Finance Act 2008

Increased non-trading credits U.K.

3 (1) This paragraph applies where— U.K.

(a) by virtue of paragraph 2 the relevant company is required to bring into account for an accounting period a non-trading credit representing a profit from a related transaction, and

(b) the investment life insurance contract is a BLAGAB contract, or a contract which is subject to a relevant comparable EEA tax charge.

(2) The non-trading credit (“NTC”) is to be treated as increased by the relevant amount and the relevant amount is to be set off against corporation tax assessable on the company for the accounting period.

(3) The relevant amount is—

where AR is the appropriate rate for the accounting period, that is—

(a) if a single rate of tax under section 88(1) of FA 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the accounting period, that rate, and

(b) if more than one such rate of tax is applicable in relation to the accounting period, the average of those rates over the accounting period.

(4) In sub-paragraph (1) “BLAGAB contract” means a contract forming part of basic life assurance and general annuity business of an insurance company but not part of business which is exempt from corporation tax under section 460 of ICTA (friendly society business and former friendly society business).

(5) For the purposes of sub-paragraph (1) the contract is subject to a relevant comparable EEA tax charge if the contract forms part of the business of a company (other than the relevant company) to which a relevant comparable EEA tax charge has applied.

(6) For the purposes of sub-paragraph (5) a relevant comparable EEA tax charge has applied to a company if—

(a) a charge to tax has applied to the company under the laws of a territory outside the United Kingdom that is within the European Economic Area,

(b) the charge has applied to the company—

(i) as a body deriving its status as a company from those laws,

(ii) as a company with its place of management there, or

(iii) as a company falling under those laws to be regarded for any other reason as resident or domiciled there,

(c) the charge applies at a rate of at least 20% in relation to the amounts subject to tax in the company's hands, other than amounts arising or accruing in respect of investments of a description for which a special relief or exemption is generally available, and

(d) the charge is made otherwise than by reference to the company's profits.

4 (1) Where the relevant company brings into account credits and debits in respect of the investment life insurance contract on the basis of fair value accounting, the relevant amount under paragraph 3 is determined as if for “NTC” in the formula in sub-paragraph (3) of that paragraph there were substituted “PC”. U.K.

(2) For this purpose “PC” is the profit from the contract, that is any amount by which—

(a) the amount payable as a result of the related transaction, exceeds

(b) the fair value of the contract when the contract was made or, if the contract was made before the beginning of the first accounting period of the company beginning on or after 1 April 2008, at the beginning of that period.

(3) If the related transaction is an assignment (or, in Scotland, assignation) or surrender of only part of the rights conferred by the contract, sub-paragraph (2) has effect as if paragraph (b) of that sub-paragraph referred to the relevant fraction of the fair value of the contract when the contract was made or, if the contract was made before the beginning of the first accounting period of the company beginning on or after 1 April 2008, at the beginning of that period.

(4) For this purpose the relevant fraction is—

where—

C is the amount payable as a result of the related transaction, and

FVC is the fair value of the contract immediately before the related transaction.