Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
411

over so much of the 10-year period in question as falls on or after the date on
which the transfer takes place.
      (4)
If only part of a business is transferred—
(a)
the appropriate proportion of the receipts or expenses is treated as
arising to the transferee over so much of the 10-year period in
5
question as falls on or after the date on which the transfer takes place,
and
(b)
the remainder of the receipts or expenses is treated as arising to the
transferor over so much of that period.
      (5)
The appropriate proportion of the receipts or expenses of a business is equal
10
to the proportion which the value of the liabilities relating to the part of the
business transferred bears to the total value of the liabilities of the whole of
the business.
      (6)
For the purposes of this paragraph and paragraphs 11 and 12 the accounting
periods of the transferor and the transferee in which the transfer takes place
15
are deemed to end immediately before the transfer takes place.
14    (1)
This paragraph applies if—
(a)
under an insurance business transfer scheme, there is a transfer from
one insurance company to another of basic life assurance and general
annuity business (or any part of that business) or non-BLAGAB long-
20
term business (or any part of that business),
(b)
the transfer is not a relevant intra-group transfer for the purposes of
paragraph 13, and
(c)
the transfer occurs at a time when the full amount of the deemed
receipts or expenses of the relevant business has not been treated as
25
arising to the transferor.
      (2)
The remaining amount of the deemed receipts or expenses of the relevant
business is to be treated as arising to the transferor in the accounting period
in which the transfer takes place.
      (3)
In this paragraph references to the deemed receipts or expenses of the
30
relevant business—
(a)
are references to the receipts or expenses within paragraph 9 or 10 of
the business the whole or part of which is transferred, but
(b)
do not include references to so much of those receipts or expenses as
fall (or have fallen) to be treated as arising to a company other than
35
the company which is the transferor for the purposes of this
paragraph.
15    (1)
This paragraph applies if—
(a)
an insurance company ceases at any time to carry on basic life
assurance and general annuity business or non-BLAGAB long-term
40
business otherwise than as a result of a transfer under an insurance
business transfer scheme, and
(b)
at that time the full amount of the deemed receipts or expenses of the
business concerned has not been treated as arising to the company.
      (2)
The remaining amount of the deemed receipts or expenses of the business
45
concerned is to be treated as arising to the company in the accounting period
in which it ceases to carry on the business concerned.

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
412

      (3)
For the purposes of this paragraph an insurance company is to be regarded
as ceasing to carry on a business at any time if, at that time, it ceases to be
within the charge to corporation tax in relation to the business.
      (4)
In this paragraph references to the deemed receipts of the business
concerned—
5
(a)
are references to the receipts or expenses within paragraph 9 or 10 of
the business concerned, but
(b)
do not include references to so much of those receipts or expenses as
fall (or have fallen) to be treated as arising to a company other than
the company concerned.
10
Financing-arrangement-funded transfers to shareholders in relation to non-profit funds
16    (1)
This paragraph applies if, as at 1 January 2013, an insurance company has an
unrelieved charge under subsection (3) of section 83YC of FA 1989 (FAFTS:
charge in relevant period of account).
      (2)
An insurance company has, as at that date, an unrelieved charge under that
15
subsection if either—
(a)
that subsection has operated in the case of the company for the
period of account ending immediately before that date (“the 2012
period of account”), or
(b)
that subsection has operated in the case of the company for one or
20
more earlier periods of account, and the total of the amounts which
are the relevant amount for the 2012 period of account or those
earlier periods under section 83YD of FA 1989 does not exceed the
amount which is the taxed amount under that section.
      (3)
The appropriate amount of the unrelieved charge is to be treated for the
25
purposes of this Part of this Schedule as if it were a relevant computational
item of a negative amount.
      (4)
The appropriate amount of the unrelieved charge is whichever is the smaller
of—
(a)
in a case within sub-paragraph (2)(a), the amount brought into
30
account under section 83YC(3) of FA 1989, or, in a case within sub-
paragraph (2)(b), the amount by which the taxed amount mentioned
there exceeds the relevant amount mentioned there, and
(b)
the sum of the outstanding debt amount and the outstanding re-
insurance amount.
35
      (5)
“The outstanding debt amount” means the total amount of the credits
brought into account by the company in relation to a non-profit fund for the
purposes of section 83YC of FA 1989 as part of total income—
(a)
for the 2012 period of account, or
(b)
for any earlier period of account,
40

in respect of relevant money debts to the extent that they have not been
repaid before that date.
      (6)
“The 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 profits of the company’s life assurance business in
45
accordance with the life assurance trade profits provisions—
(a)
for the 2012 period of account, or

