Corporation Tax Act 2009

Treatment of deficit on basic life assurance and general annuity business U.K.

387 Treatment of deficit on basic life assurance and general annuity business: introduction U.K.

(1) Sections 388 to 391 apply [F1 for the purposes of the I - E rules] instead of [F2 Chapters 16 and 16A] (non-trading deficits) if a company has a non-trading deficit from its loan relationships for BLAGAB for any accounting period.

(2) In those sections “the deficit” and “the deficit period” mean that deficit and that period respectively.

Textual Amendments

F1 Words in s. 387(1) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 151

F2 Words in s. 387(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 132

Modifications etc. (not altering text)

C1 Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

388 Basic rule: deficit set off against income and gains of deficit period U.K.

(1) The basic rule is that the deficit must be set off against any income and gains of the deficit period which are referable to BLAGAB.

(2) The income and gains are reduced accordingly.

(3) Any such reduction is made [F3 in accordance with step 4 in section 73 of FA 2012 (that is to say, before any deduction for the adjusted BLAGAB management expenses of the company for the deficit period)].

Textual Amendments

F3 Words in s. 388(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 152

389 Claim to carry back deficit U.K.

(1) If the deficit exceeds the income and gains for the deficit period referred to in section 388(1), the company may make a claim for the whole or part of the excess (“the claim amount”)—

(a) to be carried back for up to 3 accounting periods ending within the permitted period, and

(b) to be set off against the available profits of the company in those periods in accordance with subsection (2).

(2) The claim amount reduces the company's available profits in the most recent accounting period of the company, before any remainder reduces those in the next most recent accounting period and then those in the next most recent accounting period.

[F4 (2A) If any of the claim amount is carried back in accordance with this section to an accounting period, the amount which is so carried back is to be left out of account for the purpose of applying section 93 of FA 2012 in the case of that period.]

(3) For the meaning of “available profits”, see section 390.

(4) In this section and that section “permitted period” means the period of 12 months immediately before the deficit period.

(5) A claim under this section must be made—

(a) within the period of 2 years after the end of the deficit period, or

(b) within such further period as an officer of Revenue and Customs allows.

Textual Amendments

F4 S. 389(2A) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 153

390 Meaning of “available profits” U.K.

(1) For the purposes of section 389 the available profits of the company for an accounting period are its BLAGAB non-trading loan relationships profits for the period (see subsection (4)), less the unused part of the relevant deductions for the period (see subsection (5)).

(2) If an accounting period ending within the permitted period begins before it, only a part of the amount which would otherwise be the available profit for that accounting period is available profit.

(3) That part is so much as is proportionate to the part of the accounting period in the permitted period.

(4) References in this section to a company's BLAGAB non-trading loan relationships profits for an accounting period are references to the amount (if any) [F5 of the BLAGAB credits in respect of the company's loan relationships that count as income for the purposes of the I - E rules for that period (as determined by section 88(3) and (4) of FA 2012)].

(5) The unused part of the relevant deductions for an accounting period is found as follows.

Step 1

Add together—

(a) [F6 the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period], and

(b) so much of the sum of the deductions made in the case of the company in respect of [F7 qualifying charitable donations] for that period as is [F8 referable to BLAGAB].

Step 2

Add together—

[F9 (a) so much of the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period as, on the assumption that the company had no BLAGAB non-trading loan relationships profits for the period, could be subtracted at step 6 under that section without producing a negative amount, and]

(b) the total amounts [F10 referable to BLAGAB] which could be applied for the period in making deductions in respect of [F11 qualifying charitable donations] if those profits were disregarded.

Step 3

Subtract the amount found at Step 2 from the amount found at Step 1.

The result is the unused part of the relevant deductions for the accounting period.

[F12 (6) In the case of any claim under section 389, references in subsection (5) to the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period are references to that amount as determined on the assumptions in subsections (7) and (8).]

(7) The first assumption is that no account is taken of—

(a) that claim, or

(b) any other claim under section 389 relating to a deficit for an accounting period after the deficit period.

(8) The second assumption is that all such adjustments are made as are required as a result of any sum having been carried back under the Corporation Tax Acts to the accounting period mentioned in subsection (5), otherwise than as a result of—

(a) the claim mentioned in subsection (6), or

(b) any such other claim as is mentioned in subsection (7)(b).

Textual Amendments

F5 Words in s. 390(4) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(2)

F6 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(a)

F7 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(2) (with Sch. 2)

F8 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(b)

F9 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(c)

F10 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(d)

F11 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(3) (with Sch. 2)

F12 S. 390(6) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(4)

391 Carry forward of surplus deficit to next accounting period U.K.

(1) This rule applies if any of the deficit is not—

(a) set off against the income and gains referred to in section 388(1), or

(b) set off against the profits referred to in section 389(1) as the result of a claim under that section.

(2) That deficit must be carried forward to the accounting period immediately after the deficit period (“the next period”).

[F13 (3) Any deficit so carried forward is treated for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the next period.]

Textual Amendments

F13 S. 391(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 155