Session 2010 - 12
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Finance (No. 4) Bill


Finance (No. 4) Bill
Part 1 — Income tax, corporation tax and capital gains tax
Chapter 5 — Miscellaneous

30

 

51      

Relief for gift aid and other income of charities etc

Schedule 15 contains provision about relief in respect of gifts qualifying for gift

aid relief and other income of charities and other bodies.

52      

Meaning of “community amateur sports club”

(1)   

In section 658 of CTA 2010 (meaning of “community amateur sports club”), for

5

subsection (1) substitute—

“(1)   

A club is entitled to be registered as a community amateur sports club

if conditions A and B are met.

(1A)   

Condition A is that the club is, and is required by its constitution to be,

a club which—

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(a)   

is open to the whole community (see section 659),

(b)   

is organised on an amateur basis (see section 660), and

(c)   

has as its main purpose the provision of facilities for, and the

promotion of participation in, one or more eligible sports (see

section 661).

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(1B)   

Condition B is that the club meets—

(a)   

the location condition (see section 661A), and

(b)   

the management condition (see section 661B).”

(2)   

In consequence of the amendment made by subsection (1), omit paragraph 31

of Schedule 6 to FA 2010.

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(3)   

The amendments made by this section are treated as having come into force on

6 April 2010.

Other provisions

53      

Site restoration payments

(1)   

In section 168 of ITTOIA 2005 (site restoration payments), at the beginning of

25

subsection (2) insert “Subject to subsection (3A),”.

(2)   

For subsection (3) of that section substitute—

“(3)   

The deduction is allowed—

(a)   

(if the payment is made, whether directly or indirectly, to a

connected person) for the period of account in which that part

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of the restoration work to which the payment relates is

completed, or

(b)   

(in any other case) for the period of account in which the

payment is made.

(3A)   

But no deduction is allowed if the payment arises from arrangements—

35

(a)   

to which the person carrying on the trade is a party, and

(b)   

the main purpose, or one of the main purposes, of which is to

obtain a deduction under this section.”

 
 

Finance (No. 4) Bill
Part 1 — Income tax, corporation tax and capital gains tax
Chapter 5 — Miscellaneous

31

 

(3)   

At the end of that section insert—

“(7)   

“Arrangements” includes any agreement, understanding, scheme,

transaction or series of transactions (whether or not legally

enforceable).”

(4)   

In section 145 of CTA 2009 (site restoration payments), at the beginning of

5

subsection (2) insert “Subject to subsection (3A),”.

(5)   

For subsection (3) of that section substitute—

“(3)   

The deduction is allowed—

(a)   

(if the payment is made, whether directly or indirectly, to a

connected person) for the period of account in which that part

10

of the restoration work to which the payment relates is

completed, or

(b)   

(in any other case) for the period of account in which the

payment is made.

(3A)   

But no deduction is allowed if the payment arises from arrangements—

15

(a)   

to which the company carrying on the trade is a party, and

(b)   

the main purpose, or one of the main purposes, of which is to

obtain a deduction under this section.”

(6)   

At the end of that section insert—

“(7)   

“Arrangements” includes any agreement, understanding, scheme,

20

transaction or series of transactions (whether or not legally

enforceable).”

(7)   

The amendments made by this section have effect in relation to any site

restoration payment made on or after 21 March 2012, other than a payment

made pursuant to an unconditional obligation in a contract made before 21

25

March 2012.

(8)   

An unconditional obligation is an obligation which may not be varied or

extinguished by the exercise of a right (whether or not under the contract).

54      

Changes of accounting policy

(1)   

In section 227 of ITTOIA 2005 (adjustment on change of accounting basis:

30

income tax)—

(a)   

in subsection (3)(a) for “relevant change of accounting approach”

substitute “change of accounting policy”, and

(b)   

for subsection (4) substitute—

“(4)   

A “change of accounting policy” includes, in particular—

35

(a)   

a change from using UK generally accepted accounting

practice to using generally accepted accounting practice

with respect to accounts prepared in accordance with

international accounting standards, and

(b)   

a change from using generally accepted accounting

40

practice with respect to accounts prepared in

accordance with international accounting standards to

using UK generally accepted accounting practice.”

 
 

Finance (No. 4) Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 1 — Introductory

32

 

(2)   

In section 180 of CTA 2009 (adjustment on change of accounting basis:

corporation tax)—

(a)   

in subsection (3)(a) for “relevant change of accounting approach”

substitute “change of accounting policy”, and

(b)   

for subsection (4) substitute—

5

“(4)   

A “change of accounting policy” includes, in particular—

(a)   

a change from using UK generally accepted accounting

practice to using generally accepted accounting practice

with respect to accounts prepared in accordance with

international accounting standards, and

10

(b)   

a change from using generally accepted accounting

practice with respect to accounts prepared in

accordance with international accounting standards to

using UK generally accepted accounting practice.”

(3)   

Corresponding amendments are to be treated as having been made in section

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64 of FA 2002.

(4)   

In consequence of the amendment made by subsection (1)(b), omit paragraph

2 of Schedule 6 to F(No.2)A 2005.

