(1)This section applies where an insurance company makes a financing-arrangement-funded transfer to shareholders (a “FAFTS”) in relation to a non-profit fund.
(2)A company makes a FAFTS in relation to a non-profit fund if—
(a)the company enters into a relevant financing arrangement in relation to a non-profit fund in a period of account (see subsection (4) below),
(b)a positive amount is brought into account by the company as a transfer to non-technical account from the non-profit fund for that or any subsequent period of account (“the relevant period of account”), and
(c)the positive amount so brought into account for the relevant period of account exceeds the non-FAFTS surplus (see subsection (8) below).
(3)The amount of that excess is to be treated for the purposes of section 83(2) as brought into account by the company for the relevant period of account as an increase in the value of assets.
(4)For the purposes of this section and section 83YD a company enters into a relevant financing arrangement in relation to a non-profit fund in a period of account if—
(a)the loan condition (see subsection (5) below), or
(b)the reinsurance condition (see subsection (6) below),
is met.
(5)The loan condition is met if credits in respect of a money debt which is to any extent referable to the company's life assurance business (a “relevant money debt”) are brought into account in relation to a non-profit fund as part of total income for the period of account.
(6)The reinsurance condition is met if—
(a)in the period of account the company enters into a financial reinsurance arrangement relating to any liabilities (see subsection (7) below), and
(b)the reinsurance of the liabilities would (but for section 83YF(2)) be taken into account in calculating profits of the company's life assurance business in accordance with the [F2life assurance trade profits provisions] for the period of account;
and such liabilities are referred to in this section and section 83YD as “relevant liabilities”.
(7)For the purposes of this section the company enters into a financial reinsurance arrangement if—
(a)it enters into a contract of insurance under which liabilities of the company to policy holders or annuitants (or both) in respect of a non-profit fund are reinsured,
(b)the reinsured liabilities are to reduce over time,
(c)the contract is a financing arrangement within the meaning of paragraph 9(3) of Appendix 9.4 to the Prudential Sourcebook (Insurers), and
(d)the premiums which, immediately after entering into the contract, the company is liable to pay under the contract are an insubstantial proportion of the amount of the reinsured liabilities at that time.
(8)For the purposes of this section the “non-FAFTS surplus” is—
(a)the amount shown in line 39 of Form 58 in relation to the non-profit fund in the periodical return for the relevant period of account, reduced (but not to below nil) by
(b)so much of the aggregate of the relevant outstanding debt amount (see subsection (9) below) and the relevant outstanding reinsurance amount (see subsection (10) below) as is untaxed (see subsection (11) below).
(9)The “relevant outstanding debt amount” is the total amount of the credits brought into account by the company in relation to the non-profit fund as part of total income—
(a)for the relevant period of account, or
(b)for any earlier period of account,
in respect of relevant money debts to the extent that they have not been repaid before the end of the relevant period of account.
(10)The “relevant outstanding reinsurance amount” is the total of the amounts which would (but for section 83YF(2)) be taken into account in calculating profits of the company's life assurance business in accordance with the [F3life assurance trade profits provisions] —
(a)for the relevant period of account, or
(b)for any earlier period of account,
in respect of the reinsurance of relevant liabilities to the extent that they have not ceased to be reinsured before the end of the relevant period of account.
(11)The aggregate of the relevant outstanding debt amount and the relevant outstanding reinsurance amount is “untaxed” to the extent that it exceeds the difference between—
(a)the aggregate of the amounts treated as brought into account in the case of the company by the operation of subsection (3) above for periods of account of the company earlier than the relevant period of account, and
(b)the aggregate of the amounts which are the relevant amount for the relevant period of account or earlier periods of account of the company under section 83YD.]
Textual Amendments
F1Ss. 83YC-83YF inserted (with effect in accordance with Sch. 17 para. 4 of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 1(3)
F2Words in s. 83YC(6)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 345(2) (with Sch. 2 Pts. 1, 2)
F3Words in s. 83YC(10) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 345(3) (with Sch. 2 Pts. 1, 2)
Modifications etc. (not altering text)
C1S. 83YC modified by 1988 c. 1, s. 444AE (as substituted (with effect in accordance with Sch. 17 para. 4(1) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 2)