Finance (No. 4) Bill (HC Bill 325)

(b) in paragraph (b), for “section 76(12) of ICTA (unrelieved expenses carried forward)” substitute “section 73 of FA 2012 as excess BLAGAB expenses”.

(3) In subsection (2), for “section 76(12) of ICTA” substitute “section 73 of FA 2012 as excess BLAGAB expenses”.

(4) In subsection (3), for paragraph (b) substitute—

“(b) taken into account in calculating for the purposes of section 73 of FA 2012 the amount of adjusted BLAGAB management expenses of the company for the relevant accounting period as a result of—

(i) the previous application of section 73 or 93 of FA 2012, or

(ii) the carry forward to the relevant accounting period of an amount under section 391 of this Act (surplus deficit).”

(5) In subsection (4), for “qualifying life assurance business loss” substitute “qualifying BLAGAB loss”.

(6) In the heading, for ““qualifying life assurance business loss”” substitute ““qualifying BLAGAB loss””.

203 In section 1166(1) (amount of tax credit)—

(a) for “life assurance company tax credit” substitute “BLAGAB tax credit”, and

(b) for “qualifying life assurance business loss” substitute “qualifying BLAGAB loss”.

204 In section 1167(1) and (3)(a) (payment of tax credit etc), for “a life assurance company tax credit” substitute “a BLAGAB tax credit”.

205 (1) Section 1168 (restriction on carrying forward expenses payable where tax credit claimed) is amended as follows.

(2) In subsection (1), for “a life assurance company tax credit” substitute “a BLAGAB tax credit”.

(3) In subsection (2)—

(a) for “section 76 of ICTA” substitute “section 73 of FA 2012”,

(b) for “subsection (12) of that section” substitute “that section as excess BLAGAB expenses”, and

(c) for “Step 7 in subsection (7) of that section” substitute “step 5 in section 76 of FA 2012”.

(4) In subsection (3), for “qualifying life assurance business loss” substitute “qualifying BLAGAB loss”.

206 In section 1169(2) (artificially inflated claims for relief or tax credit)—

(a) in paragraph (c), for “life assurance business” substitute “basic life assurance and general annuity business”, and

(b) in paragraph (d), for “life assurance company tax credits” substitute “BLAGAB tax credits”.

207 After section 1223 insert—

“1223A Exception for basic life assurance and general annuity business

(1) Sections 1219 to 1223 do not apply in relation to an accounting period of an insurance company with investment business so far as the business consists of basic life assurance and general annuity business.

(2) See instead the rules set out in Chapter

3

of Part

2

of FA 2012.”

208 (1) Section 1251 (car hire) is amended as follows.

(2) In subsection (3), after “subsection (2)” insert “(including as applied by section 82(4) of FA 2012)”.

(3) In subsection (5)—

(a) at the end of paragraph (a) insert “or”, and

(b) omit paragraph (c) (together with the “or” before that paragraph).

209 In section 1288(4) (unpaid remuneration)—

(a) in paragraph (a), after “business),” insert “including as applied by section 82 of FA 2012”, and

(b) omit paragraph (b) (together with the “and” before it).

210 (1) Section 1297 (life assurance business) is amended as follows.

(2) In subsection (1), for “section 76 of ICTA applies (expenses of companies carrying on life assurance business)” substitute “the I - E rules apply”.

(3) In subsection (2), for “section 86 of FA 1989” substitute “section 79 of FA 2012”.

(4) In subsection (4)—

(a) for “purposes of section 86 of FA 1989” substitute “purpose of calculating the adjusted BLAGAB management expenses of the company for the purposes of section 73 of FA 2012”, and

(b) for “payable for that period which fall to be included at Step 1 in section 76(7) of ICTA” substitute “debited, in accordance with generally accepted accounting practice, in the accounts drawn up by the company for that period”.

(5) In subsection (5)(a), for “an amount being brought into account under section 76 of ICTA as expenses payable” substitute “an amount constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012”.

(6) For the heading substitute “Basic life assurance and general annuity business”.

211 In section 1298(2) (business entertainment and gifts), for paragraph (c) substitute—

“(c) expenses to which this section applies are not to be regarded as constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012.”

212 In section 1304 (crime-related payments), for subsection (3) substitute—

“(3) Expenses to which subsection (4) or (5) applies are not to be regarded as constituting ordinary BLAGAB management expenses of a company for the purposes of section 76 of FA 2012.”

