Amendment of the Income and Corporation Taxes Act 1988

3.—(1) Amend section 432YA of the Income and Corporation Taxes Act 1988 (long-term business other than life assurance business – adjustment consequent on change in Insurance Prudential Sourcebook)(1) as follows.

(2) In subsection (1)—

(a)for “(other than nil)” substitute “(“the relevant amount”)”;

(b)for “the first” substitute “a”;

(c)after “31st December 2006” insert “but before 1st January 2009 (a “relevant period of account”)”.

(3) For subsection (2) substitute—

“(2) In computing profits of long-term business which is not life assurance business in accordance with the provisions applicable to Case I of Schedule D—

(a)X shall be added to the closing long term business provision of the company for the relevant period of account; and

(b)XA shall be brought into account as a trading receipt of the company for each subsequent period of account until the total sum of the amounts so bought into account is equal to X (and if that total sum would otherwise exceed X, the excess shall be ignored).

(2A) In applying subsection (2)(b) above no account shall be taken of a period of account which is deemed to exist by virtue of section 444AA(3)(2).

(2B) X is—

(a)where the relevant period of account ends before 1st April 2007, the whole of the relevant amount;

(b)where the relevant period of account ends on or after 1st April 2007 but before 1st January 2008, two-thirds of the relevant amount;

(c)where the relevant period of account ends on or after 1st January 2008, one-third of the relevant amount.

(2C) XA is the amount found by applying the following formula—

Here—

Y is the number of months of the period of account in question (part of a month being counted as a month); and

Z is—

(a)where X is the whole of the relevant amount, one-third of X;

(b)where X is two thirds of the relevant amount, one-half of X;

(c)where X is one third of the relevant amount, the whole of X.”.

(4) Omit subsections (3) and (4).

(5) After subsection (5) add—

“(6) This section is subject to sections 82E and 82F of the Finance Act 1989 (treatment of transferors and transferees under insurance business transfer schemes)(3) and those sections shall apply in relation to this section as if any reference in them to a provision of section 82D of that Act (treatment of profits: life assurance – adjustment consequent on change in Insurance Prudential Sourcebook)(4) were a reference to the corresponding provision of section 432YA.”.

(1)

Section 432YA was inserted by article 2 of S.I. 2006/3387.

(2)

Section 444AA was inserted by paragraph 19 of Schedule 33 to the Finance Act 2003 (c. 26).

(4)

Section 82D was inserted by articles 3 and 5 of S.I. 2006/3387.