Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 4 — Consequential repeals
404

(ii)
paragraph 39 of Schedule 5,
(j)
in FA 2000, sections 108 and 109,
(k)
in FA 2003, paragraphs 1, 2, 5, 8, 10, 12, 20, 22 to 24 and 29 of Schedule
33,
(l)
in FA 2004—
5
(i)
sections 40 and 41,
(ii)
section 44,
(iii)
Schedule 6,
(iv)
paragraphs 5, 8 and 9(2) of Schedule 7, and
(v)
paragraph 20 of Schedule 35,
10
(m)
in F(No.2)A 2005, paragraphs 1 to 3, 5, 10, 12 to 15, 17 and 18 of
Schedule 9,
(n)
in ITTOIA 2005, paragraphs 176 and 178 of Schedule 1,
(o)
in FA 2006—
(i)
section 86, and
15
(ii)
Schedule 11,
(p)
in FA 2007—
(i)
paragraphs 3, 6, 8 to 14, 16, 17, 19, 21 to 23, 25, 26, 31 to 33, 35
to 38, 57 to 59 and 80 to 84 of Schedule 7,
(ii)
paragraphs 2 to 6, 8, 9, 11 to 16, 28 and 29 of Schedule 8,
20
(iii)
paragraphs 1(1) and (3), 3(1) and (3), 4 to 8, 10, 11(3), 12, 15
and 16 of Schedule 9, and
(iv)
paragraphs 2(1), 4, 11 to 13 and 15(1) to (3) of Schedule 10,
(q)
in FA 2008—
(i)
paragraph 2 of Schedule 14, and
25
(ii)
paragraphs 1, 2, 4 to 6, 8, 9(2) and (3), 10, 11, 17, 18, 20 to 22,
26, 28(3) and (4), 31 to 34 and 37 of Schedule 17,
(r)
in CTA 2009, paragraphs 30 to 44, 126 to 154, 282, 307(3)(a) and 341
to 351 of Schedule 1,
(s)
in FA 2009—
30
(i)
section 46,
(ii)
paragraph 24 of Schedule 7,
(iii)
paragraph 60 of Schedule 11, and
(iv)
paragraphs 1 to 7 of Schedule 23,
(t)
in CTA 2010, paragraphs 9, 10, 42 to 51, 213 and 214 of Schedule 1,
35
(u)
in FA 2010, section 47,
(v)
in F(No.2)A 2010, section 9,
(w)
in F(No.3)A 2010, section 15,
(x)
in TIOPA 2010, paragraph 34 of Schedule 8, and
(y)
in FA 2011, section 56.
40

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
405

Schedule 17
Section 147

Part 2: transitional provision
Part 1
Deemed receipts or expenses
General outline of the provision of this Part of this Schedule
5
1     (1)
This Part of this Schedule makes provision, by reference to the 2012 balance
sheet and the 2012 periodical return of an insurance company (see
paragraphs 2 to 4), for deeming amounts to be receipts or expenses of basic
life assurance and general annuity business, or non-BLAGAB long-term
business, carried on by the company (see paragraphs 9(1) and (2) and 10(1)
10
and (2)).
      (2)
Those amounts are determined in accordance with provision made by or
under paragraphs 5 to 8.
      (3)
The deeming is to have effect for the purpose of calculating the BLAGAB
trade profit or loss or (as the case may be) for the purpose of calculating for
15
corporation tax purposes the profits of the non-BLAGAB long-term business
(see paragraphs 9(3) and 10(3)).
      (4)
The general rule is that, subject to exceptions, the receipts or expenses are
treated as arising over a 10-year period (see paragraphs 11 to 15).
      (5)
Special provision is made in relation to the operation of sections 83YC to
20
83YF of FA 1989 (see paragraph 16).
      (6)
Anti-avoidance provision is made by paragraphs 17 to 19.
      (7)
Provision in relation to overseas life insurance companies is made by
paragraph 20.
Basic concepts
25
2
In this Part of this Schedule—
“the 2012 balance sheet”, in relation to an insurance company, means—
(a)
an actual balance sheet of the company drawn up as at the
end of 31 December 2012 in accordance with generally
accepted accounting practice, or
30
(b)
a deemed balance sheet of the company under paragraph 3,
and
“the 2012 periodical return”, in relation to an insurance company,
means—
(a)
an actual periodical return of the company covering a period
35
ending immediately before 1 January 2013, or
(b)
a deemed periodical return of the company under paragraph
4.
3     (1)
This paragraph applies if an insurance company does not have a balance
sheet drawn up as at the end of 31 December 2012 in accordance with
40
generally accepted accounting practice.