213 (1) Schedule 2 (transitionals and savings) is amended as follows.

(2) In paragraph 139—

(a) in sub-paragraph (3), for the words from “Section 76ZE” to “section 75)” substitute “Section 81(4) of FA 2012 (which, in the case of companies carrying on basic life assurance and general annuity business, applies section 75(2) to (4))”,

(b) in that sub-paragraph, for “condition in subsection (1) of that section” substitute “conditions in paragraphs (a) and (b) of that subsection”, and

(c) in sub-paragraph (4), for “and section 76ZE of ICTA” substitute “(including as applied by section 81(4) of FA 2012)”.

(3) In paragraph 140(1)(b), for “section 76ZL of ICTA” substitute “the application by section 82 of FA 2012 of section 1249(1) to (3) of this Act”.

214 In Schedule 4 (index of defined expressions)—

(a) in the entry for “basic life assurance and general annuity business”, for “section 431F of ICTA (as applied by section 431(2) of that Act)” substitute “sections 57 and 67(5) of FA 2012 (as applied by section 141(2) of that Act)”,

(b) omit the entry for “deposit back arrangements”,

(c) omit the entry for “gross roll-up business”,

(d) in the entry for “the I minus E basis”, for “I minus E basis” substitute “I - E rules” and for “section 431(2) of ICTA” substitute “section 70(1)and (2) of FA 2012 (as applied by section 141(2) of that Act)”,

(e) in the entry for “insurance business transfer scheme”, for “section 431(2) of ICTA” substitute “section 139(1) of FA 2012 (as applied by section 141(2) of that Act)”,

(f) in the entry for “insurance company”, for “section 431(2) of ICTA” substitute “section 65 of FA 2012 (as applied by section 141(2) of that Act)”,

(g) omit the entry for “the Insurance Prudential Sourcebook”,

(h) in the entry for “life assurance business”, for “section 431(2) of ICTA” substitute “section 56 of FA 2012 (as applied by section 141(2) of that Act)”,

(i) omit the entry for “linked assets”,

(j) in the entry for “long-term business”, for “section 431(2) of ICTA” substitute “section 63 of FA 2012 (as applied by section 141(2) of that Act)”,

(k) omit the entry for “long-term insurance fund”,

(l) in the entry for “overseas life insurance company”, for “section 431(2) of ICTA” substitute “section 139(1) of FA 2012 (as applied by section 141(2) of that Act)”, and

(m) omit the entry for “qualifying overseas transfer”.

Corporation Tax Act 2010

215 CTA 2010 is amended as follows.

216 In section 17(3) (interpretation of Chapter: meaning of “carried-forward amount”)—

(a) in paragraph (f), for “section 76(12) or (13) of ICTA (certain expenses of insurance companies)” substitute “section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies)”, and

(b) omit paragraph (g).

217 In section 54(2) (non-UK resident company: receipts of interest, dividends or royalties), for the words from “any of these provisions—” to the end substitute “section 37 or 45”.

218 In Chapter 4 of Part 4 (property losses), after section 67A insert—

“Insurance companies

67B Exclusion in the case of property businesses of insurance companies

(1) This Chapter does not apply for the purpose of applying the I - E rules in relation to a loss made by an insurance company in any of its separate UK property businesses or overseas property businesses within section 86(4) of FA 2012.

(2) But in the case of a loss which is referable, in accordance with Chapter

4

of Part

2

of that Act, to the company’s basic life assurance and general annuity business, see section 87(3) and (4) of that Act.”

219 In section 606(5) (groups), in the definition of “insurance company”, for “section 431(2) of ICTA” substitute “section 65 of FA 2012”.

220 (1) Section 783 (treatment of payer of manufactured dividend) is amended as follows.

(2) In subsection (6), for the words from “as if” to the end substitute “for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the accounting period in which it is paid.”

(3) In subsection (7)—

(a) in paragraph (a), for “under section 432A of ICTA” substitute “in accordance with Chapter

4

of Part

2

of FA 2012”, and

(b) in paragraph (b), for “under section 432A of ICTA” substitute “in accordance with that Chapter”.

221 (1) Section 785 (treatment of payer: REITs) is amended as follows.

