Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Part 3 — Friendly societies carrying on long-term business
91

155
Meaning of “exempt” BLAGAB or eligible PHI business
(1)
In this Part “exempt” BLAGAB or eligible PHI business means BLAGAB or
eligible PHI business other than non-qualifying business.
(2)
Business is “non-qualifying” so far as it consists of—
(a)
the assurance of gross sums, or the granting of annuities, which meet
5
the conditions set out in the following table (which vary according to
the date on which the contracts in question were made), or
(b)
the effecting or carrying out of contracts for the assurance of gross sums
which are made on or after 20 March 1991 and which are expressed at
the outset not to be made in the course of exempt BLAGAB or eligible
10
PHI business.
(3)
This is the table mentioned above—

Contracts to which
Applicable limit for
Applicable limit for

assurance or annuities relate
premiums or gross sums
annuities

Contracts made on or
Assurance of gross sums
Granting of annuities

15

after 1 May 1995
under contracts under
of annual amounts

which the total premiums
exceeding £156

payable in any period of

12 months exceed £270

Contracts made on or
Assurance of gross sums
Granting of annuities

20

after 25 July 1991 but
under contracts under
of annual amounts

before 1 May 1995
which the total premiums
exceeding £156

payable in any period of

12 months exceed £200

Contracts made on or
Assurance of gross sums
Granting of annuities

25

after 1 September 1990 but
under contracts under
of annual amounts

before 25 July 1991
which the total premiums
exceeding £156

payable in any period of

12 months exceed £150

Contracts made on or
Assurance of gross sums
Granting of annuities

30

after 1 September 1987 but
under contracts under
of annual amounts

before 1 September 1990
which the total premiums
exceeding £156

payable in any period of

12 months exceed £100

Contracts made on or
Assurance of gross sums
Granting of annuities

35

after 14 March 1984 but
exceeding £750
of annual amounts

before 1 September 1987

exceeding £156

Contracts made before 14
Assurance of gross sums
Granting of annuities

March 1984
exceeding £500
of annual amounts

exceeding £104

40
(4)
In applying the limits in the above table in relation to the total premiums
payable in any period of 12 months (in the case of contracts made on or after 1
September 1987)—

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Part 3 — Friendly societies carrying on long-term business
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(a)
if the premiums are payable more frequently than annually, ignore an
amount equal to 10% of the premiums, and
(b)
ignore so much of any premium as is charged on the ground that an
exceptional risk of death or disability is involved.
(5)
In applying the limits in the above table in the case of contracts made on or after
5
1 September 1987, ignore any bonus or addition declared upon an annuity.
(6)
In applying the limits in the above table in the case of contracts made before 1
September 1987, ignore any bonus or addition which—
(a)
is declared upon the assurance of a gross sum or annuity, or
(b)
accrues upon the assurance of a gross sum or annuity by reference to an
10
increase in the value of any investments.
(7)
In the case of a contract for the assurance of a gross sum under exempt
BLAGAB or eligible PHI business made on or after 1 September 1987 but before
1 May 1995, there is a special rule if the amount payable by way of premium
under the contract is increased as a result of a variation made—
15
(a)
in the period beginning with 25 July 1991 and ending with 31 July 1992,
or
(b)
in the period beginning with 1 May 1995 and ending with 31 March
1996.
(8)
The rule is that, in relation to any profits relating to the contract as varied, the
20
contract is to be treated for the purposes of the above table as made at the time
of the variation.
156
Societies with no provision for assuring gross sums exceeding £2,000 etc
(1)
This section applies to a friendly society if its rules make no provision for it to
carry on BLAGAB or eligible PHI business, or other long-term business,
25
consisting of—
(a)
the assurance of gross sums exceeding £2,000, or
(b)
the granting of annuities of annual amounts exceeding £416.
(2)
The table in section 155 applies in relation to a friendly society to which this
section applies as if, in the final row of that table—
30
(a)
the reference to £500 were a reference to £2,000, and
(b)
the reference to £104 were a reference to £416.
(3)
If at any time a friendly society to which this section applies amends its rules
so as to cease to be such a friendly society, any part of its BLAGAB or eligible
PHI business which—
35
(a)
relates to contracts made before that time, and
(b)
immediately before that time was exempt BLAGAB or eligible PHI
business,

