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Finance (No. 4) Bill


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

98

 

(c)   

it is registered on or after that date but before 27 March 1974 and its

rules limit the total amount which may be paid by a member by way of

contributions and deposits to not more than £1 per month or such

greater amount as HMRC Commissioners may authorise for the

purposes of this section.

5

(3)   

For the purposes of this section a registered friendly society formed on the

amalgamation of two or more friendly societies is treated as registered before

1 June 1973 if, at the time of amalgamation, each of the societies amalgamated

was a qualifying society (but otherwise is treated as registered at that time).

(4)   

The exemption applies only if the society makes a claim.

10

165     

Incorporated friendly societies

(1)   

An incorporated friendly society which is a qualifying society is not liable to

pay corporation tax (whether on income or chargeable gains) on its profits

other than those arising from—

(a)   

life assurance business, or

15

(b)   

PHI business comprised in BLAGAB or eligible PHI business.

(2)   

An incorporated friendly society is a qualifying society if it falls within any of

cases A to C (but see section 168 for circumstances in which it ceases to be a

qualifying society).

(3)   

Case A is that, immediately before its incorporation, it was a registered friendly

20

society which was a qualifying society within the meaning of section 164.

(4)   

Case B is that—

(a)   

it was formed otherwise than by the incorporation of a registered

friendly society or the amalgamation of two or more friendly societies,

and

25

(b)   

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 is for the time being approved for the

purposes of this section by HMRC Commissioners.

(5)   

Case C is that—

30

(a)   

it was formed by the amalgamation of two or more friendly societies,

and

(b)   

at the time of the amalgamation each of the societies being

amalgamated was a qualifying society within the meaning of section

164 or this section.

35

(6)   

The exemption applies only if the society makes a claim.

(7)   

The exemption does not apply to any profits arising or accruing to the society

from, or by reason of its interest in, a body corporate—

(a)   

which is a subsidiary of the society (within the meaning of FSA 1992), or

(b)   

of which the society has joint control (within the meaning of FSA 1992).

40

166     

Transfers from friendly societies to insurance companies etc

(1)   

For the purposes of this Part “relevant other business” means any business

other than—

(a)   

life assurance business, or

 
 

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

99

 

(b)   

PHI business comprised in BLAGAB or eligible PHI business.

(2)   

If—

(a)   

at any time an insurance company acquires by way of transfer of

engagements from a friendly society any relevant other business, and

(b)   

immediately before that time the society was exempt from corporation

5

tax on profits arising from that business as a result of section 164 or 165,

   

the insurance company is exempt from corporation tax on its profits arising

from the relevant other business so far as relating to contracts made before that

time.

(3)   

If a friendly society—

10

(a)   

at any time ceases as a result of section 91 of FSA 1992 (conversion into

company) to be registered under that Act, and

(b)   

immediately before that time the society was, as a result of section 164

or 165, exempt from corporation tax on profits arising from any

relevant other business carried on by it,

15

   

the company into which the society is converted is exempt from corporation

tax on its profits arising from the relevant other business so far as relating to

contracts made before that time.

(4)   

If during an accounting period of a company there is an increase in the scale of

benefits which it undertakes to provide in the course of carrying on relevant

20

other business relating to contracts made before the time of transfer or

conversion, the company is not exempt from corporation tax as a result of this

section for that or any subsequent accounting period.

(5)   

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

25

as a separate business from any other business carried on by the company.

(6)   

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.

30

(7)   

The regulations may make provision having retrospective effect.

(8)   

The regulations may—

(a)   

make different provision for different cases or circumstances, and

(b)   

contain incidental, supplementary, consequential, transitional,

transitory or saving provision.

35

167     

Transfers between friendly societies

(1)   

If—

(a)   

at any time a friendly society acquires by way of transfer of

engagements or amalgamation from another friendly society any

relevant other business, and

40

(b)   

immediately before that time the transferor was exempt from

corporation tax on profits arising from that business as a result of

section 164 or 165,

   

the transferee is exempt from corporation tax on its profits arising from the

relevant other business so far as relating to contracts made before that time.

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

100

 

(2)   

If during an accounting period of the transferee there is an increase in the scale

of benefits which it undertakes to provide in the course of carrying on relevant

other business relating to contracts made before that time, the transferee is not

exempt from corporation tax as a result of this section for that or any

subsequent accounting period.

5

(3)   

If—

(a)   

at any time a friendly society acquires by way of transfer of

engagements or amalgamation from another friendly society any

relevant other business, and

(b)   

immediately before that time the transferor was not exempt from

10

corporation tax on profits arising from that business as a result of

section 164 or 165,

   

the transferee is not exempt from corporation tax on its profits arising from the

relevant other business so far as relating to contracts made before that time.