(2) In subsection (4), for the words from “as if” to the end substitute “for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the accounting period in which it is paid.”

(3) In subsection (5)(b), for “under section 432A of ICTA” substitute “in accordance with Chapter

4

of Part

2

of FA 2012”.

222 (1) Section 791 (treatment of payer of manufactured overseas dividend) is amended as follows.

(2) In subsection (6), for the words from “as if” to the end substitute “for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the accounting period in which it is paid.”

(3) In subsection (7)—

(a) in paragraph (a), for “under section 432A of ICTA” substitute “in accordance with Chapter

4

of Part

2

of FA 2012”, and

(b) in paragraph (b), for “under section 432A of ICTA” substitute “in accordance with that Chapter”.

223 In section 799(5) (manufactured payments under arrangements with unallowable purpose), for paragraph (a) substitute—

“(a) section 77(4)(e) or (f) of FA 2012 (ordinary BLAGAB management expenses: excluded amounts),”.

224 In section 835(2) (transferor or associate becomes liable for payment of rent), for paragraph (c) substitute—

“(c) a deduction is allowed for the payment by taking it into account in the calculation at step 1 of section 76 of FA 2012 (management expenses of insurance companies carrying on basic life assurance and general annuity business).”

225 In section 836(2) (transferor or associate becomes liable for payment other than rent), for paragraph (c) substitute—

“(c) a deduction is allowed for the payment by taking it into account in the calculation at step 1 of section 76 of FA 2012

(management expenses of insurance companies carrying on basic life assurance and general annuity business).”

226 (1) Section 839 (deduction under section 76 of ICTA not to exceed commercial rent) is amended as follows.

(2) In subsection (1), for “the deduction under section 76 of ICTA allowed for” substitute “the amount to be taken into account as mentioned in section 835(2)(c) or 836(2)(c) in respect of”.

(3) In subsection (3), for “The deduction” substitute “The amount of the payment to be taken into account”.

(4) In the heading, omit “under section 76 of ICTA”.

227 (1) Section 840 (carrying forward parts of payments) is amended as follows.

(2) In subsection (2), for “allowed as a deduction under section 76 of ICTA is not allowed” substitute “taken into account as mentioned in section 835(2)(c) or 836(2)(c) is not taken into account”.

(3) In subsection (4), for “a deduction under section 76 of ICTA” substitute “the calculation at step 1 of section 76 of FA 2012”.

(4) In subsection (5), for “allowed as a deduction under section 76 of ICTA” substitute “taken into account in the calculation at step 1 of section 76 of FA 2012”.

228 In section 860 (relevant corporation tax relief), for paragraph (d) (but not the “and” at the end of that paragraph) substitute—

“(d) a deduction of an amount which for the purposes of section 73 of FA 2012 is an amount of adjusted BLAGAB management expenses of an insurance company for an accounting period,”.

229 In section 886 (relevant tax relief), for paragraph (c) substitute—

“(c) a deduction of an amount which for the purposes of section 73 of FA 2012 is an amount of adjusted BLAGAB management expenses of an insurance company for an accounting period,”.

230 In section 1171(2) (powers under orders and regulations excluded from general provision)—

(a) omit the “and” before paragraph (g), and

(b) after that paragraph insert “, and

(h) Parts

2

and

3

of FA 2012.”

231 In section 1173(2) (miscellaneous charges), in Part 3 of the table, omit—

(a) the entry relating to section 436A(1) of ICTA,

(b) the entry relating to section 442A(1) of ICTA,

(c) the entry relating to section 85(1) of FA 1989, and

(d) the entry relating to section 85A(1) of FA 1989.

Taxation (International and Other Provisions) Act 2010

232 TIOPA 2010 is amended as follows.

233 In section 43(7) (profits attributable to permanent establishments for purposes of section 42(2)), omit “(within the meaning given by section 431(2) of ICTA)”.

234 In section 72(2) (application of section 73(1)), omit paragraph (b) (together with the “or” before it).

235 In section 96(1) (companies with overseas branches: restriction of credit)—

(a) omit “or section 436A of ICTA”,

(b) omit “, calculated in accordance with the provisions applicable for the purposes of section 35 of CTA 2009,” and

(c) for “life assurance business or gross roll-up business” substitute “non-BLAGAB long-term business”.

