Finance Act 1989

[F1 83 Receipts to be brought into account. U.K.

(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.

(2) 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 [F2 long-term insurance] 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.

[F3 (3) 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 [F2 long-term insurance] 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.

F3 (4) 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.

F3 (5) 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.

F3 (6) In subsection (3) above “transfer of business” means—

[F4 (a) a transfer, under an insurance business transfer scheme, of business which consists of the effecting or carrying out of contracts of long-term insurance;]

(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).

[F5 (6A) In subsection (6)(a) above—

• “insurance business transfer scheme” means a scheme falling within section 105 of the Financial Services and Markets Act 2000, including an excluded scheme falling within Case 2, 3 or 4 of subsection (3) of that section;

• “contracts of long-term insurance” means contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.]

(7) 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.

F3 (8) In this section—

• “add”, in relation to an amount and a company’s [F6 long-term insurance] 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—

(a)

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

(b)

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

(c)

is specifically exempted from tax.]

Textual Amendments

F1 Ss. 83, 83A substituted for s. 83 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(1) (with Sch. 8 paras. 55(2), 57(1))

F2 Words in s. 83(2)(a)(3) substituted (1.12.2001) by S.I. 2001/329, art. 60(1)(a)

F3 S. 83(3)-(8) substituted for s. 83(3) (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 4

F4 S. 83(6)(a) substituted (1.12.2001 with effect as mentioned in art. 56(4) of the amending S.I.) by S.I. 2001/3629, art. 56(2)

F5 S. 83(6A) inserted (1.12.2001 with effect as mentioned in art. 56(4) of the amending S.I.) by S.I. 2001/3629, art. 56(3)

F6 Words in the definition of “add” in s. 83(8) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(a)

Modifications etc. (not altering text)

C1 S. 83 applied (1.5.1995) by 1988 c. 1, s. 439B(3)(a) (as inserted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 27(1) (with Sch. 8 paras. 55(2), 57(1)))

S. 83 modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 33, 34

C2 S. 83(2) applied (1.5.1995) by 1998 c. 1, s. 432E (as amended (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(3) (with ss. 55(2), 57(1)))

C3 S. 83(6) modified (retrospective to 1.1.1996) by S.I. 1997/743, regs. 1(2), 35 (as amended (1.12.2001) by S.I. 2001/3629, arts. 160, 165(1)(b))