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
413

(b)
for any earlier period of account,

in respect of the re-insurance of relevant liabilities to the extent that they
have not ceased to be re-insured before that date.
      (7)
Any expression which is used in this paragraph and in section 83YC of FA
1989 has the same meaning in this paragraph as in that section.
5
      (8)
In this paragraph references to sections 83YC and 83YD of FA 1989 include
references to those sections as they have effect in accordance with paragraph
4(2) to (6) of Schedule 17 to FA 2008.
Anti-avoidance
17    (1)
This paragraph applies if—
10
(a)
on or after 21 March 2012 an insurance company (“C”) enters into
any arrangements or does any other thing directly or indirectly for
the purposes of, or in connection with, the operation of the
transitional rules, and
(b)
the main purpose, or one of the main purposes, of C in entering into
15
the arrangements or doing the other thing is an unallowable
purpose.
      (2)
A purpose is an “unallowable purpose” if—
(a)
it consists of securing a tax advantage for C or any other company
which is connected to the operation of the transitional rules, or
20
(b)
it is not amongst C’s business or other commercial purposes.
      (3)
If a tax advantage connected to the operation of the transitional rules arises
to C, an officer of Revenue and Customs may make such adjustments as are
required to negate the tax advantage so far as referable to the unallowable
purpose on a just and reasonable apportionment.
25
      (4)
If a tax advantage connected to the operation of the transitional rules arises
to a company other than C, an officer of Revenue and Customs may make
such adjustments as are required to negate the tax advantage.
      (5)
The power to make adjustments under this paragraph includes power to
make adjustments by any of the following means—
30
(a)
an amendment of the company’s tax return under paragraph 34(2) or
(2A) of Schedule 18 to FA 1998 (amendment after enquiry),
(b)
an assessment,
(c)
the nullifying of a right to repayment,
(d)
the requiring of the return of a repayment already made, and
35
(e)
the calculation or recalculation of profits or gains or liability to
corporation tax.
      (6)
Nothing in this paragraph authorises the making of an assessment later than
6 years after the accounting period to which the tax advantage relates.
      (7)
For the purposes of this paragraph—
40
(a)
“arrangement” includes any agreement, scheme, transaction or
understanding (whether or not legally enforceable),
(b)
the reference to the operation of the transitional rules is a reference
to the operation of any provision made by or under this Part of this
Schedule,
45

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 1 — Deemed receipts or expenses
414

(c)
one example (among others) of entering into arrangements or
otherwise doing something for the purposes of, or in connection
with, the operation of those rules is entering into the arrangements
or otherwise doing the thing to secure that an item is, or is not, taken
into account in calculating the total transitional difference, and
5
(d)
section 1139 of CTA 2010 (meaning of “tax advantage”) applies, but
reading references to tax as references to corporation tax.
      (8)
If C is not within the charge to corporation tax in respect of a part of its
activities, C’s business or other commercial purposes for the purposes of this
paragraph do not include the purposes of that part of its activities.
10
      (9)
This paragraph does not apply in any case if section 132 applies in that case.
18    (1)
Paragraph 17 does not apply if, on an application by C, HMRC
Commissioners give a notice under this paragraph stating that they are
satisfied that the doing of the relevant things is or will be such that no action
ought to be taken by an officer of Revenue and Customs under that
15
paragraph.
      (2)
The reference here to the doing of the relevant things is a reference to the
entering into of any arrangements, or the doing of any other thing, directly
or indirectly for the purposes of, or in connection with, the operation of the
transitional rules (within the meaning of paragraph 17).
20
19    (1)
An application under paragraph 18 must—
(a)
be in writing, and
(b)
contain particulars of the arrangements or the thing done or
proposed to be done.
      (2)
HMRC Commissioners may by notice require C to provide further
25
particulars in order to enable them to determine the application.
      (3)
A requirement may be imposed under sub-paragraph (2) within 30 days of
the receipt of the application or of any further particulars required under
that sub-paragraph.
      (4)
If a notice under that sub-paragraph is not complied with within 30 days or
30
such longer period as HMRC Commissioners may allow, they need not
proceed further on the application.
      (5)
HMRC Commissioners must give notice to C of their decision on an
application under paragraph 18—
(a)
within 30 days of receiving the application, or
35
(b)
if they give a notice under sub-paragraph (2), within 30 days of that
notice being complied with or within such longer period as may be
agreed with C.
      (6)
If any particulars provided under this paragraph do not fully and accurately
disclose all facts and considerations material for the decision of HMRC
40
Commissioners, any resulting notice under paragraph 18 is void.
Overseas life insurance companies
20
Receipts or expenses are not to be treated as arising under this Part of this
Schedule in a case where—

