Part II Income Tax, Corporation Tax and Capital Gains Tax
CHAPTER I General
Life assurance
86 Spreading of relief for acquisition expenses.
1
For the purposes of this section, the acquisition expenses for any period of an insurance company carrying on life assurance business are such of the following expenses of management as are for that period attributable to the company’s basic life assurance business,—
a
commissions (however described), other than commissions in respect of industrial life assurance business carried on by the company,
b
any other expenses of management which are disbursed solely for the purpose of the acquisition of business, and
c
so much of any other expenses of management which are disbursed partly for the purpose of the acquisition of business and partly for other purposes as are properly attributable to the acquisition of business,
less any such repayments or refunds falling within section 76(1)(c) ofthe Taxes Act 1988 as are received in the period F1and less any reinsurance commission falling withinsection 76(1)(ca) of that Act.
2
The exclusion from paragraph (a) of subsection (1) above of commissions in respect of industrial life assurance business shall not prevent such commissions constituting expenses of management for the purposes of paragraph(b) or paragraph (c) of that subsection.
3
Nothing in subsections (1) and (2) above applies to commissions (however described) in respect of insurances made before 14th March 1989, but without prejudice to the application of those subsections to any commission attributable to a variation on or after that date in a policy issued in respect of an insurance made before that date; and, for this purpose, the exercise of any rights conferred by a policy shall be regarded as a variation of it.
4
In subsection (1) above “the acquisition of business” includes the securing on or after 14th March 1989 of the payment of increasedor additional premiums in respect of a policy of insurance issued in respectof an insurance already made (whether before, on or after that date).
5
In relation to any period, the expenses of management attributable to a company’s basic life assurance business are expenses—
a
which are disbursed for that period (disregarding any treated as so disbursed by section 75(3) of the Taxes Act 1988); and
b
which, disregarding subsection (6) below, are deductible as expenses of management in accordance with sections 75 and 76 of the Taxes Act 1988.
6
Notwithstanding anything in sections 75 and 76 of the Taxes Act 1988 but subject to subsection (7) below, only one-seventh of the acquisition expenses for any accounting period (in this section referred to as “the base period”) shall be treated as deductible under those sections for the base period, and in subsections (8) and (9) below any reference to the full amount of the acquisition expenses for the base period is a reference to the amount of those expenses which would be deductible for that period apart from this subsection.
7
In the case of the acquisition expenses for an accounting period or part of an accounting period falling wholly within 1990, subsection (6) above shall have effect as if for “one-seventh” there were substituted “five-sevenths”; and, in the case of the acquisition expenses for an accounting period or part of an accounting period falling wholly within 1991,1992 or 1993, the corresponding substitution shall be “four-sevenths”, “three-sevenths” or “two-sevenths” respectively.
8
Where, by virtue of subsection (6) (and, where appropriate, subsection(7)) above, only a fraction of the full amount of the acquisition expenses for the base period is deductible under sections 75 and 76 of the Taxes Act 1988 for that period, then, subject to subsection (9) below, a further one-seventh of the full amount shall be so deductible for each succeeding accounting period after the base period until the whole of the full amount has become so deductible, except that, for any accounting period of less than a year, the fraction of one-seventh shall be proportionately reduced.
9
For any accounting period for which the fraction of the full amount of the acquisition expenses for the base period which would otherwise be deductible in accordance with subsection (8) above exceeds the balance of those expenses which has not become deductible for earlier accounting periods, only that balance shall be deductible.
10
This section has effect for accounting periods beginning on or after 1st January 1990 (including the 1990 component period).