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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)—

 
 

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

92

 

(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
Part 3 — Friendly societies carrying on long-term business

93

 

   

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
Part 3 — Friendly societies carrying on long-term business

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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
Part 3 — Friendly societies carrying on long-term business

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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.

 
 

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

96

 

(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

 
 

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

97

 

(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

 
 

 
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