid to the UK company at the end of the accounting period mentioned in subsection (1)(a) above in respect of the property or rights which represent the UK company’s relevant interest in the controlled foreign company.

(14) For the purposes of this section, any attribution of creditable tax to a particular part of the apportioned profit shall be made in the proportion which that part of the apportioned profit bears to the whole of the apportioned profit.]

Textual Amendments

F1 S. 755A inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 13; S.I. 1998/3173, art. 2

F2 Words in s. 755A(1)(c)(5)(7)(12) 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)(j)

F3 Words in s. 755A(2)(6)(a) substituted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 10 (with Sch. 8 Pt. 2)

F4 Words in s. 755A(3) substituted (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(8)

F5 Words in s. 755A(4) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 47(2) (with Sch. 7 Pt. 2)

F6 S. 755A(4A) inserted (31.12.2006 with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 8(a)

F7 Words in s. 755A(5) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 219(2) (with Sch. 2 Pts. 1, 2)

F8 Words in s. 755A(6)(c) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 47(3) (with Sch. 7 Pt. 2)

F9 Words in s. 755A(7)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 219(3) (with Sch. 2 Pts. 1, 2)

F10 Words in s. 755A(8) omitted (31.12.2006 with effect in accordance with art. 1(2) of the repealing S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 8(b)

F11 S. 755A(9) omitted (31.12.2006 with effect in accordance with art. 1(2) of the repealing S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 8(c)

F12 S. 755A(11)-(11C) substituted for s. 755A(11) (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(9)

F13 S. 755A(11BA) inserted (with effect in accordance with Sch. 17 para. 15 of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 14

F14 Words in s. 755A(11BA) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 219(4)(a) (with Sch. 2 Pts. 1, 2)

F15 Words in s. 755A(11BA) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 219(4)(b) (with Sch. 2 Pts. 1, 2)

F16 S. 755A(11C)(b) and preceding word omitted (with effect in accordance with Sch. 17 para. 18(6) of the repealing Act) by virtue of Finance Act 2008 (c. 9), Sch. 17 para. 18(2)

F17 S. 755A(12): definition of "long-term insurance fund" repealed (with effect in accordance with Sch. 10 para. 17(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 10 para. 14(2)(d), Sch. 27 Pt. 2(10), Note

F18 S. 755A(13)(a)(ba) substituted for s. 755A(13)(a)-(d) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 47(4) (with Sch. 7 Pt. 2)

Modifications etc. (not altering text)

C1 S. 755A modified (6.4.1999) by The Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), regs. 1, 5, 18

C2 S. 755A modified by the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 30B (as inserted (13.10.1999) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 1999 (S.I. 1999/2636), regs. 1, 4; and as that reg. 30B is amended by S.I. 2004/822, regs. 1, 24)

C3 S. 755A modified (6.4.2005) by The Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680), regs. 1, 4, 16; S.I. 2004/3369, art. 2(1)

C4 S. 755A modified (12.8.2005 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 22 (as amended by S.I. 2007/2134, regs. 1(1)(2), 21)

Marginal Citations

M1 1989 c. 26.