continues to be exempt BLAGAB or eligible PHI business for the purposes of
this Part.
40
(4)
If at any time a friendly society to which this section does not apply amends its
rules so as to become a friendly society to which this section applies, any part
of its BLAGAB or eligible PHI business which—
(a)
relates to contracts made before that time, and
(b)
immediately before that time was not exempt BLAGAB or eligible PHI
45
business,

Finance (No. 4) Bill
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continues not to be exempt BLAGAB or eligible PHI business for the purposes
of this Part.
(5)
If at any time a friendly society to which this section does not apply acquires
by way of transfer of engagements or amalgamation from another friendly
society any BLAGAB or eligible PHI business which—
5
(a)
relates to contracts made before that time, and
(b)
immediately before that time was exempt BLAGAB or eligible PHI
business,

that business continues to be exempt BLAGAB or eligible PHI business for the
purposes of this Part.
10
(6)
If at any time a friendly society to which this section applies acquires by way
of transfer of engagements or amalgamation from another friendly society any
BLAGAB or eligible PHI business which—
(a)
relates to contracts made before that time, and
(b)
immediately before that time was not exempt BLAGAB or eligible PHI
15
business,

that business continues not to be exempt BLAGAB or eligible PHI business for
the purposes of this Part.
157
Transfers to friendly societies
(1)
If at any time an insurance business transfer scheme transfers any long-term
20
business to a friendly society, any BLAGAB or eligible PHI business which
relates to contracts included in the transfer is subsequently not to be capable of
being exempt BLAGAB or eligible PHI business for the purposes of this Part.
(2)
This rule does not apply in relation to business relating to contracts to which
section 158 applied immediately before the transfer had effect.
25
158
Transfers from friendly societies to insurance companies etc
(1)
If at any time an insurance company acquires by way of transfer of
engagements from a friendly society any BLAGAB or eligible PHI business
which—
(a)
relates to contracts made before that time, and
30
(b)
immediately before that time was exempt BLAGAB or eligible PHI
business,

that business continues to be exempt from corporation tax (whether on income
or chargeable gains) on profits arising from it.
(2)
If at any time a friendly society ceases as a result of section 91 of FSA 1992
35
(conversion into company) to be registered under that Act, any part of its
BLAGAB or eligible PHI business which—
(a)
relates to contracts made before that time, and
(b)
immediately before that time was exempt BLAGAB or eligible PHI
business,
40

continues to be exempt from corporation tax (whether on income or chargeable
gains) on profits arising from it.
(3)
If contracts constituting or forming part of the business of a company covered
by this section are varied during an accounting period of the company so as to
increase the premiums payable under them, the business relating to those
45

