5(1)In the case of an insurance company, a comparison must be made between—U.K.
(a)the amount attributed to shareholders as at 31 December 2012 (see sub-paragraphs (2) to (4)), and
(b)the cumulative taxed surplus as at 31 December 2012 (see sub-paragraph (5) and (6)).
(2)The amount attributed to shareholders as at 31 December 2012 is—
(a)the amount shown in line 75 of Form 14 of the 2012 periodical return in respect of the whole of the company's long-term business, less
(b)the amount (if any) shown in the 2012 balance sheet of the company in respect of the fund for future appropriations or unallocated divisible surplus.
(3)In prescribed cases the amount attributed to shareholders as at 31 December 2012 is to be found by making prescribed adjustments to the amount found by sub-paragraph (2)(a) and (b).
(4)In sub-paragraph (3) “prescribed” means prescribed, or of a description prescribed, by regulations made by the Treasury.
The regulations may be made so as to have effect in relation to any period beginning before but ending on or after the day on which the regulations are made (as well as in relation to periods no part of which falls before that day).
(5)The cumulative taxed surplus as at 31 December 2012 is found by adding together the amounts (if any) found by the following paragraphs—
(a)the amount shown in line 13 of Form 14 of the 2012 periodical return in respect of the whole of the company's long-term business but excluding the amount representing any undistributed demutualisation surplus of the company for the period of account ending immediately before 1 January 2013, and
(b)the total amount brought into account for any period of account of the company as a result of section 83YA(3) of FA 1989 less the total amount brought into account for any period of account as a result of section 83YA(4) of FA 1989 (changes in value of assets brought into account: non-profit companies).
(6)In sub-paragraph (5)(a) “undistributed demutualisation surplus” means the undistributed demutualisation surplus of the company for the period of account in question for the purposes of section 444AF of ICTA.
(7)The difference between the amount attributed to shareholders as at 31 December 2012 and the cumulative taxed surplus as at 31 December 2012 is referred to in this Part of this Schedule as “the total transitional difference”.
(8)If the amount attributed to shareholders as at 31 December 2012 exceeds the cumulative taxed surplus as at 31 December 2012, the total transitional difference is a positive figure.
(9)If the cumulative taxed surplus as at 31 December 2012 exceeds the amount attributed to shareholders as at 31 December 2012, the total transitional difference is a negative figure.
6(1)The insurance company—U.K.
(a)must, by comparing amounts shown in the 2012 periodical return with amounts shown in the 2012 balance sheet, determine the particular items that, when taken together, result in the total transitional difference, and
(b)must allocate a positive or negative amount to each of those items.
(2)The positive or negative amounts allocated to those items in accordance with this paragraph must, when added together, equal the total transitional difference.
(3)The Treasury may make regulations prescribing—
(a)the way in which the comparison or determination under sub-paragraph (1)(a) must be done, and
(b)the method for making the allocation under sub-paragraph (1)(b).
(4)The provision that may be made by regulations under sub-paragraph (3)(a) includes provision prescribing descriptions of amounts which are, or are not, to be compared with each other.
7(1)Each of the items determined in accordance with paragraph 6(1)(a) is a “relevant computational item” for the purposes of this Part of this Schedule except in so far as it consists of an excluded item.U.K.
(2)An item is “an excluded item” in so far as it—
(a)represents an amount forming part of the company's deferred acquisition costs which is included in its 2012 balance sheet and which has been taken into account in calculating its life assurance trade profits,
(b)represents an amount which is included in the company's 2012 balance sheet as an asset in respect of the value of future profits arising from a business (or part of a business) transferred to the company (but excluding an asset so far as it is regarded for accounting purposes as internally-generated),
(c)represents an outstanding contingent loan or an outstanding re-insurance amount,
(d)represents an asset to which Part 8 of CTA 2009 (intangible fixed assets) applies for an accounting period of the company beginning on or after 1 January 2013, or
(e)falls within a description of item excluded for the purposes of this paragraph by regulations made by the Treasury.
(3)In sub-paragraph (2)(c) “outstanding contingent loan” means the total amount of the credits brought into account by the company as part of total income—
(a)for the period of account ending immediately before 1 January 2013, or
(b)for any earlier period of account,
in respect of money debts so far as those debts have not been repaid before that date.
(4)In sub-paragraph (2)(c) “outstanding re-insurance amount” means the total of the amounts which would (but for section 83YF(2) of FA 1989) have been taken into account in calculating the company's life assurance trade profits—
(a)for the period of account ending immediately before 1 January 2013, or
(b)for any earlier period of account,
in respect of the re-insurance of relevant liabilities (within the meaning of section 83YC of FA 1989) to the extent that they have not ceased to be re-insured before that date.
(5)In this paragraph “life assurance trade profits” means profits arising from life assurance business calculated in accordance with the provisions applicable for the purposes of the taxation of such profits under section 35 of CTA 2009 (charge on trade profits).
(6)For any accounting period beginning on or after 1 January 2013, an amount is not to be taken into account—
(a)in calculating the BLAGAB trade profit or loss of any basic life assurance and general annuity business, or
(b)in calculating for corporation tax purposes the profits of non-BLAGAB long-term business,
in so far as the amount consists of an excluded item as a result of falling within sub-paragraph (2)(a) to (d) or, in a case where the regulations provide for the application of this sub-paragraph, within sub-paragraph (2)(e).
8(1)Each relevant computational item must be apportioned between—U.K.
(a)any basic life assurance and general annuity business carried on by the company as at 31 December 2012,
(b)any gross roll-up business carried on by the company as at that date, and
(c)any PHI business carried on by the company as at that date.
(2)The Treasury may make regulations for apportioning for the purposes of this Part of this Schedule relevant computational items between those businesses (including provision for the whole amount of a relevant computational item to be apportioned to one of those businesses).
(3)A relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company's basic life assurance and general annuity business or gross roll-up business is dealt with in accordance with paragraph 9 or 10.
(4)But a relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company's PHI business is ignored in the application of the remaining provisions of this Part of this Schedule.