(4)   

The Treasury may by regulations provide that, where any part of the business

15

of a friendly society is, or is not, 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.

(5)   

The regulations may make provision having retrospective effect.

(6)   

The regulations may—

20

(a)   

make different provision for different cases or circumstances, and

(b)   

contain incidental, supplementary, consequential, transitional,

transitory or saving provision.

(7)   

Nothing in this section applies in relation to transfers or amalgamations taking

place before 21 July 2008.

25

168     

Withdrawal of qualifying status

(1)   

HMRC Commissioners may give a direction under this section to—

(a)   

a registered friendly society which is a qualifying society for the

purposes of section 164 as a result of its registration before 1 June 1973,

or

30

(b)   

an incorporated friendly society which is a qualifying society for the

purposes of section 165 as a result of falling within case A or C and

whose business and rules are not of a kind mentioned in section

164(2)(b) or (c).

(2)   

The Commissioners may give the direction if—

35

(a)   

the society begins to carry on relevant other business or, in their

opinion, begins to carry on relevant other business on an enlarged scale

or of a new character, and

(b)   

it appears to them, having regard to the restrictions imposed by section

164 on registered friendly societies registered on or after 1 June 1973,

40

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 ceases to be a

qualifying society as from the date of the direction.

(4)   

The society may appeal against the direction on the ground that—

45

 
 

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

101

 

(a)   

it has not begun to carry on business as mentioned in subsection (2)(a),

or

(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.

5

169     

Payments by non-qualifying societies treated as qualifying distributions

(1)   

This section applies if—

(a)   

a friendly society which is not a qualifying society makes a payment to

a member in respect of the member’s interest in the society,

(b)   

the payment is made in the course of relevant other business, and

10

(c)   

the payment exceeds the total amount of any sums paid by the member

to the society by way of contributions or deposits after deducting from

that total any relevant previous payment and any relevant earlier

repayment.

(2)   

The excess is treated for the purposes of corporation tax and income tax as a

15

qualifying distribution.

(3)   

In this section—

(a)   

the reference to a relevant previous payment is to the amount of any

previous payment made by the society to the member in respect of the

member’s interest in the society, and

20

(b)   

the reference to a relevant earlier repayment is to the amount of any

earlier repayment of sums paid by the member to the society by way of

contributions or deposits.

(4)   

In the case of an incorporated friendly society which, immediately before its

incorporation, was a registered friendly society which was not a qualifying

25

society—

(a)   

references in this section to payments (or repayments) to or from the

society include payments (or repayments) to or from the registered

friendly society, but

(b)   

subsection (3)(a) does not apply to a payment made before 27 March

30

1974 or, if the registered friendly society was previously a qualifying

society but ceased to be one as a result of a direction given to it under

section 168(1)(a), a payment made on or before such later date as was

specified in the direction.

(5)   

In the case of any other incorporated friendly society which was previously a

35

qualifying society but ceased to be one as a result of a direction given to it

under section 168(1)(b), subsection (3)(a) does not apply to a payment made on

or before the date specified in the direction.

(6)   

In the case of a registered friendly society, subsection (3)(a) does not apply to—

(a)   

a payment made before 27 March 1974, or

40

(b)   

if the society was previously a qualifying society but ceased to be one

as a result of a direction given to it under section 168(1)(a), a payment

made on or before such later date as was specified in the direction.

(7)   

For the purposes of this section—

 
 

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

102

 

(a)   

a registered friendly society is not a qualifying society at any time if, at

that time, it is not a qualifying society within the meaning of section

164, and

(b)   

an incorporated friendly society is not a qualifying society at any time

if, at that time, it is not a qualifying society within the meaning of

5

section 165.

Miscellaneous

170     

Transfer schemes under s.6(5) of FSA 1992

(1)   

This section applies if assets of a branch of a registered friendly society have

been identified in a scheme under section 6(5) of FSA 1992 (property, rights etc

10

excluded from transfer to the society on its incorporation).

(2)   

In relation to any time after the incorporation of the society, the assets are to be

treated for the purposes of the Tax Acts as assets of the society (and,

accordingly, any corporation tax or income tax liability arising in respect of

them is a liability of the society rather than of the branch).

15

(3)   

If, as a result of this section, corporation tax or income tax in respect of any of

the assets becomes chargeable on and is paid by the society, the society may

recover from the trustees in whom those assets are vested the amount of the tax

paid.