Finance (No. 4) Bill
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contracts is not exempt from corporation tax for that or any subsequent
accounting period.
(4)
For the purposes of the Corporation Tax Acts any part of a company’s business
which is exempt from corporation tax as a result of this section is to be treated
as a separate business from any other business carried on by the company.
5
(5)
The Treasury may by regulations provide that, where any part of the business
of a company is exempt from corporation tax as a result of this section, the
Corporation Tax Acts have effect subject to such exceptions or other
modifications as they consider appropriate.
(6)
The regulations may make provision having retrospective effect.
10
(7)
The regulations may—
(a)
make different provision for different cases or circumstances, and
(b)
contain incidental, supplementary, consequential, transitional,
transitory or saving provision.
159
Exception in case of breach of maximum benefits payable to members
15
(1)
The exemption from corporation tax afforded by section 153, 156(3) or (5) or
158 does not apply in relation to so much of the profits arising to a friendly
society or insurance company from any business as is attributable to a policy
which—
(a)
is not a qualifying policy as a result of sub-paragraph (2) of paragraph
20
6 of Schedule 15 to ICTA and is not an excluded policy, and
(b)
would not be a qualifying policy as a result of that sub-paragraph if all
excluded policies were ignored.
(2)
A policy is an excluded policy if—
(a)
it is held otherwise than with the friendly society or insurance
25
company, or
(b)
the person who has the contract effecting the policy acquired the rights
under it on an assignment otherwise than for money or money’s worth.
(3)
This section does not withdraw the exemption from corporation tax afforded
by section 153, 156(3) or (5) or 158 in relation to profits arising from any part of
30
a business relating to contracts made on or before 3 May 1966.
Exempt BLAGAB or eligible PHI business: benefits payable by friendly societies etc
160
Maximum benefits payable to members
(1)
This section imposes restrictions on the entitlement of a person to have at any
time outstanding contracts with any one or more friendly societies, registered
35
branches or insurance companies (“relevant persons”) which are—
(a)
for the assurance of gross sums under business which is afforded
exemption from corporation tax under section 153, 156(3) or (5) or 158
(see subsections (2) and (3)), or
(b)
for the assurance by way of annuity under business which is afforded
40
exemption from corporation tax under any of those provisions (see
subsection (4)).

Finance (No. 4) Bill
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(2)
In the case of contracts for the assurance of gross sums made before 1
September 1987, a person is not entitled to have outstanding at any time with
relevant persons contracts which, taking them all together, are for the
assurance of more than £750 (but see subsection (9)).
(3)
In the case of contracts for the assurance of gross sums at least one of which
5
was made on or after that date, a person is not entitled to have outstanding at
any time with relevant persons—
(a)
contracts under which the total premiums payable in any period of 12
months exceed £270,
(b)
contracts made before 1 May 1995 under which the total premiums
10
payable in any period of 12 months exceed £200,
(c)
contracts made before 25 July 1991 under which the total premiums
payable in any period of 12 months exceed £150, or
(d)
contracts made before 1 September 1990 under which the total
premiums payable in any period of 12 months exceed £100.
15
(4)
In the case of contracts for the assurance by way of annuity, a person is not
entitled to have at any time outstanding with relevant persons contracts which,
taking them all together, are for the assurance of more than £156 (but see
subsection (9)).
(5)
In applying the limits in this section in relation to the total premiums payable
20
in any period of 12 months—
(a)
if the premiums are payable more frequently than annually, ignore an
amount equal to 10% of the premiums, and
(b)
ignore so much of any premium as is charged on the ground that an
exceptional risk of death or disability is involved.
25
(6)
In applying the limits in this section, ignore —
(a)
any bonus or addition which is declared upon an assurance of a gross
sum or annuity or which accrues upon an assurance of a gross sum or
annuity by reference to an increase in the value of any investments,
(b)
any policy of insurance or annuity contract by means of which the
30
benefits to be provided under an occupational pension scheme (within
the meaning of section 150(5) of FA 2004) are secured,
(c)
any annuity contract which constitutes, or is issued or held in
connection with, a registered pension scheme other than one within
paragraph (b), and
35
(d)
any increase in a benefit under a friendly society contract (within the
meaning given by section 6 of the Decimal Currency Act 1969) resulting
from the adoption of a scheme prescribed or approved under
subsection (3) of that section.
(7)
In the case of a contract for the assurance of a gross sum made on or after 1
40
September 1987 but before 1 May 1995, there is a special rule if the amount
payable by way of premium under the contract is increased as a result of a
variation made—
(a)
in the period beginning with 25 July 1991 and ending with 31 July 1992,
or
45
(b)
in the period beginning with 1 May 1995 and ending with 31 March
1996.