236 For section 97 substitute—

“97 Companies with more than one category of business: restriction of credit

(1) This section applies if—

(a) an insurance company carries on more than one category of long-term business in an accounting period, and

(b) there arises to the company in that period any income or gain (“the relevant income”) in respect of which credit for foreign tax is to be allowed under the arrangements.

(2) The amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable, in accordance with Part

2

of FA 2012, to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with subsection (3), is attributable to that category of business.

(3) The fraction of the foreign tax that is attributable to the category of business in question is the fraction given by—

where—

97A Commercial allocation of relevant income to different categories of long-term business

(1) The amount of the relevant income that, for the purposes of section 97, is to be regarded as referable to a category of business is to be determined in accordance with an acceptable commercial method adopted by the company for the period of account in which the relevant income arises.

(2) A method is an “acceptable commercial method” if, in all the circumstances, it can reasonably be regarded as providing a fair method for the purposes of section 97 for determining for a period of

account the amount of any income or gain arising in the period that is referable to a particular category of long-term business carried on by the company.

(3) The Treasury may make regulations for the purposes of this section—

(a) prescribing cases in which a method is, or is not, to be regarded as an acceptable commercial method, and

(b) prescribing cases in which the only acceptable commercial method is to be a method prescribed, or of a description prescribed, in the regulations.

(4) Subject to any provision made by regulations under subsection (3), the method adopted for the purposes of this section for a period of account must be consistent with the method adopted for the purposes of section 98 or 115 of FA 2012 for that period.”

237 Omit section 98 (attribution for section 97 purposes if category is gross roll-up business).

238 In section 99(7) (allocation of expense etc in calculations under section 35 of CTA 2009), for “98” substitute “97A”.

239 Omit section 102 (interpreting sections 99 to 101 for life assurance or gross roll-up business).

240 (1) Section 103 (interpreting sections 99 to 101 for other insurance business) is amended as follows.

(2) In subsection (1), omit the words from “if” to the end.

(3) In the heading, omit “for other insurance business”.

241 In section 104(3) (interpreting sections 100 and 101: amounts referable to category of business), for “98” substitute “97A”.

242 In section 269(6) (insurance activities and insurance-related activities), in the definition of “contract of insurance”, for “has the same meaning as in Chapter 1 of Part 12 of ICTA” substitute “has the meaning given by section 64 of FA 2012”.

243 In section 310(2) (meaning of “carried-forward amount”)—

(a) in paragraph (a), for “section 76(12) or (13) of ICTA (certain expenses of insurance companies)” substitute “section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies)”, and

(b) omit paragraph (b).

244 In Part 1 of Schedule 11 (index of defined expressions used in Parts 2 and 3 of Act), insert the following entries at the appropriate places—

Finance Act 2011

245 FA 2011 is amended as follows.

246 In paragraph 73(2) of Schedule 19 (bank levy: meaning of “excluded entity”), for “meaning given by section 431(2) of ICTA” substitute “meanings given by sections 65 and 139 of FA 2012 respectively”.

Part 4 Consequential repeals

247 In consequence of the amendments made by Parts 1 to 3 of this Schedule (or previous amendments made by other enactments), omit the following provisions—

(a) in FA 1989—

(i) section 84(4), and

(ii) Schedule 8,

(b) in FA 1990—

(i) sections 41 and 42,

(ii) section 45(1) to (7) and (9) to (11),

(iii) section 48,

(iv) paragraphs 1, 4 and 8 of Schedule 6,

(v) Schedule 7, and

(vi) paragraphs 4 and 7 of Schedule 9,

(c) in FA 1991—

(i) paragraphs 5 and 12 of Schedule 7, and

(ii) paragraph 15 of Schedule 15,

(d) in TCGA 1992, paragraph 14(22) to (24) of Schedule 10,

(e) in FA 1993, section 103(1) and (3),

(f) in FA 1995—

(i) section 51,

(ii) Schedule 8, and

(iii) paragraph 1 of Schedule 9,

(g) in FA 1996—

(i) section 163,

(ii) section 167(3) and (10),

(iii) section 168(2),

(iv) paragraph 23 of Schedule 14,

(v) Schedule 31, and

(vi) Schedule 33,

(h) in FA 1997, section 67,

(i) in FA 1998—

(i) section 123(5)(a), and

(ii) paragraph 39 of Schedule 5,

(j) in FA 2000, sections 108 and 109,

(k) in FA 2003, paragraphs 1, 2, 5, 8, 10, 12, 20, 22 to 24 and 29 of Schedule 33,

