Finance Act 2007

Part 2 U.K. Transitional provisions

Introduction U.K.

80 (1) A loss incurred by an insurance company in a pre-commencement period may not be set off against profits of the company chargeable under section 436A of ICTA in a post-commencement period, except in accordance with this Part of this Schedule. U.K.

(2) In this Part of this Schedule—

• “the commencement period”, in relation to an insurance company, means the first period of account of the company to begin on or after 1st January 2007,

• “pre-commencement period”, in relation to an insurance company, means a period of account of the company beginning before 1st January 2007, and

• “post-commencement period”, in relation to an insurance company, means a period of account of the company beginning on or after 1st January 2007.

(3) Expressions which are—

(a) used in this Part of this Schedule in relation to a period of account, and

(b) used in Chapter 1 of Part 12 of ICTA,

have the same meaning in this Part of this Schedule in relation to that accounting period as they have in that Chapter (as that Chapter has effect in relation to that period of account).

Carry forward of unused pension business losses U.K.

81 (1) An unused pension business loss of an insurance company (see sub-paragraph (4)) is to be treated as if it were a loss incurred by the company on its gross roll-up business in the period of account immediately preceding the commencement period. U.K.

(2) Subsections (4) and (5) of section 436A of ICTA accordingly apply to the loss, but subject to sub-paragraph (3) (and to subsection (7) of that section).

(3) The amount by which the company's profits charged under that section in a period of account is to be treated as reduced under subsection (4)(b) of that section by virtue of this paragraph must not exceed—

where—

“CP” is the amount of the company's profits chargeable under that section in the period of account,

“PBL” is the mean of the opening and closing liabilities of the company's pension business for the period of account, and

“GRBL” is the mean of the opening and closing liabilities of the company's gross roll-up business for the period of account.

(4) In this paragraph “unused pension business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its pension business in any pre-commencement period as were not set off under section 436(3)(c) of ICTA against profits in any such period.

Carry forward of unused non-pension business losses U.K.

82 (1) An unused non-pension business loss of an insurance company (see paragraph 83) is to be treated as if it were a loss incurred by the company on its gross roll-up business in the period of account immediately preceding the commencement period. U.K.

(2) Subsections (4) and (5) of section 436A of ICTA accordingly apply to the loss, but subject to sub-paragraph (3) (and to subsection (7) of that section).

(3) The amount by which an insurance company's profits charged under that section in a period of account are to be treated as reduced under subsection (4)(b) of that section is to be determined—

(a) first by giving effect to subsection (4)(b) in respect of a loss treated as incurred by the company on its gross roll-up business by virtue of paragraph 81, and

(b) then by giving effect to subsection (4)(b) in respect of a loss treated as incurred by the company on its gross roll-up business by virtue of this paragraph,

(before giving effect to subsection (4)(b) in respect of losses incurred by the company on its gross roll-up business in post-commencement periods).

83 (1) In paragraph 82 “unused non-pension business loss”, in relation to an insurance company, means the aggregate of the following amounts— U.K.

(a) any unexhausted individual savings account business loss (see sub-paragraph (2)),

(b) any unexhausted child trust fund business loss (see sub-paragraph (3)),

(c) any unexhausted life reinsurance business loss (see sub-paragraph (4)), and

(d) any unexhausted overseas life assurance business loss (see sub-paragraph (5)).

(2) In this paragraph “unexhausted individual savings account business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its individual savings account business in any pre-commencement period as were not set off by virtue of a relevant provision (see sub-paragraph (6)) against profits in any such period.

(3) In this paragraph “unexhausted child trust fund business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its child trust fund business in any pre-commencement period as were not set off by virtue of a relevant provision against profits in any such period.

(4) In this paragraph “unexhausted life reinsurance business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its life reinsurance business in any pre-commencement period as were not set off under section 439B(3)(c) of ICTA against profits in any such period.