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 2 — Specific transitional provisions
415

(a)
an overseas life insurance company has, in accordance with
international accounting standards, prepared accounts for a period
which includes 31 December 2012, and
(b)
parts of the income statements included in those accounts are
recognised for the purposes of sections 82A to 83ZA of FA 1989 as a
5
result of provision made by regulation 24 of the Overseas Life
Insurance Companies Regulations 2006.
Part 2
Specific transitional provisions
Insurance company with BLAGAB consisting wholly of protection business
10
21    (1)
This paragraph applies if—
(a)
in its first accounting period to which this Part applies an insurance
company carries on business which, under the old law, would have
been basic life assurance and general annuity business,
(b)
the business in question consists wholly of the effecting or carrying
15
out of contracts of long-term insurance in relation to which the
condition in section 62(2)(a) is met, and
(c)
some or all of the contracts are made before 1 January 2013.
      (2)
On or before the filing date for that accounting period, the company may
make an election for the contracts made before that date to be treated for the
20
purposes of section 62 as if they were made on or after that date.
      (3)
Accordingly, no relief is available for any amount that, but for the election,
would have constituted excess BLAGAB expenses for that accounting
period.
      (4)
The election has effect for the first accounting period of the company to
25
which this Part applies and all subsequent accounting periods.
      (5)
The election is irrevocable.
      (6)
In this paragraph—
“the filing date”, in relation to an accounting period of an insurance
company, means the date which, for the purposes of paragraph 14 of
30
Schedule 18 to FA 1998, is the filing date for the company’s tax return
for that period, and
“the old law” means the law as it had effect immediately before the day
on which this Act is passed.
Disregard of amounts previously taken into account for tax purposes
35
22    (1)
This paragraph applies if, for an accounting period ending before 1 January
2013, an amount is taken into account in calculating the profits of an
insurance company arising from life assurance business in accordance with
the provisions applicable for the purposes of the taxation of such profits
under section 35 of CTA 2009 (charge on trade profits).
40
      (2)
For any accounting period beginning on or after 1 January 2013—
(a)
the amount is not to be taken into account in calculating the BLAGAB
trade profit or loss of any basic life assurance and general annuity
business carried on by the company, and

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 2 — Specific transitional provisions
416