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
406

      (2)
For the purposes of this Part of this Schedule the company is deemed to have
drawn up a balance sheet as at the end of 31 December 2012 in accordance
with generally accepted accounting practice.
      (3)
For the purposes of this Part of this Schedule the entries shown in this
deemed balance sheet are deemed to be those entries which would have
5
been shown in an actual balance sheet of the company drawn up as
mentioned in sub-paragraph (1).
      (4)
The generally accepted accounting practice that is to be applicable for the
purposes of sub-paragraphs (2) and (3) is the practice that is actually
adopted for the accounts of the company drawn up for the period in which
10
31 December 2012 falls.
4     (1)
This paragraph applies if an insurance company does not have a periodical
return covering a period ending immediately before 1 January 2013.
      (2)
For corporation tax purposes the company is deemed to have a periodical
return covering the period—
15
(a)
beginning immediately after the last period ending before 1 January
2013 that is covered by a periodical return of the company, and
(b)
ending immediately before 1 January 2013.
      (3)
This deemed periodical return is deemed to contain such entries as would be
included in an actual periodical return of the company covering the period
20
beginning and ending as mentioned in sub-paragraph (2)(a) and (b).
      (4)
For corporation tax purposes the period beginning and ending as mentioned
in sub-paragraph (2)(a) and (b) is deemed to be a period of account of the
company.
The comparison etc
25
5     (1)
In the case of an insurance company, a comparison must be made between—
(a)
the amount attributed to shareholders as at 31 December 2012 (see
sub-paragraphs (2) to (4)), and
(b)
the cumulative taxed surplus as at 31 December 2012 (see sub-
paragraph (5) and (6)).
30
      (2)
The amount attributed to shareholders as at 31 December 2012 is—
(a)
the amount shown in line 75 of Form 14 of the 2012 periodical return
in respect of the whole of the company’s long-term business, less
(b)
the amount (if any) shown in the 2012 balance sheet of the company
in respect of the fund for future appropriations or unallocated
35
divisible surplus.
      (3)
In prescribed cases the amount attributed to shareholders as at 31 December
2012 is to be found by making prescribed adjustments to the amount found
by sub-paragraph (2)(a) and (b).
      (4)
In sub-paragraph (3) “prescribed” means prescribed, or of a description
40
prescribed, by regulations made by the Treasury.

The regulations may be made so as to have effect in relation to any period
beginning before but ending on or after the day on which the regulations are
made (as well as in relation to periods no part of which falls before that day).

