The Group Relief for Overseas Losses (Modification of the Corporation Tax Acts for Non-resident Insurance Companies) (No. 2) (Amendment) Regulations 2007

EXPLANATORY NOTE

(This note is not part of the Regulations)

The Finance Act 2006 (c. 25: “FA 2006”) extended the provisions in the Corporation Tax Acts concerning loss relief for groups of companies (known as “group relief”). Prior to that Act, the relief was available only to U.K. resident companies or companies with a permanent establishment in the U.K.. Following the EC Court of Justice’s decision in Marks and Spencer p.l.c. v Halsey (H.M. Inspector of Taxes) in 2005, FA 2006 included provisions allowing certain non-resident companies (an “EEA company”) to surrender losses to a U.K. resident company in the same group. The loss must be calculated following the provisions of the Corporation Tax Acts.

Paragraph 16 of Schedule 18A to the Income and Corporation Taxes Act 1988 (c. 1) (inserted by FA 2006) gives the Treasury power to modify the relevant provisions, including for a particular class of trade or business. The Group Relief for Overseas Losses (Modification of the Corporation Tax Acts for Non-resident Insurance Companies) (No. 2) Regulations 2006 (S.I. 2006/3389: “the principal Regulations”) make such provision for insurance companies.

These Regulations amend the principal Regulations in order to take into account amendments made by the Finance Act 2007 (c. 11: “FA 2007”).

Regulation 1 provides for citation, commencement and effect. The retrospective effect is authorised by paragraph 16(5) of Schedule 18A to the Income and Corporation Taxes Act 1988.

Regulation 2 introduces the amendments to the principal Regulations.

Regulation 3 omits regulation 3 (modifications of section 12 of the Income and Corporation Act 1988).

Regulation 4 amends regulation 5 (modification of section 439A of the Income and Corporation Taxes Act 1988) so as to take into account the repeal of section 439A and the insertion of section 431G by FA 2007.

Regulation 5 substitutes regulation 6 (modification of section 444AA of the Income and Corporation Taxes Act 1988) so as to take into account the substitution of section 444AA by FA 2007.

Regulation 6 inserts a new regulation 7A (modification of section 444ABD of the Income and Corporation Taxes Act 1988) so as to take into account the insertion of section 444ABD by FA 2007.

These Regulations, together with the relevant legislation in FA 2007, are part of the outcome of a continuing consultation process. A draft regulatory impact assessment was included as part of a consultation document, “Life Assurance Company Taxation – A Technical Consultative Document”, which was published by Her Majesty’s Revenue and Customs in May 2006. This is available at www.hmrc.gov.uk/consultations.