(b)
the amount is not to be taken into account in calculating for
corporation tax purposes the profits of any non-BLAGAB long-term
business carried on by the company.
23
For the purposes of section 76 an expense is to be treated as deductible under
another relevant rule so far as it was brought into account at Step 1 in section
5
76(7) of ICTA as an expense referable to an accounting period ending before
1 January 2013.
Intangible fixed assets
24    (1)
This paragraph applies to assets—
(a)
which, under the old law, were assets excluded from Part 8 of CTA
10
2009 (intangible fixed assets), and
(b)
which, as a result of provision made by this Part of this Act, become
assets which are not excluded from Part 8 of that Act.
      (2)
Any expenditure incurred before 1 January 2013 on an asset to which this
paragraph applies is to be left out of account in determining any amount to
15
be brought into account under Part 8 of CTA 2009.
      (3)
Section 780 of CTA 2009 (company ceasing to be member of group: deemed
realisation and re-acquisition at market value) is not to apply in relation to
any asset to which this paragraph applies.
      (4)
For the purposes of this paragraph references to an asset’s exclusion from
20
Part 8 of CTA 2009 includes its exclusion from that Part except as respects
royalties.
      (5)
In this paragraph “the old law” means the law as it had effect immediately
before the day on which this Act is passed.
Assets held for purposes of long-term business
25
25    (1)
The rules in sections 116 to 118 apply in relation to anything occurring on or
after 1 January 2013 (and the rules in section 440 of ICTA, including as
modified, apply in relation to anything occurring before that date).
      (2)
Accordingly, the replacement of the rules in section 440 of ICTA with the
different rules in sections 116 to 118 is not by itself sufficient to give rise to a
30
deemed disposal and re-acquisition for the purposes of corporation tax on
chargeable gains.
26    (1)
The rules in sections 119 to 121 apply in relation to securities held on or after
1 January 2013 (and the rules in section 440A of ICTA, including as modified,
apply in relation to securities held before that date).
35
      (2)
The replacement of the separate holdings given by section 440A of ICTA
(including as modified) with the separate holdings given by sections 119 to
121 is, for the purposes of corporation tax on chargeable gains, not to be
treated as involving a disposal or acquisition that gives rise to a chargeable
gain or allowable loss.
40
      (3)
But see paragraph 27 for provision for carrying forward the base cost of the
old holdings into the base cost of the new holdings.
27    (1)
This paragraph applies if—

Finance (No. 4) Bill
Schedule 17 — Part 2: transitional provision
Part 2 — Specific transitional provisions
417

(a)
immediately before 1 January 2013 securities are treated, as a result
of section 440A of ICTA (including as modified), as separate
holdings of a company for the purposes of corporation tax, and
(b)
the securities that are comprised in those separate holdings (the “old
holdings”) are, as at 1 January 2013, comprised in separate holdings
5
of the company as determined by the rules in sections 119 to 121 (the
“new holdings”).
      (2)
Each new holding is treated for the purposes of corporation tax on
chargeable gains as if, on 1 January 2013, it had been acquired by the
company for a consideration equal to the total of the amounts of the indexed
10
base costs of the old holdings that are carried into the new holding.
      (3)
In this paragraph references to the indexed base cost of an old holding are—
(a)
in relation to a holding which was a separate section 104 holding,
references to what would be the indexed pool of expenditure within
the meaning of section 110 of TCGA 1992 if the holding were
15
disposed of immediately before 1 January 2013, and
(b)
in relation to a holding which was a separate 1982 holding,
references to the amount of expenditure together with the indexation
allowance that would fall to be deducted if the holding were
disposed of immediately before 1 January 2013.
20
      (4)
In the case of securities (“new securities”) comprised in a new holding, the
amount of the indexed base cost of an old holding that is carried into the new
holding is equal to the proportion which the new securities derived from the
old holding bear to all of the securities comprised in the old holding.
      (5)
In this paragraph—
25
“1982 holding” has the same meaning as in section 109 of TCGA 1992,
and
“section 104 holding” has the same meaning as in section 104(3) of
TCGA 1992.
28    (1)
This paragraph applies in a case where—
30
(a)
section 210B(2) to (4) of TCGA 1992 would, but for this Part of this
Act, have applied in relation to a disposal and acquisition of section
440A securities, and
(b)
the identification in accordance with those subsections of the section
440A securities disposed of with the section 440A securities acquired
35
would have involved—
(i)
identifying securities disposed of before 1 January 2013 with
securities acquired on or after that date, or
(ii)
identifying securities acquired before 1 January 2013 with
securities disposed of on or after that date.
40
      (2)
The securities disposed of are to be identified with the securities acquired (if
necessary applying the rules in section 210B(3) and (4) of TCGA 1992 and
subject to section 105(1) of that Act), and—
(a)
in a case within sub-paragraph (1)(b)(i), the securities acquired are
not therefore to be comprised in a separate holding of securities
45
within any of sections 119 to 121 of this Act, and
(b)
in a case within sub-paragraph (1)(b)(ii), the securities acquired are
not therefore to be regarded as comprised in a separate holding of
securities within section 440A of ICTA (including as applied).