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
407

      (5)
The cumulative taxed surplus as at 31 December 2012 is found by adding
together the amounts (if any) found by the following paragraphs—
(a)
the amount shown in line 13 of Form 14 of the 2012 periodical return
in respect of the whole of the company’s long-term business but
excluding the amount representing any undistributed
5
demutualisation surplus of the company for the period of account
ending immediately before 1 January 2013, and
(b)
the total amount brought into account for any period of account of
the company as a result of section 83YA(3) of FA 1989 less the total
amount brought into account for any period of account as a result of
10
section 83YA(4) of FA 1989 (changes in value of assets brought into
account: non-profit companies).
      (6)
In sub-paragraph (5)(a) “undistributed demutualisation surplus” means the
undistributed demutualisation surplus of the company for the period of
account in question for the purposes of section 444AF of ICTA.
15
      (7)
The difference between the amount attributed to shareholders as at 31
December 2012 and the cumulative taxed surplus as at 31 December 2012 is
referred to in this Part of this Schedule as “the total transitional difference”.
      (8)
If the amount attributed to shareholders as at 31 December 2012 exceeds the
cumulative taxed surplus as at 31 December 2012, the total transitional
20
difference is a positive figure.
      (9)
If the cumulative taxed surplus as at 31 December 2012 exceeds the amount
attributed to shareholders as at 31 December 2012, the total transitional
difference is a negative figure.
6     (1)
The insurance company—
25
(a)
must, by comparing amounts shown in the 2012 periodical return
with amounts shown in the 2012 balance sheet, determine the
particular items that, when taken together, result in the total
transitional difference, and
(b)
must allocate a positive or negative amount to each of those items.
30
      (2)
The positive or negative amounts allocated to those items in accordance with
this paragraph must, when added together, equal the total transitional
difference.
      (3)
The Treasury may make regulations prescribing—
(a)
the way in which the comparison or determination under sub-
35
paragraph (1)(a) must be done, and
(b)
the method for making the allocation under sub-paragraph (1)(b).
      (4)
The provision that may be made by regulations under sub-paragraph (3)(a)
includes provision prescribing descriptions of amounts which are, or are
not, to be compared with each other.
40
7     (1)
Each of the items determined in accordance with paragraph 6(1)(a) is a
“relevant computational item” for the purposes of this Part of this Schedule
except in so far as it consists of an excluded item.
      (2)
An item is “an excluded item” in so far as it—
(a)
represents an amount forming part of the company’s deferred
45
acquisition costs which is included in its 2012 balance sheet and

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
408

which has been taken into account in calculating its life assurance
trade profits,
(b)
represents an amount which is included in the company’s 2012
balance sheet as an asset in respect of the value of future profits
arising from a business (or part of a business) transferred to the
5
company (but excluding an asset so far as it is regarded for
accounting purposes as internally-generated),
(c)
represents an outstanding contingent loan or an outstanding re-
insurance amount,
(d)
represents an asset to which Part 8 of CTA 2009 (intangible fixed
10
assets) applies for an accounting period of the company beginning
on or after 1 January 2013, or
(e)
falls within a description of item excluded for the purposes of this
paragraph by regulations made by the Treasury.
      (3)
In sub-paragraph (2)(c) “outstanding contingent loan” means the total
15
amount of the credits brought into account by the company as part of total
income—
(a)
for the period of account ending immediately before 1 January 2013,
or
(b)
for any earlier period of account,
20

in respect of money debts so far as those debts have not been repaid before
that date.
      (4)
In sub-paragraph (2)(c) “outstanding re-insurance amount” means the total
of the amounts which would (but for section 83YF(2) of FA 1989) have been
taken into account in calculating the company’s life assurance trade
25
profits—
(a)
for the period of account ending immediately before 1 January 2013,
or
(b)
for any earlier period of account,

in respect of the re-insurance of relevant liabilities (within the meaning of
30
section 83YC of FA 1989) to the extent that they have not ceased to be re-
insured before that date.
      (5)
In this paragraph “life assurance trade profits” means profits arising from
life assurance business calculated in accordance with the provisions
applicable for the purposes of the taxation of such profits under section 35 of
35
CTA 2009 (charge on trade profits).
      (6)
For any accounting period beginning on or after 1 January 2013, an amount
is not to be taken into account—
(a)
in calculating the BLAGAB trade profit or loss of any basic life
assurance and general annuity business, or
40
(b)
in calculating for corporation tax purposes the profits of non-
BLAGAB long-term business,

in so far as the amount consists of an excluded item as a result of falling
within sub-paragraph (2)(a) to (d) or, in a case where the regulations provide
for the application of this sub-paragraph, within sub-paragraph (2)(e).
45
8     (1)
Each relevant computational item must be apportioned between—
(a)
any basic life assurance and general annuity business carried on by
the company as at 31 December 2012,

