Finance Act 1989

85 Charge of certain receipts of basic life assurance business. U.K.

(1) Subject to subsection (2) below, where [F1 an insurance company is charged to tax under the I minus E basis in respect of its life assurance business], [F2 the charge to corporation tax on income shall apply to] any receipts referable to the company’s [F3 basic life assurance and general annuity business]—

(a) which, if [F4 the profits of the life assurance business] were charged under [F5 section 35 of the Corporation Tax Act 2009 (charge on trade profits)], would be taken into account in computing those profits; and

(b) which would not be within the charge to tax (except under [F6 section 35 of the Corporation Tax Act 2009]) apart from this section;

and for the purposes of paragraph (a) above, the provisions of section 83 above as to the manner in which any item is to be taken into account shall be disregarded.

(2) The receipts referred to in subsection (1) above do not include—

(a) any premium; F7 ...

[F8 (b) any sum received under a reinsurance contract, except for reinsurance commissions, however described, (but subject to subsection (2ZA) below) and any sum calculated to any extent by reference to expenses of the company brought into account at Step 1 in section 76(7) of the Taxes Act 1988; or]

F9 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9 (ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) any sum which is not within the charge to tax (except under [F10 section 35 of the Corporation Tax Act 2009]) because of an exemption from tax[F11 ; or

(f) any payment received under the Financial Services Compensation Scheme[F12 , or from another insurance company,] to enable the company to meet its obligations to policy holders.]

[F13 (2ZA) The reference in subsection (2)(b) above to reinsurance commissions does not include so much of the relevant reinsurance fraction (see subsection (9D) of section 76 of the Taxes Act 1988) of any reinsurance commissions received from the reinsurer under a fronting reinsurance contract (within the meaning of subsection (9B) of that section) as does not exceed the amount arrived at under subsection (9C) of that section in relation to the contract.]

[F14 (2A) Receipts falling within subsection (1) above are to be taken into account for the purposes of corporation tax when they are brought into account.

F15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F16 (2B) Expenses are deducted from receipts falling within subsection (1) so far as is necessary for calculating the full amount of the profits.

(2BA) The provisions of Chapter 1 of Part 20 of the Corporation Tax Act 2009 (general rules for restricting deductions) apply to the calculation of those profits.]

(2C) For the purposes of subsection (1) above, a receipt is referable to basic life assurance and general annuity business if—

(a) in the case of a repayment or refund of acquisition expenses, the acquisition expenses fell within section 86 below,

[F17 (aa) in the case of a repayment or refund of expenses other than acquisition expenses, the expenses—

(i) were attributable to basic life assurance and general annuity business for the purposes of Step 1 in subsection (7) of the new section 76 (see subsection (8) of that section), or

(ii) fell to be deducted by virtue of subsection (1) of the old section 76;

and for this purpose, “the new section 76” and “the old section 76” have the same meaning as in section 44 of the Finance Act 2004 (see subsection (8) of that section),]

(b) in the case of a reinsurance commission, the policy or contract reinsured under the arrangement in respect of which the commission is paid constitutes basic life assurance and general annuity business, and

(c) in any other case, it is income which, if it were income from an asset, would by virtue of section 432A of the Taxes Act 1988 (apportionment of insurance companies' income) be referable to basic life assurance and general annuity business.]

(3) This section has effect with respect to the receipts of accounting periods beginning on or after 1st January 1990 F18 ....

Textual Amendments

F1 Words in s. 85(1) substituted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 13(a) (with Sch. 8 Pt. 2)

F2 Words in s. 85(1) 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. 348(2)(a) (with Sch. 2 Pts. 1, 2)

F3 Words in s. 85(1) substituted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras.12, 18.

F4 Words in s. 85(1) substituted (with effect in accordance with s. 39(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 8 para. 13(b) (with Sch. 8 Pt. 2)

F5 Words in s. 85(1)(a) 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. 348(2)(b) (with Sch. 2 Pts. 1, 2)

F6 Words in s. 85(1)(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. 348(2)(c) (with Sch. 2 Pts. 1, 2)

F7 Word in s. 85(2)(a) repealed (with effect in accordance with s. 42 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(3)

F8 S. 85(2)(b) substituted (with effect in accordance with Sch. 17 para. 6(5) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 6(2)

F9 S. 85(2)(c)-(d) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(2), Sch. 42 Pt. 2(3)

F10 Words in s. 85(2)(e) 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. 348(3) (with Sch. 2 Pts. 1, 2)

F11 S. 85(2)(f) and preceding word inserted (with effect in accordance with Sch. 9 para. 15(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 15(2)

F12 Words in s. 85(2)(f) inserted (with effect in accordance with Sch. 17 para. 6(5) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 6(3)

F13 S. 85(2ZA) inserted (with effect in accordance with Sch. 17 para. 6(5) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 6(4)

F14 S. 85(2A)-(2C) inserted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(3)

F15 Words in s. 85(2A) repealed (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 14(3)(a), Sch. 27 Pt. 2(10)

F16 S. 85(2B)(2BA) substituted for s. 85(2B) (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. 348(4) (with Sch. 2 Pts. 1, 2)

F17 S. 85(2C)(aa) inserted (with effect in accordance with Sch. 9 para. 15(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 15(3)

F18 Words in s. 85(3) repealed (19.7.2007) by Finance Act 2007 (c. 11), Sch. 10 para. 16(4)(b), Sch. 27 Pt. 2(10)

Modifications etc. (not altering text)

C1 S. 85(1) modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 38

C2 S. 85(1)(2C) modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 31