(5)   

The amendments made by this section have effect in relation to a change of

basis if the new basis—

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(a)   

is adopted for a period of account which begins on or after 1 January

2012, or

(b)   

is adopted for a period of account which begins before 1 January 2012

and the adoption is in consequence of the issue, revocation,

amendment or recognition of, or withdrawal of recognition from, an

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accounting standard by an accounting body on or after 1 January 2012.

(6)   

In this section—

“accounting body” means the International Accounting Standards Board,

the Accounting Standards Board, or a successor body to either of those

Boards;

30

“accounting standard” includes any statement of practice, guidance or

other similar document.

Part 2

Insurance companies carrying on long-term business

Chapter 1

35

Introductory

Outline of provisions of Part

55      

Overview

(1)   

This Part makes special provision for corporation tax purposes in relation to

life assurance business and other long-term business carried on by insurance

40

companies.

 
 

Finance (No. 4) Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 1 — Introductory

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(2)   

Chapter 1 explains some of the key concepts for the purposes of this Part,

including the concept of basic life assurance and general annuity business

(abbreviated to “BLAGAB”).

(3)   

Chapter 2—

(a)   

provides for the profits of BLAGAB to be subject to a charge to

5

corporation tax on the I - E basis as the profits of a separate business,

and

(b)   

provides for the profits of other long-term business to be charged to

corporation tax under section 35 of CTA 2009 as the profits of a single

trade.

10

(4)   

Chapter 3 sets out the rules applicable to the I - E charge (which operate in part

by reference to the calculation of an insurance company’s BLAGAB trade profit

or loss).

(5)   

Chapter 4 sets out rules for determining for the purposes of the I - E charge how

to apportion items to an insurance company’s basic life assurance and general

15

annuity business.

(6)   

Chapter 5—

(a)   

provides for the policyholders’ share of the I - E profit to be charged at

the policyholders’ rate (the basic rate of income tax), and

(b)   

provides for policyholder tax to be taken into account in calculating an

20

insurance company’s BLAGAB trade profit or loss.

(7)   

Chapter 6 contains special rules that are to apply for the purpose of calculating

an insurance company’s BLAGAB trade profit or loss or the profits of an

insurance company’s other long-term business.

(8)   

Chapter 7 sets out rules for determining for the purposes of that calculation

25

how to allocate items between BLAGAB and other long-term business.

(9)   

The remainder of the Part contains—

(a)   

provision in relation to assets held for the purposes of an insurance

company’s long-term business (see Chapter 8),

(b)   

provision for relieving BLAGAB trade losses and restrictions in relation

30

to the policyholders’ share of an I - E profit (see Chapter 9),

(c)   

provision in relation to the transfer of BLAGAB or other long-term

business (see Chapter 10), and

(d)   

definitions and other supplementary material (see Chapters 11 and 12).

Meaning of “life assurance business”

35

56      

Meaning of “life assurance business”

(1)   

This section defines for the purposes of this Part what is meant by “life

assurance business”.

(2)   

Business is “life assurance business” if—

(a)   

it consists of the effecting or carrying out of contracts of insurance

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which fall within paragraph I, II, III or VII(b) of Part 2 of Schedule 1 to

the FISMA (Regulated Activities) Order 2001, or

(b)   

it is capital redemption business (see subsection (3)).

 
 

Finance (No. 4) Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 1 — Introductory

34

 

(3)   

Business is “capital redemption business” if it consists of the effecting on the

basis of actuarial calculations, and the carrying out, of contracts under which,

in return for one or more fixed payments, a sum of a specified amount (or a

series of sums of a specified amount) become payable at a future time or over

a period.

5

Meaning of “basic life assurance and general annuity business”

57      

Meaning of “basic life assurance and general annuity business”

(1)   

This section defines for the purposes of this Part what is meant by “basic life

assurance and general annuity business”.

(2)   

“Basic life assurance and general annuity business” means life assurance

10

business other than—

(a)   

pension business (which is defined for the purposes of this section by

section 58),

(b)   

child trust fund business (which is defined for the purposes of this

section by section 59),

15

(c)   

individual savings account business (which is defined for the purposes

of this section by section 60),

(d)   

business which consists of the effecting or carrying out of immediate

needs annuities (within the meaning of section 725 of ITTOIA 2005),

(e)   

re-insurance of life assurance business other than excluded business,

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(f)   

overseas life assurance business (which is defined for the purposes of

this section by section 61), or

(g)   

protection business (which is defined for the purposes of this section by

section 62).

(3)   

In subsection (2)(e) “excluded business” means business of any description

25

excluded for the purposes of this section by regulations made by HMRC

Commissioners.

58      

Section 57: meaning of “pension business”

(1)   

This section defines for the purposes of the definition of “basic life assurance

and general annuity business” given by section 57 what is meant by “pension

30

business”.

(2)   

Life assurance business is “pension business” if—

(a)   

it consists of the effecting or carrying out of contracts entered into for

the purposes of a registered pension scheme, or

(b)   

it is the re-insurance of business within paragraph (a).

