Part II Income Tax, Corporation Tax and Capital Gains Tax

CHAPTER I General

Life assurance

C183F1 Receipts to be brought into account.

1

The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

C22

So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period—

a

the company’s investment income from the assets of its long term business fund, and

b

any increase in value (whether realised or not) of those assets.

If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period.

F23

In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the company’s long term business fund as part of or in connection with—

a

a transfer of business to the company, or

b

a demutualisation of the company not involving a transfer of business,

that amount shall (subject to subsection (4) below) be taken into account, for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above.

F24

Subsection (3) above does not apply where, or to the extent that, the amount concerned—

a

would fall to be taken into account as a receipt apart from this section,

b

is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or

c

is specifically exempted from tax.

F25

Any amount which is to be taken into account pursuant to subsection (3) above for a period of account shall be so taken into account—

a

after the making of any reduction under subsection (6) of section 83AA below in relation to that period, but

b

before the making of any reduction under subsection (3) of that section in relation to an accounting period of the company ending in or with that period.

C3F26

In subsection (3) above “transfer of business” means—

a

a transfer of the whole or part of the long term business of an insurance company in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the M1Insurance Companies Act 1982;

b

a qualifying overseas transfer, within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988; or

c

the making of a contract of reinsurance which, in whole or in part, constitutes or forms part of a total reinsurance by the reinsured, unless the reinsurer under the contract falls within section 439A of the Taxes Act 1988 (pure reinsurance).

F27

For the purposes of subsection (3)(a) above, a transfer of business falling within subsection (6)(c) above shall be treated as a transfer of business to the company which is the reinsurer under the contract of reinsurance.

F28

In this section—

  • “add”, in relation to an amount and a company’s long term business fund, includes transfer (whether from other assets of the company or otherwise);

    “demutualisation” means the conversion, under the law of any territory, of a company which has been carrying on insurance business without having a share capital into a company with a share capital, without any change of legal personality;

    “total reinsurance” means the reinsurance (whether effected by a single contract of reinsurance or by two or more such contracts, taken together, whether or not made with the same reinsurer) of the whole, or substantially the whole, of the reinsured’s risk—

a

under policies of a particular description issued in respect of insurances made in the course of carrying on life assurance business before the making of the contract of reinsurance (or, in a case where there are two or more contracts of reinsurance, the last of them); or

b

under contracts of a particular description so made.

This subsection does not apply where, or to the extent that, the amount concerned—

  1. a

    would fall to be taken into account as a receipt apart from this section,

  2. b

    is otherwise taken into account under subsection (2) above, or

  3. c

    is specifically exempted from tax.