(l) in FA 2004—

(i) sections 40 and 41,

(ii) section 44,

(iii) Schedule 6,

(iv) paragraphs 5, 8 and 9(2) of Schedule 7, and

(v) paragraph 20 of Schedule 35,

(m) in F(No.2)A 2005, paragraphs 1 to 3, 5, 10, 12 to 15, 17 and 18 of Schedule 9,

(n) in ITTOIA 2005, paragraphs 176 and 178 of Schedule 1,

(o) in FA 2006—

(i) section 86, and

(ii) Schedule 11,

(p) in FA 2007—

(i) paragraphs 3, 6, 8 to 14, 16, 17, 19, 21 to 23, 25, 26, 31 to 33, 35 to 38, 57 to 59 and 80 to 84 of Schedule 7,

(ii) paragraphs 2 to 6, 8, 9, 11 to 16, 28 and 29 of Schedule 8,

(iii) paragraphs 1(1) and (3), 3(1) and (3), 4 to 8, 10, 11(3), 12, 15 and 16 of Schedule 9, and

(iv) paragraphs 2(1), 4, 11 to 13 and 15(1) to (3) of Schedule 10,

(q) in FA 2008—

(i) paragraph 2 of Schedule 14, and

(ii) paragraphs 1, 2, 4 to 6, 8, 9(2) and (3), 10, 11, 17, 18, 20 to 22, 26, 28(3) and (4), 31 to 34 and 37 of Schedule 17,

(r) in CTA 2009, paragraphs 30 to 44, 126 to 154, 282, 307(3)(a) and 341 to 351 of Schedule 1,

(s) in FA 2009—

(i) section 46,

(ii) paragraph 24 of Schedule 7,

(iii) paragraph 60 of Schedule 11, and

(iv) paragraphs 1 to 7 of Schedule 23,

(t) in CTA 2010, paragraphs 9, 10, 42 to 51, 213 and 214 of Schedule 1,

(u) in FA 2010, section 47,

(v) in F(No.2)A 2010, section 9,

(w) in F(No.3)A 2010, section 15,

(x) in TIOPA 2010, paragraph 34 of Schedule 8, and

(y) in FA 2011, section 56.

Section 147

SCHEDULE 17 Part

2

: transitional provision

Part 1 Deemed receipts or expenses

General outline of the provision of this Part of this Schedule

1 (1) This Part of this Schedule makes provision, by reference to the 2012 balance sheet and the 2012 periodical return of an insurance company (see paragraphs 2 to 4), for deeming amounts to be receipts or expenses of basic life assurance and general annuity business, or non-BLAGAB long-term business, carried on by the company (see paragraphs 9(1) and (2) and 10(1)and (2)).

(2) Those amounts are determined in accordance with provision made by or under paragraphs 5 to 8.

(3) The deeming is to have effect for the purpose of calculating the BLAGAB trade profit or loss or (as the case may be) for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business (see paragraphs 9(3) and 10(3)).

(4) The general rule is that, subject to exceptions, the receipts or expenses are treated as arising over a 10-year period (see paragraphs 11 to 15).

(5) Special provision is made in relation to the operation of sections 83YC to 83YF of FA 1989 (see paragraph 16).

(6) Anti-avoidance provision is made by paragraphs 17 to 19.

(7) Provision in relation to overseas life insurance companies is made by paragraph 20.

Basic concepts

2 In this Part of this Schedule—

• “the 2012 balance sheet”, in relation to an insurance company, means—

  (a)

  an actual balance sheet of the company drawn up as at the end of 31 December 2012 in accordance with generally accepted accounting practice, or

  (b)

  a deemed balance sheet of the company under paragraph 3, and

• “the 2012 periodical return”, in relation to an insurance company, means—

  (a)

  an actual periodical return of the company covering a period ending immediately before 1 January 2013, or

  (b)

  a deemed periodical return of the company under paragraph 4.

3 (1) This paragraph applies if an insurance company does not have a balance sheet drawn up as at the end of 31 December 2012 in accordance with generally accepted accounting practice.

(2) For the purposes of this Part of this Schedule the company is deemed to have drawn up a balance sheet as at the end of 31 December 2012 in accordance with generally accepted accounting practice.