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
409

(b)
any gross roll-up business carried on by the company as at that date,
and
(c)
any PHI business carried on by the company as at that date.
      (2)
The Treasury may make regulations for apportioning for the purposes of
this Part of this Schedule relevant computational items between those
5
businesses (including provision for the whole amount of a relevant
computational item to be apportioned to one of those businesses).
      (3)
A relevant computational item (or a part of a relevant computational item)
allocated in accordance with this paragraph to the company’s basic life
assurance and general annuity business or gross roll-up business is dealt
10
with in accordance with paragraph 9 or 10.
      (4)
But a relevant computational item (or a part of a relevant computational
item) allocated in accordance with this paragraph to the company’s PHI
business is ignored in the application of the remaining provisions of this Part
of this Schedule.
15
Deemed receipts or expenses of BLAGAB or non-BLAGAB long-term business
9     (1)
If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s basic life
assurance and general annuity business is a positive amount, the item (or
part of the item) is to be treated as a receipt of that business.
20
      (2)
If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s basic life
assurance and general annuity business is a negative amount, the item (or
part of the item) is to be treated as an expense of that business.
      (3)
Receipts and expenses within this paragraph are to be taken into account, in
25
accordance with the provisions of this Part of this Schedule, in calculating
the BLAGAB trade profit or loss of that business for accounting periods
beginning on or after 1 January 2013.
      (4)
Receipts within this paragraph are to count as excluded receipts for the
purposes of section 92.
30
10    (1)
If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s gross roll-up
business is a positive amount, the item (or part of the item) is to be treated
as a receipt of the company’s non-BLAGAB long-term business.
      (2)
If a relevant computational item (or a part of a relevant computational item)
35
allocated in accordance with paragraph 8 to the company’s gross roll-up
business is a negative amount, the item (or part of the item) is to be treated
as an expense of the company’s non-BLAGAB long-term business.
      (3)
Receipts and expenses within this paragraph are to be taken into account, in
accordance with the provisions of this Part of this Schedule, in calculating
40
for corporation tax purposes the profits of the company’s non-BLAGAB
long-term business for accounting periods beginning on or after 1 January
2013.

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
410

Period over which deemed receipts or expenses arise
11    (1)
A receipt or expense within paragraph 9 or 10 is to be treated as arising over
the period of 10 years beginning with 1 January 2013.
      (2)
The amount of the receipt or expense apportioned to (and treated as arising
in) any accounting period falling wholly or partly in that 10-year period is to
5
be determined in proportion to the number of days of the accounting period
falling within that 10-year period.
      (3)
This paragraph does not apply to a receipt which consists of a relevant court-
protected item within the meaning of paragraph 12.
      (4)
This paragraph is subject to paragraphs 13 to 15 (transfers and cessation of
10
business etc).
12    (1)
For the purposes of this paragraph a “relevant court-protected item” means
a relevant computational item that relates to an excess of assets over
liabilities held in a non-profit fund in respect of which an order made by a
court is in force preventing the distribution of the excess (in any
15
circumstances whatever) before the end of a period specified in the order.
      (2)
A receipt within paragraph 9 or 10 consisting of a relevant court-protected
item is to be treated as arising over the period of 10 years beginning with the
relevant day.
      (3)
The relevant day is whichever of the following days occurs first—
20
(a)
the day on which the court order ceases to be in force, or
(b)
1 January 2015.
      (4)
The amount of the receipt apportioned to (and treated as arising in) any
accounting period falling wholly or partly in that 10-year period is to be
determined in proportion to the number of days of the accounting period
25
falling within that 10-year period.
      (5)
This paragraph is subject to paragraphs 13 to 15 (transfers and cessation of
business etc).
13    (1)
This paragraph applies if—
(a)
under an insurance business transfer scheme, there is a transfer from
30
one insurance company to another of basic life assurance and general
annuity business (or any part of that business) or non-BLAGAB long-
term business (or any part of that business),
(b)
the transfer is a relevant intra-group transfer, and
(c)
the transfer occurs at a time when the full amount of the receipts or
35
expenses within paragraph 9 or 10 of the business the whole or part
of which is transferred has not been treated as arising.
      (2)
A transfer is a “relevant intra-group transfer” for the purposes of this
paragraph if—
(a)
the transferor and the transferee are members of the same group of
40
companies when the transfer occurs (as determined in accordance
with section 170(2) to (11) of TCGA 1992), and
(b)
the transferee is within the charge to corporation tax in relation to the
transfer.
      (3)
The receipts or expenses are to continue to be dealt with in accordance with
45
the provisions of this Schedule, but are treated as arising to the transferee