The Insurance Companies (Reserves) (Tax) (Amendment) Regulations 2008

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Insurance Companies (Reserves) (Tax) Regulations 1996 (S.I. 1996/2991) (“the principal Regulations”). The principal Regulations provide for the taxation of two different types of equalisation reserve which are required to be maintained by insurance companies. The amendments are in consequence of the Finance Act 2003, the Commissioners for Revenue and Customs Act 2005 (s. 11) (“CRCA 2005”), the Companies Act 2006 (c. 46) and as a result of changes to the Statement of Recommended Practice on Accounting for Insurance Business, the Financial Services Authority Sourcebooks and the way UK GAAP is applied to insurance companies.

Regulation 1 provides for the citation, commencement and effect.

Regulation 2 introduces the amendments to the principal Regulations.

Regulation 3 amends regulation 2 of the principal Regulations (interpretation). The definition of “Board” is updated (in consequence of the enactment of the CRCA 2005). The definition of “branch” (which is substituted in the principal Regulations by the concept “permanent establishment”) is omitted. The definition of “paragraph 52 method of accounting” is substituted by “paragraph 58 method of accounting” (which is the equivalent method in provisions made under the Companies Act 2006 and which replaces the paragraph 52 method). The definition of “equalisation reserve rules” is amended and the definition of “the Prudential Sourcebook (Insurers)” is replaced by the definition of “INSPRU”, a newly defined term.

Regulation 4 omits regulation 5 of the principal Regulations (non-annual accounts: tax returns prepared on an annual basis).

Regulation 5 amends regulation 7 of the principal Regulations (EEA firms and Treaty firms) by substituting “permanent establishment” for “branch”.

Regulation 6 amends regulation 8A of the principal Regulations (certain insurance business carried on outside the United Kingdom by a controlled foreign company – non-annual accounts but returns prepared on an annual basis) by substituting “paragraph 58” (method of accounting) for “paragraph 52” and amending the reference to “accident year basis”. The amendments also disapply the operation of regulation 8A in respect of returns of chargeable profits based on accounts prepared on an annual basis.

Regulation 7 amends regulation 8B of the principal Regulations (disapplication of regulations 8 and 8A where controlled foreign company prepares non-annual accounts and final replacement of the technical provision does not take place in conformity with the Companies Act) by substituting “paragraph 58” for “paragraph 52”.

Regulation 8 amends regulation 9 of the principal Regulations (United Kingdom branches of companies not resident in the United Kingdom which maintain equalisation reserves by virtue of equalisation reserves rules) by substituting “permanent establishment” for “branch” and “company tax return” for “return under section 11 of the Management Act”.

Regulation 9 amends regulation 10 of the principal Regulations (double taxation relief) by substituting “permanent establishment” and “permanent establishments” for “branch” and “branches” respectively.

Regulation 10 makes a consequential amendment by removing the reference to regulation 5 which is omitted by these Regulations.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.