(3) For the purposes of this Part of this Schedule the entries shown in this deemed balance sheet are deemed to be those entries which would have been shown in an actual balance sheet of the company drawn up as mentioned in sub-paragraph (1).

(4) The generally accepted accounting practice that is to be applicable for the purposes of sub-paragraphs (2) and (3) is the practice that is actually adopted for the accounts of the company drawn up for the period in which 31 December 2012 falls.

4 (1) This paragraph applies if an insurance company does not have a periodical return covering a period ending immediately before 1 January 2013.

(2) For corporation tax purposes the company is deemed to have a periodical return covering the period—

(a) beginning immediately after the last period ending before 1 January 2013 that is covered by a periodical return of the company, and

(b) ending immediately before 1 January 2013.

(3) This deemed periodical return is deemed to contain such entries as would be included in an actual periodical return of the company covering the period beginning and ending as mentioned in sub-paragraph (2)(a) and (b).

(4) For corporation tax purposes the period beginning and ending as mentioned in sub-paragraph (2)(a) and (b) is deemed to be a period of account of the company.

The comparison etc

5 (1) In the case of an insurance company, a comparison must be made between—

(a) the amount attributed to shareholders as at 31 December 2012 (see sub-paragraphs (2) to (4)), and

(b) the cumulative taxed surplus as at 31 December 2012 (see sub-paragraph (5) and (6)).

(2) The amount attributed to shareholders as at 31 December 2012 is—

(a) the amount shown in line 75 of Form 14 of the 2012 periodical return in respect of the whole of the company’s long-term business, less

(b) the amount (if any) shown in the 2012 balance sheet of the company in respect of the fund for future appropriations or unallocated divisible surplus.

(3) In prescribed cases the amount attributed to shareholders as at 31 December 2012 is to be found by making prescribed adjustments to the amount found by sub-paragraph (2)(a) and (b).

(4) In sub-paragraph (3) “prescribed” means prescribed, or of a description prescribed, by regulations made by the Treasury.

(5) The cumulative taxed surplus as at 31 December 2012 is found by adding together the amounts (if any) found by the following paragraphs—

(a) the amount shown in line 13 of Form 14 of the 2012 periodical return in respect of the whole of the company’s long-term business but excluding the amount representing any undistributed demutualisation surplus of the company for the period of account ending immediately before 1 January 2013, and

(b) the total amount brought into account for any period of account of the company as a result of section 83YA(3) of FA 1989 less the total amount brought into account for any period of account as a result of section 83YA(4) of FA 1989 (changes in value of assets brought into account: non-profit companies).

(6) In sub-paragraph (5)(a) “undistributed demutualisation surplus” means the undistributed demutualisation surplus of the company for the period of account in question for the purposes of section 444AF of ICTA.

(7) The difference between the amount attributed to shareholders as at 31 December 2012 and the cumulative taxed surplus as at 31 December 2012 is referred to in this Part of this Schedule as “the total transitional difference”.

(8) If the amount attributed to shareholders as at 31 December 2012 exceeds the cumulative taxed surplus as at 31 December 2012, the total transitional difference is a positive figure.

(9) If the cumulative taxed surplus as at 31 December 2012 exceeds the amount attributed to shareholders as at 31 December 2012, the total transitional difference is a negative figure.

6 (1) The insurance company—

(a) must, by comparing amounts shown in the 2012 periodical return with amounts shown in the 2012 balance sheet, determine the particular items that, when taken together, result in the total transitional difference, and

(b) must allocate a positive or negative amount to each of those items.

(2) The positive or negative amounts allocated to those items in accordance with this paragraph must, when added together, equal the total transitional difference.

(3) The Treasury may make regulations prescribing—

(a) the way in which the comparison or determination under sub-paragraph (1)(a) must be done, and

(b) the method for making the allocation under sub-paragraph (1)(b).

(4) The provision that may be made by regulations under sub-paragraph (3)(a)includes provision prescribing descriptions of amounts which are, or are not, to be compared with each other.

7 (1) Each of the items determined in accordance with paragraph 6(1)(a) is a “relevant computational item” for the purposes of this Part of this Schedule except in so far as it consists of an excluded item.

