Finance Act 1990

45 Policy holders' share of profits etc

(1) In section 88 of the Finance Act 1989 (corporation tax: policy holders' fraction of profits), in subsection (1) for the words “the policy holders' fraction of its relevant profits for any accounting period shall” there shall be substituted the words—

“(a) the policy holders' share of the relevant profits for any accounting period, or

(b) where the business is mutual business, the whole of those profits

shall”.

(2) In subsection (4) of that section, for the word “fraction” there shall be substituted the word “share”, and after the words “that period” there shall be inserted the words “, or where the business is mutual business the whole of those profits,”.

(3) For section 89 of that Act (which defines the shareholders' and policy holders' fractions) there shall be substituted—

“89 Policy holders' share of profits

(1) The references in section 88 above to the policy holders' share of the relevant profits for an accounting period of a company carrying on life assurance business are references to the amount arrived at by deducting from those profits the Case I profits of the company for the period in respect of the business, reduced in accordance with subsection (2) below.

(2) For the purposes of subsection (1) above, the Case I profits for a period shall be reduced by—

(a) the amount, so far as unrelieved, of any franked investment income arising in the period as respects which the company has made an election under section 438(6) of the Taxes Act 1988, and

(b) the shareholders' share of any other unrelieved franked investment income arising in the period from investments held in connection with the business.

(3) For the purposes of this section “the shareholders' share” in relation to any income is so much of the income as is represented by the fraction

where—

• A is an amount equal to the Case I profits of the company for the period in question in respect of its life assurance business, and

• B is an amount equal to the excess of the company’s relevant non-premium income and relevant gains over its relevant expenses and relevant interest for the period.

(4) Where there is no such excess as is mentioned in subsection (3) above, or where the Case I profits are greater than any excess, the whole of the income shall be the shareholders' share; and (subject to that) where there are no Case I profits, none of the income shall be the shareholders' share.

(5) In subsection (3) above the references to the relevant non-premium income, relevant gains, relevant expenses and relevant interest of a company for an accounting period are references respectively to the following items as brought into account for the period, so far as referable to the company’s life assurance business,—

(a) the company’s investment income from the assets of its long-term business fund together with its other income, apart from premiums;

(b) any increase in the value (whether realised or not) of those assets;

(c) expenses payable by the company;

(d) interest payable by the company;

and if for any period 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 the period.

(6) Except in so far as regulations made by the Treasury otherwise provide, in this section “brought into account” means brought into account in the revenue account prepared for the purposes of the [1982 c. 50.] Insurance Companies Act 1982; and where the company’s period of account does not coincide with the accounting period, any reference to an amount brought into account for the accounting period is a reference to the corresponding amount brought into account for the period of account in which the accounting period is comprised, proportionately reduced to reflect the length of the accounting period as compared with the length of the period of account.

(7) In this section “Case I profits” means profits computed in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D.

(8) For the purposes of this section franked investment income is “unrelieved” if—

(a) it has not been excluded from charge to tax by virtue of any provision,

(b) no tax credit comprised in it has been paid, and

(c) no relief has been allowed against it by deduction or set-off.”

(4) In subsection (3) of section 434 of the Taxes Act 1988 (franked investment income etc.)—

(a) for the words “policy holders' fraction” in both places where they occur there shall be substituted the words “policy holders' share”;

(b) in paragraph (a), after the word “income” there shall be inserted the words “from investments held in connection with the company’s life assurance business”;

(c) in paragraph (b), for the words “only to the shareholders' fraction of that income” there shall be substituted the words “to that income excluding the amount within paragraph (a) above”.

(5) In subsection (3A) of that section, for the word “fraction” there shall be substituted the word “share”.

(6) In subsection (6) of that section, for the word “therefrom” onwards there shall be substituted the words “the policy holders' share of the relevant profits”.

(7) After subsection (6) of that section there shall be inserted—

“(6A) For the purposes of this section—

(a) “the policy holders' share” of any franked investment income is so much of that income as is not the shareholders' share within the meaning of section 89 of the [1989 c. 26.] Finance Act 1989, and

(b) “the policy holders' share of the relevant profits” has the same meaning as in section 88 of that Act.”

(8) In section 434A of the Taxes Act 1988—

(a) in subsection (1), for the word “fraction” there shall be substituted the word “share”, and

(b) in subsection (2), for the words “the relevant profits” onwards there shall be substituted the words ““the policy holders' share of the relevant profits” has the same meaning as in section 88 of the Finance Act 1989”.

(9) In section 438 of the Taxes Act 1988, in subsection (6) after the words “part of its” there shall be inserted the word “relevant”, and after that subsection there shall be inserted—

“(6A) In subsection (6) above “relevant franked investment income” means the shareholders' share of franked investment income within subsection (1) above, and for this purpose “shareholders' share” has the same meaning as for the purposes of section 89 of the Finance Act 1989.”

(10) The [1989 c. 26.] Finance Act 1989 shall be deemed always to have had effect with the amendments made by subsections (1) to (3) above, and the amendments made by subsections (4) to (9) above shall have the same effect as, by virtue of section 84(5)(b) of that Act, they would have had if they had been made by Schedule 8 to that Act.

(11) Paragraphs 1 and 3(3) of Schedule 8 to the Finance Act 1989 shall be deemed never to have had effect.