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(3)   

Subsection (4) applies if the pension scheme ceases to be a registered pension

scheme as a result of the withdrawal of its registration under section 157 of FA

2004.

(4)   

The company’s life assurance business that was pension business when the

scheme was a registered pension scheme is treated as ceasing to be pension

40

business at the beginning of the company’s period of account in which the

scheme so ceases to be a registered pension scheme.

(5)   

If—

 
 

Finance (No. 4) Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 1 — Introductory

35

 

(a)   

immediately before 6 April 2006 an annuity contract fell within any of

the descriptions of contracts specified in section 431B(2) of ICTA as it

had effect immediately before that date, but

(b)   

the contract does not fall to be regarded for the purposes of this section

as having been entered into for the purposes of a registered pension

5

scheme,

   

the contract is treated for the purposes of this section as having been entered

into for those purposes.

59      

Section 57: meaning of “child trust fund business”

(1)   

This section defines for the purposes of the definition of “basic life assurance

10

and general annuity business” given by section 57 what is meant by “child trust

fund business”.

(2)   

Life assurance business is “child trust fund business” if it consists of the

effecting or carrying out of child trust fund policies.

(3)   

But the re-insurance of business consisting of the effecting or carrying out of

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child trust fund policies is not “child trust fund business”.

(4)   

In this section “child trust fund policy” means a policy of life insurance which

is an investment under a child trust fund (within the meaning of the Child

Trust Funds Act 2004).

60      

Section 57: meaning of “individual savings account business”

20

(1)   

This section defines for the purposes of the definition of “basic life assurance

and general annuity business” given by section 57 what is meant by

“individual savings account business”.

(2)   

Life assurance business is “individual savings account business” if it consists

of the effecting or carrying out of individual savings account policies.

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(3)   

But the re-insurance of business consisting of the effecting or carrying out of

individual savings account policies is not “individual savings account

business”.

(4)   

In this section “individual savings account policy” means a policy of life

insurance which is an investment of a kind specified in regulations made as a

30

result of section 695(1) of ITTOIA 2005.

61      

Section 57: meaning of “overseas life assurance business”

(1)   

This section defines for the purposes of the definition of “basic life assurance

and general annuity business” given by section 57 what is meant by “overseas

life assurance business”.

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(2)   

Life assurance business is “overseas life assurance business” if—

(a)   

it consists of the effecting or carrying out of contracts with

policyholders or annuitants who are not resident in the United

Kingdom, and

(b)   

it does not consist of excluded business,

40

   

but the re-insurance of business that meets the conditions in paragraphs (a)

and (b) is not “overseas life assurance business”.

 
 

Finance (No. 4) Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 1 — Introductory

36

 

(3)   

For this purpose “excluded business” means—

(a)   

business which is pension business within the meaning of section 58,

(b)   

business which is child trust fund business within the meaning of

section 59,

(c)   

business which is individual savings account business within the

5

meaning of section 60, or

(d)   

business of any description excluded by regulations made by HMRC

Commissioners.

(4)   

HMRC Commissioners may by regulations—

(a)   

make provision as to the circumstances in which a trustee who is a

10

policyholder or annuitant residing in the United Kingdom is to be

treated for the purposes of this section as not residing there, and

(b)   

provide that nothing in Chapter 9 of Part 4 of ITTOIA 2005 is to apply

to a policy or contract which constitutes overseas life assurance

business as a result of provision made under paragraph (a).

15

(5)   

HMRC Commissioners may by regulations make provision for giving effect to

this section.

(6)   

Regulations under subsection (5) may—

(a)   

provide that, in prescribed circumstances, any prescribed issue as to

whether business is, or is not, overseas life assurance business (or

20

overseas life assurance business of a particular kind) is to be

determined by reference to prescribed matters,

(b)   

require companies to obtain certificates, undertakings, information or

declarations from any person for the purposes of the regulations,

(c)   

make provision for dealing with cases where any issue within

25

paragraph (a) is (for any reason) wrongly determined, including

provision allowing for charges to tax to be imposed (with or without

limits on time) on the insurance company concerned or on the

policyholders or annuitants concerned,

(d)   

require companies to supply information and make available books,

30

documents and other records for inspection by officers of Revenue and

Customs, and

(e)   

make provision (including provision imposing penalties) for

contravention of, or non-compliance with, the regulations.

(7)   

The matters that may be prescribed under subsection (6)(a) include—

35

(a)   

the giving of certificates or undertakings,

(b)   

the giving or possession of information, and

(c)   

the making of declarations.

(8)   

Regulations under this section may—

(a)   

make different provision for different cases or circumstances, and

40

(b)   

contain incidental, supplementary, consequential, transitional,

transitory or saving provision (including provision amending any

enactment or instrument made under any enactment).

62      

Section 57: meaning of “protection business”

(1)   

This section defines for the purposes of the definition of “basic life assurance

45

and general annuity business” given by section 57 what is meant by “protection

business”.

 
 

 
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Revised 28 March 2012