(2) An item is “an excluded item” in so far as it—

(a) represents an amount forming part of the company’s deferred acquisition costs which is included in its 2012 balance sheet and

which has been taken into account in calculating its life assurance trade profits,

(b) represents an amount which is included in the company’s 2012 balance sheet as an asset in respect of the value of future profits arising from a business (or part of a business) transferred to the company (but excluding an asset so far as it is regarded for accounting purposes as internally-generated),

(c) represents an outstanding contingent loan or an outstanding re-insurance amount,

(d) represents an asset to which Part 8 of CTA 2009 (intangible fixed assets) applies for an accounting period of the company beginning on or after 1 January 2013, or

(e) falls within a description of item excluded for the purposes of this paragraph by regulations made by the Treasury.

(3) In sub-paragraph (2) (c) “outstanding contingent loan” means the total amount of the credits brought into account by the company as part of total income—

(a) for the period of account ending immediately before 1 January 2013, or

(b) for any earlier period of account,

in respect of money debts so far as those debts have not been repaid before that date.

(4) In sub-paragraph (2) (c) “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 company’s life assurance trade profits—

(a) for the period of account ending immediately before 1 January 2013, or

(b) for any earlier period of account,

in respect of the re-insurance of relevant liabilities (within the meaning of section 83YC of FA 1989) to the extent that they have not ceased to be re-insured before that date.

(5) In this paragraph “life assurance trade profits” means profits arising from life assurance business calculated 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).

(6) For any accounting period beginning on or after 1 January 2013, an amount is not to be taken into account—

(a) in calculating the BLAGAB trade profit or loss of any basic life assurance and general annuity business, or

(b) in calculating for corporation tax purposes the profits of non-BLAGAB long-term business,

in so far as the amount consists of an excluded item as a result of falling within sub-paragraph (2) (a) to (d) or, in a case where the regulations provide for the application of this sub-paragraph, within sub-paragraph (2) (e).

8 (1) Each relevant computational item must be apportioned between—

(a) any basic life assurance and general annuity business carried on by the company as at 31 December 2012,

(b) any gross roll-up business carried on by the company as at that date, and

(c) any PHI business carried on by the company as at that date.

(2) The Treasury may make regulations for apportioning for the purposes of this Part of this Schedule relevant computational items between those businesses (including provision for the whole amount of a relevant computational item to be apportioned to one of those businesses).

(3) A relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company’s basic life assurance and general annuity business or gross roll-up business is dealt with in accordance with paragraph 9 or 10.

(4) But a relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company’s PHI business is ignored in the application of the remaining provisions of this Part of this Schedule.

Deemed receipts or expenses of BLAGAB or non-BLAGAB long-term business

9 (1) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company’s basic life assurance and general annuity business is a positive amount, the item (or part of the item) is to be treated as a receipt of that business.

(2) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company’s basic life assurance and general annuity business is a negative amount, the item (or part of the item) is to be treated as an expense of that business.

(3) Receipts and expenses within this paragraph are to be taken into account, in accordance with the provisions of this Part of this Schedule, in calculating the BLAGAB trade profit or loss of that business for accounting periods beginning on or after 1 January 2013.

(4) Receipts within this paragraph are to count as excluded receipts for the purposes of section 92.

10 (1) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company’s gross roll-up business is a positive amount, the item (or part of the item) is to be treated as a receipt of the company’s non-BLAGAB long-term business.

(2) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company’s gross roll-up business is a negative amount, the item (or part of the item) is to be treated as an expense of the company’s non-BLAGAB long-term business.

(3) Receipts and expenses within this paragraph are to be taken into account, in accordance with the provisions of this Part of this Schedule, in calculating for corporation tax purposes the profits of the company’s non-BLAGAB long-term business for accounting periods beginning on or after 1 January 2013.

Period over which deemed receipts or expenses arise

11 (1) A receipt or expense within paragraph 9 or 10 is to be treated as arising over the period of 10 years beginning with 1 January 2013.

(2) The amount of the receipt or expense apportioned to (and treated as arising in) any accounting period falling wholly or partly in that 10-year period is to be determined in proportion to the number of days of the accounting period falling within that 10-year period.

(3) This paragraph does not apply to a receipt which consists of a relevant court-protected item within the meaning of paragraph 12.

(4) This paragraph is subject to paragraphs 13 to 15 (transfers and cessation of business etc).