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
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
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(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

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(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—
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(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
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(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—
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(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.
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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
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(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—
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Finance (No. 4) Bill
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(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
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(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
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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
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(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 57, 67(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)

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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
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(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.