The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005

and in a case where only part of an asset is so identified, references to a linked asset are references to that part.

6A

For the purposes of subsection (5) above “the relevant fraction”, in relation to any other category of business other than basic life assurance and general annuity business and overseas life assurance business, is the fraction of which—

a

the numerator is the aggregate of—

i

the mean of the opening and closing liabilities of the category, reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to the category, and

ii

the mean of the appropriate parts of the opening and closing amounts of the free assets amounts; and

b

the denominator is the aggregate of—

i

the numerator given by paragraph (a) above

ii

the numerators given by that paragraph in relation to the other categories of business; and

iii

the numerators given by subsection (6)(a) above in relation to the basic life assurance and general annuity business.

8

In subsections (6) and (6A) above—

a

“appropriate part”, in relation to the free assets amount, means—

i

where none (or none but an insignificant proportion) of the liabilities of the long-term business are with-profits liabilities, the part of that amount which bears to the whole the proportion A/B where—

• A is the amount of the liabilities of the category of business in question;

• B is the whole amount of the liabilities of the long-term business; and

ii

in any other case the part of the free assets amount which bears to the whole the proportion C/D where—

• C is the amount of the with-profits liabilities of the category of business in question;

• D is the whole amount of the with-profits liabilities of the long-term business; and

b

the amount of the shareholders' excess assets in relation to any period of account of the company is the amount equal to SXA − L27 where—

i

SXA is the aggregate amount of the assets shown in its non-participating funds which are attributed to its shareholders as a result of a relevant reattribution; and

ii

L27 is the amount (if any) shown in line 27 of Form 19 in its periodical return for the relevant period of account.

8A

In this section—

• “non-participating funds” means accounts which relate exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus;

• “reattribution” in relation to an insurance company which has an inherited estate, means the attribution of assets to shareholders' interests as a result of—

  1. a

     an agreement between the company and the relevant regulator as to the amount of that estate and its attribution between shareholders and policy holders; or

  2. b

     a decision of the company to specify and identify an amount of assets (otherwise than in connection with a transfer to the company’s long-term insurance fund) as attributable only to shareholders' interests;

  a reattribution is “relevant” if it arises as a result of any of the following—

  1. a

     a transfer of business under—

     1. i

        section 49 of, or Schedule 2C to, the Insurance Companies Act 1982;

     2. ii

        an insurance business transfer scheme (within the meaning of section 431(2));

  2. b

     a scheme of arrangement under section 425 of the Companies Act 1985;

  3. c

     an order under section 68 of the Insurance Companies Act 1982;

  4. d

     a waiver under section 148 of the Financial Services and Markets Act 2000;

  5. e

     an amendment to the company’s memorandum, articles of association or other instrument regulating the company.

8B

In subsection (8A) above—

• “inherited estate” has the same meaning as it has in the Integrated Prudential Sourcebook; and

• “relevant regulator” means the Financial Services Authority, the Treasury or the Secretary of State.

4

The following provisions of this section have effect where sections 432C and 432D—

a

apply in relation to any account for a fund in which shareholders' excess assets are held, and

b

apply in relation to that account in relation to any period of account beginning on or after 1st January 2005 and ending before 1st October 2006.

5

The part of the amount brought into account as income which is referable in accordance with section 432C to any category of business apart from—

a

basic life assurance and general annuity business, and

b

overseas life assurance business,

is reduced by the relevant fraction of the shareholders' excess income.

6

The part of the amount brought into account as the increase or decrease in the value of assets or as other income which is referable in accordance with section 432D to any category of business apart from basic life assurance and general annuity business is reduced or increased as follows.

7

The part of that amount is—

a

reduced by the relevant fraction of the shareholders' excess gains, or

b

increased by the relevant fraction of the shareholders' excess losses,

as the case may be.

8

But no such reduction or increase is made if, in relation to the fund in question, an election in accordance with Rule 9.10(c) of the Prudential Sourcebook (Insurers) has effect for the period of account.

9

For the purposes of this section—

• “the relevant fraction”, in relation to a category of business, is the fraction of which—

  1. a

     the numerator is the section 83 net amount referable to the category; and

  2. b

     the denominator is the section 83 net amount referable to all categories of business apart from basic life assurance and general annuity business;

• “the section 83 net amount” means the net amount (before giving effect to subsections (5) to (7) above) to be taken into account in accordance with section 83(2) of the Finance Act 198914 (that is to say, the aggregate amount to be taken into account as receipts reduced by the aggregate amount to be taken into account as expenses);

• “shareholders' excess gains” means the amount by which—

  1. a

     the investment gains referable to basic life assurance and general annuity business in accordance with section 432A for the period of account exceeds

  2. b

     those gains that would be so referable if section 432A(6) were amended in accordance with subsection (10) below;

• “shareholders' excess income” means the amount by which—

  1. a

     the investment income referable to basic life assurance and general annuity business in accordance with section 432A for the period of account exceeds

  2. b

     the amount that would be so referable if section 432A(6) were amended in accordance with subsection (10) below;

• “shareholders' excess losses” means the amount by which—

  1. a

     the investment losses referable to basic life assurance and general annuity business in accordance with section 432A for the period of account exceeds

  2. b

     the amount that would be so referable if section 432A(6) were amended in accordance with subsection (10) below.

10

For the purposes of the definitions of “shareholders' excess gains”, “shareholders' excess income” and “shareholders' excess losses”, the amendments of section 432A(6) mentioned in those definitions are—

a

in paragraph (a)(ii) the insertion after “the mean of” of “the appropriate parts of”;

b

in paragraph (a)(ii) the insertion after “assets” of—

(and for this purpose the definition of “appropriate part” in subsection (8)(a) below applies in relation to the shareholders' excess assets as it applies in relation to the free assets amount)

c

in paragraph (b) the substitution for sub-paragraph (ii) of—

ii

the numerators that would be given by that paragraph in relation to the other categories of business if this subsection applied in relation to any category of business.

11

For the purposes of subsection (9)—

a

the amount of a company’s investment gains is the greater of LG + NTC − NTD and nil where—

i

LG is the amount of chargeable gains accruing from disposals of assets of the company’s long-term insurance fund in the period of account after deducting the aggregate of allowable losses so accruing in the period of account and any previous period of account to which section 8(1)(b) of the Taxation of Chargeable Gains Act 1992 (company’s total profits to include chargeable gains) applies;

ii

NTC is the amount of non-trading credits for the period given by paragraph 2(1) of Schedule 11 to the Finance Act 199615 which arise to the company from increases in the fair value of the company’s loan relationships or from related transactions; and

iii

NTD is the amount of non-trading debits given by that paragraph which arise to the company from decreases in the fair value of the company’s loan relationships or from related transactions;

b

“investment income” means the aggregate of—

i

the non-trading credits for the period given by paragraph 2(1) of Schedule 11 to the Finance Act 199616 which do not arise to the company from increases in the fair value of the company’s loan relationships or from related transactions;

ii

income falling with Schedule A; and

iii

income falling within Case V of Schedule D; and

c

the amount of a company’s investment losses is the greater of LA + NTD − NTC and nil where—

i

LA is the amount of the company’s allowable losses accruing from disposals of assets of the company’s long-term insurance fund in the period of account after deducting chargeable gains so accruing; and

ii

NTC and NTD have the same meanings as they have in relation to a company’s investment gains.