(5) In this paragraph “unexhausted overseas life assurance business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its overseas life assurance business in any pre-commencement period as were not set off under section 441(4)(b) of ICTA against profits in any such period.

(6) In this paragraph “relevant provision” means—

(a) regulation 13 of the Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), or

(b) regulation 11 of the Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680).

“Section 432F(2) excesses” U.K.

84 U.K. Where there is a subsection (2) excess (within the meaning of section 432F of ICTA) for any category of business of an insurance company in the period of account immediately preceding the commencement period it shall be taken to be, or form part of, the subsection (2) excess falling to be carried forward under subsection (3) of that section (as amended by this Schedule) and used in a post-commencement period.

[F1 [F2 Losses transferred under section 444AZA] U.K.

Textual Amendments

F1 Sch. 7 paras 85, 86 and cross-headings added (with effect in accordance with art. 1(5) of the amending S.I.) by The Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), arts. 1(1), 30

F2 Sch. 7 para. 85 cross-heading 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. 725(3) (with Sch. 2 Pts. 1, 2)

85. (1) This paragraph applies where a loss F3 ... is treated by virtue of section 444AZA of ICTA as a loss of the transferee F3 .... U.K.

(2) Where any [F4 losses so treated] would (assuming the transferor had continued to carry on the business transferred after the transfer) have been losses to which paragraph 81(1) would have applied, the amount of such losses to be treated as [F5 losses of the transferee] in any period of account must not exceed—

where—

• “GRBP” has the same meaning as in section 444AZA(2) of ICTA,

• “PBTL” is the mean of the opening and closing liabilities of the transferred pension business for the period of account, and

• “GRBTL” is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account.

Textual Amendments

F3 Words in Sch. 7 para. 85(1) repealed (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. 725(2)(a), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F4 Words in Sch. 7 para. 85(2) 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. 725(2)(b)(i) (with Sch. 2 Pts. 1, 2)

F5 Words in Sch. 7 para. 85(2) 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. 725(2)(b)(ii) (with Sch. 2 Pts. 1, 2)

[F6 Losses transferred under section 444AZB] U.K.

Textual Amendments

F6 Sch. 7 para. 86 cross-heading 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. 725(5) (with Sch. 2 Pts. 1, 2)

86 (1) This paragraph applies where section 444AZB of ICTA has effect in relation to a transferee and the circumstances specified in sub-paragraph (2) or (3) below apply. U.K.

(2) The circumstances are that—

(a) the profits of the life assurance business of the transferee for the period of account immediately preceding the first period of account beginning on or after 1st January 2007 were chargeable to tax in accordance with Case I of Schedule D by virtue of section 439A of ICTA, and

(b) in that period, the transferee carried on pension business.

(3) The circumstances are that—

(a) paragraph 29 of Schedule 8 applies in relation to the transferee, and

(b) the transferee has an unused pension business loss within the meaning given by paragraph 81(4).

(4) The appropriate fraction of any amount treated by virtue of section 444AZB(2) of ICTA as a loss of the transferee (a “[F7 gross roll-up business] loss”) available to be set off against profits chargeable under section 436A of ICTA is to be treated for the purposes of paragraph 81 as an unused pension business loss.

(5) The relevant fraction of any [F8 gross roll-up business] loss is to be treated for the purposes of paragraph 82 as an unused non-pension business loss.

(6) In this paragraph “the appropriate fraction”, in relation to a period of account, is—

where—

• “PBTL” is the mean of the opening and closing liabilities of the transferred pension business for the period of account, and

• “TL” is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.

(7) In this paragraph the “the relevant fraction”, in relation to a period of account, is—

where—

• “NPBTL” is the mean of the opening and closing liabilities of the transferred gross roll-up business which is not pension business for the period of account, and

• “TL” is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.]

Textual Amendments

F7 Words in Sch. 7 para. 86(4) 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. 725(4) (with Sch. 2 Pts. 1, 2)

F8 Words in Sch. 7 para. 86(5) 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. 725(4) (with Sch. 2 Pts. 1, 2)