171     

Exemption for unregistered friendly societies

20

(1)   

A friendly society which is neither a registered friendly society nor an

incorporated friendly society is not liable to pay corporation tax (whether on

income or chargeable gains) on its profits if its income does not exceed £160 a

year.

(2)   

The exemption applies only if the society makes a claim.

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Interpretation

172     

Minor definitions

(1)   

In this Part—

“friendly society”, without qualification, means (except in section 171) a

registered friendly society or an incorporated friendly society,

30

“incorporated friendly society” means a society incorporated under FSA

1992,

“policy”, in relation to BLAGAB or eligible PHI business, includes an

instrument evidencing a contract to pay an annuity upon human life,

“registered branch” has the same meaning as in FSA 1992 (and includes

35

any branch that as a result of section 96(3) of FSA 1992 is treated as a

registered branch), and

“registered friendly society” has the same meaning as in FSA 1992 (and

includes any society that as a result of section 96(2) of FSA 1992 is

treated as a registered friendly society).

40

(2)   

Any other expression which is used in this Part and in Part 2 has the same

meaning in this Part as in that Part.

 
 

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

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(3)   

References in this Part to a friendly society include, in the case of a registered

friendly society, references to any branch of that society.

(4)   

It is declared that for the purposes of this Part (except where provision to the

contrary is made) a friendly society formed on the amalgamation of two or

more friendly societies is treated as different from the amalgamated societies.

5

(5)   

A registered friendly society formed on the amalgamation of two or more

friendly societies is treated for the purposes of this Part as registered not later

than 3 May 1966 if at the time of the amalgamation—

(a)   

all the societies amalgamated were registered friendly societies eligible

for the exemption conferred by section 153, and

10

(b)   

at least one of them was an old society,

   

or, if the amalgamation took place before 19 March 1985, the society was

treated as registered not later than 3 May 1966 as a result of the proviso to

section 337(4) of the Income and Corporation Taxes Act 1970.

(6)   

An incorporated friendly society formed on the amalgamation of two or more

15

friendly societies is treated for the purposes of this Part as a society which,

before its incorporation, was a registered friendly society registered not later

than 3 May 1966 if at the time of the amalgamation—

(a)   

all the societies amalgamated were registered friendly societies eligible

for the exemption conferred by section 153, and

20

(b)   

at least one of them was an old society.

173     

Abbreviations

(1)   

In this Part—

“FSA 1992” means the Friendly Societies Act 1992, and

“FISMA (Regulated Activities) Order 2001” means the Financial Services

25

and Markets Act 2000 (Regulated Activities) Order 2001.

(2)   

For abbreviations of other Acts, see section 226.

174     

Index of defined terms

In this Part the following expressions are defined or otherwise explained by the

provisions indicated—

30

 

Expression

Where explained

 
 

basic life assurance and general annuity

sections 5767(5) and

 
 

business (abbreviated to “BLAGAB”)

172(2)

 
 

BLAGAB or eligible PHI business

section 154

 
 

contract of insurance

sections 64 and 172(2)

 

35

 

exempt BLAGAB or eligible PHI business

section 155

 
 

friendly society

section 172(1)

 
 

HMRC Commissioners

sections 139(1) and 172(2)

 
 

incorporated friendly society

section 172(1)

 
 
 

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

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Expression

Where explained

 
 

insurance business transfer scheme

sections 139(1) and 172(2)

 
 

insurance company

sections 65 and 172(2)

 
 

life assurance business

sections 56 and 172(2)

 
 

long-term business

sections 63(1) and 172(2)

 

5

 

old society

section 161(2)

 
 

PHI business

sections 63(2) and 172(2)

 
 

policy

section 172(1)

 
 

registered

section 172(5) and (6)

 
 

registered branch

section 172(1)

 

10

 

registered friendly society

section 172(1) and (3)

 
 

relevant other business

section 166

 
 

re-insurance

sections 139(1) and 172(2)

 
 

Regulations

175     

Regulations

15

(1)   

Any power of the Treasury to make any regulations under this Part is

exercisable by statutory instrument.

(2)   

Any statutory instrument containing any regulations made by the Treasury

under this Part is subject to annulment in pursuance of a resolution of the

House of Commons.

20

(3)   

Nothing in this Part that authorises the inclusion of any particular kind of

provision in any regulations under this Part is to be read as restricting the

generality of the provision that may be included in the regulations.

Consequential amendments and transitional provision

176     

Consequential amendments

25

Schedule 18 contains consequential amendments.

177     

Transitional provision

Schedule 19 contains transitional provision in connection with the coming into

force of this Part.

 
 

 
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Revised 28 March 2012