PART IV PROVISIONS RELATING TO THE SCHEDULE D CHARGE
C1CHAPTER V COMPUTATIONAL PROVISIONS
Deductions
C276 Expenses of management: insurance companies.
1
M1Subject to the provisions of this section and of section 432, section 75 shall apply for computing the profits of a company carrying on life assurance business, whether mutual or proprietary, (and not charged to corporation tax in respect of it under Case I of Schedule D), whether or not the company is resident in the United Kingdom, as that section applies in relation to an investment company except that—
a
there shall be deducted from the amount treated as the expenses of management for any accounting period the amount of any fines, fees or profits arising from reversions, and
c
there shall be deducted from the amount treated as the expenses of management for any accounting period any repayment or refund (in whole or in part) of a sum disbursed by the company (for that or any earlier period) as acquisition expenses; and
F2ca
there shall also be deducted from the amount treated as the expenses of management for any accounting period any reinsurance commission earned in the period which is referable to F3basic life assurance and general annuity business; and
d
e
the amount of profits from which expenses of management may be deducted for any accounting period shall not exceed the net income and gains of that accounting period referable to F3basic life assurance and general annuity business;
and for this purpose “net income and gains” means income and gains after deducting any reliefs or exemptions which fall to be applied before taking account of this section.
2
M2Relief in respect of management expenses shall not be given to any such company, whether under section 242 or subsection (1) above, so far as it would, if given in addition to all other reliefs to which the company is entitled, reduce the corporation tax borne by the company on the income and gains of its life assurance business for any accounting period to less than would have been paid if the company had been charged to tax in respect of that business under Case I of Schedule D.
In this subsection the references to reliefs do not include references to any set-off under section 239.
3
M3For the purposes of subsection (2) above—
a
any tax credit to which the company is entitled in respect of a distribution received by it shall be treated as an equivalent amount of corporation tax borne or paid in respect of that distribution; and
b
any payment in respect of that credit under section 242 shall be treated as reducing the tax so treated as borne or paid.
4
In applying subsection (2) above to an accounting period in which a company—
a
carries on any business in addition to life assurance business, or
b
carries on both ordinary life assurance business and industrial life assurance business,
the tax that would have been paid if the company had been charged under Case I of Schedule D in respect of its life assurance business, or its life assurance business of either of those classes, shall be calculated as if any advance corporation tax set against the company’s liability to corporation tax for that accounting period were apportioned to the corporation tax attributable to each business in proportion to the profits of that business charged to corporation tax for that accounting period.
5
M4Where relief has been withheld in respect of any accounting period by virtue of subsection (2) above, the excess to be carried forward by virtue of section 75(3) shall be increased accordingly.
6
M5The relief under this section available to an overseas life insurance company (within the meaning of section 431) in respect of its expenses of management shall be limited to expenses attributable to the life assurance business carried on by the company at or through its branch or agency in the United Kingdom.
C4C5C67
M6For the purposes of this section any sums paid by a company under F6(a)a long term business levy imposed by virtue of the M7Policyholders Protection Act 1975 F7or
b
a levy imposed in pursuance of a scheme established by rules under section 54 of the 1986 Act (compensation fund for unsatisfied claims),
shall be treated as part of its expenses of management.
F87A
The Treasury may by regulations make provision for any sums paid by a company under a prescribed levy imposed under a prescribed investor protection scheme established under the rules of a prescribed recognised self-regulating organisation to be treated for the purposes of this section as part of the company’s expenses of management; and, without prejudice to the generality of the foregoing, regulations under this subsection may, in particular—
a
provide for only a prescribed part of any sums so paid to be so treated;
b
provide for sums paid before, as well as after, the coming into force of the regulations to be so treated; and
c
make different provision for different cases or in relation to different levies, schemes or organisations.
F98
In this section—
“the 1986 Act” means the Financial Services Act 1986;
“acquisition expenses” means expenses falling within paragraphs (a) to (c) of subsection (1) of section 86 of the Finance Act 1989;
“authorised person” has the same meaning as it has in the 1986 Act by virtue of section 207(1) of that Act;
“investment business” has the same meaning as it has in the 1986 Act by virtue of section 1(2) of that Act;
“investor” includes a person who is an investor for the purposes of the 1986 Act;
“investor protection scheme” means a scheme established under the rules of a recognised self-regulating organisation for purposes which consist of or include the compensating of investors in cases where persons, or persons of some class or description, who are or have been authorised persons, are, or are likely to be, unable to satisfy claims in respect of any description of civil liability incurred by them in connection with their investment businesses;
“prescribed” means specified in regulations made by the Treasury under subsection (7A) above;
“recognised self-regulating organisation” has the same meaning as it has in the 1986 Act;
and other expressions have the same meaning as in Chapter I of Part XII.
See—1979(C) s.122—election to take capital gain or loss into account when asset appropriated to stock in trade.1989 ss.67-74—employee share ownership trusts.Banking Act 1987 (c.22) s.66—contributions to the Deposit Protection Fund.