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(8)
The rule is that, in relation to times when the contract has effect as varied, the
contract is to be treated for the purposes of this section as made at the time of
variation.
(9)
If a person’s outstanding contracts with relevant persons were contracts which
were all made before 14 March 1984—
5
(a)
subsection (2) has effect as if the reference to £750 were a reference to
£2,000, and
(b)
subsection (4) has effect as if the reference to £156 were a reference to
£416.
161
Section 160: supplementary
10
(1)
This section makes further provision for the purposes of section 160 the
application of which depends on whether or not a friendly society is an old
society.
(2)
For the purposes of this Part an “old society” means—
(a)
a registered friendly society which was registered before 4 February
15
1966,
(b)
a registered friendly society which was registered in the period
beginning with that date and ending with 3 May 1966 and which on or
before 3 May 1966 carried on any life or endowment business (within
the meaning of section 29 of FA 1966), or
20
(c)
an incorporated friendly society which, before its incorporation, was a
registered friendly society within paragraph (a) or (b).
(3)
In applying the limits in section 160(3) in relation to the total premiums
payable in any period of 12 months, ignore £10 of the premiums payable under
any contract made before 1 September 1987 by an old society.
25
(4)
In applying the limits in section 160(3), the premiums under any contract for
an annuity which was made before 1 June 1984 by a friendly society other than
an old society are to be dealt with as if the contract were for the assurance of a
gross sum.
(5)
In applying the limits in section 160 in any case where a person has outstanding
30
with relevant persons one or more contracts made after 13 March 1984 and one
or more contracts made on or before that date, any contract for an annuity
which was made before 1 June 1984 by a friendly society other than an old
society is to be regarded—
(a)
as a contract for the annual amount concerned, and
35
(b)
as a contract for the assurance of a gross sum equal to 75% of the total
premiums which would be payable under the contract if it were to run
for its full term or, as the case may be, if the member concerned were to
die at the age of 75.
162
Section 160: statutory declarations
40
A friendly society, registered branch or insurance company may require a
person to make and sign a statutory declaration—
(a)
that the total amount assured under outstanding contracts entered into
by that person with any one or more friendly societies, registered
branches or insurance companies (taken together) does not exceed the
45
limits set out in section 160, and

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(b)
that the total premiums under those contracts do not exceed those
limits.
Exempt BLAGAB or eligible PHI business: directions to old societies
163
Directions given to old societies
(1)
HMRC Commissioners may give a direction under this section to an old
5
society.
(2)
The Commissioners may give the direction if—
(a)
the society begins to carry on exempt BLAGAB or eligible PHI business
or, in their opinion, begins to carry on exempt BLAGAB or eligible PHI
business on an enlarged scale or of a new character, and
10
(b)
it appears to them, having regard to the restrictions placed on
qualifying policies issued by friendly societies other than old societies
by paragraphs 3(1)(b) and 4(3)(b) of Schedule 15 to ICTA, that for the
protection of the revenue it is expedient to give the direction.
(3)
The direction is that (and has the effect that) the society is to be treated for the
15
purposes of this Part and Schedule 15 to ICTA as a friendly society other than
an old society with respect to business carried on after the date of the direction.
(4)
The society may appeal against the direction on the ground that—
(a)
it has not begun to carry on business as mentioned in subsection (2)(a),
or
20
(b)
the direction is not necessary for the protection of the revenue.
(5)
The appeal must be made within 30 days of the date on which the direction is
given.
(6)
If a registered friendly society in respect of which a direction is in force under
this section becomes an incorporated friendly society, the direction continues
25
to have effect, so that for the purposes of this Part and Schedule 15 to ICTA it
is treated as a friendly society other than an old society.
Exemption for other business
164
Societies registered before 1 June 1973, etc
(1)
A registered friendly society which is a qualifying society is not liable to pay
30
corporation tax (whether on income or chargeable gains) on its profits other
than those arising from—
(a)
life assurance business, or
(b)
PHI business comprised in BLAGAB or eligible PHI business.
(2)
A registered friendly society is a qualifying society if—
35
(a)
it was registered before 1 June 1973 (but see section 168 for
circumstances in which it ceases to be a qualifying society),
(b)
it is registered on or after that date and its business is limited to the
provision, in accordance with its rules, of benefits for or in respect of
employees of a particular employer or such other group of persons as
40
is for the time being approved for the purposes of this section by
HMRC Commissioners, or