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108 Meaning of “the closing deferred policyholder tax balance” etc

(1) For the purposes of section 107 “the closing deferred policyholder tax balance for a period of account” means so much of the closing amount shown, in accordance with generally accepted accounting practice, in the accounts of the company for that period in respect of deferred tax as is wholly attributable to policyholder tax.

(2) Provision forming part of the closing amount is “wholly attributable to policyholder tax” if—

(a) the provision is made in respect of a BLAGAB matter (see subsection (3)), and

(b) anything included in the closing amount in respect of that matter is calculated wholly by reference to the policyholders’ rate of tax chargeable on the policyholders’ share of the company’s I - E profit for any accounting period.

(3) A “BLAGAB matter” means—

(a) an amount of excess BLAGAB expenses,

(b) an amount of acquisition expenses falling to be relieved in the future in accordance with section 79,

(c) an amount of expenses otherwise falling to be taken into account in the future under the I - E rules,

(d) an amount of BLAGAB allowable loss (within the meaning of section 210A of TCGA 1992) carried forward for future use,

(e) an amount to which section 213 of TCGA 1992 applies (spreading of gains and losses under section 212), or

(f) an amount in respect of the future disposal (or part disposal) of an asset which would fall to be taken into account in accordance with section 75.

(4) If—

(a) for a period of account of the company the provision made in respect of a BLAGAB matter is taken into account for the purposes of section 107, and

(b) for a subsequent period of account of the company the provision made in respect of that matter is no longer wholly attributable to policyholder tax because the condition in subsection (2)(b) ceases to be met,

there is to be a reversal in the subsequent period of account in respect of the provision (so far as section 107 does not otherwise apply in relation to the case).

(5) The reversal in the subsequent period of account is to be made as follows—

(a) if the provision was an amount which for accounting purposes was regarded as an asset, a negative amount equal to that amount is to be taken into account in calculating the closing deferred policyholder tax balance for that period for the purposes of section 107, and

(b) if the provision was an amount which for accounting purposes was regarded as a liability, a positive amount equal to that amount is to be taken into account in calculating the closing deferred policyholder tax balance for that period for the purposes of section 107.

(6) The Treasury may by order amend the definition of a “BLAGAB matter”.

(7) An order under subsection (6) may contain incidental, supplementary, consequential, transitional, transitory or saving provision.

CHAPTER 6 Trade calculation rules applying to long-term business

109 Application of Chapter

(1) The rules contained in this Chapter have effect for the purpose of—

(a) calculating the BLAGAB trade profit or loss of any basic life assurance and general annuity business carried on by an insurance company, and

(b) calculating for corporation tax purposes the profits of any non-BLAGAB long-term business carried on by an insurance company,

but, in the case of section 112, see also subsection (6) of that section.

(2) In this Chapter references to the calculation of the profits are, in the case of the calculation of the BLAGAB trade profit or loss, to be read as references to the calculation of that profit or loss.

(3) See also section 47 of CTA 2009 (losses calculated on same basis as profits).

(4) In the case of the calculation of the BLAGAB trade profit or loss, see also sections 106 to 108.

110 Allocations to policyholders

(1) In calculating the profits for an accounting period, a deduction is allowed for any amount which is allocated to policyholders or annuitants in respect of the accounting period.

(2) But there is no deduction for an amount of a capital nature that—

(a) is allocated to holders of with-profits policies, and

(b) has not been funded from an amount credited in accounts of the business drawn up in accordance with generally accepted accounting practice (whether drawn up by the company or another company).

(3) For this purpose a payment made in connection with the reattribution of inherited estate is to be regarded as an amount of a capital nature.

(4) “With-profits policies” means policies under which the holders are eligible to participate in surplus.

111 Dividends and other distributions

(1) Dividends or other distributions—

(a) which are receivable by the company, and

(b) which are referable, in accordance with Chapter

7

, to the business concerned,

are to be brought into account as receipts in calculating the profits.

(2) This rule—

(a) applies whether or not the distributions are exempt for the purposes of Part 9A of CTA 2009 or would otherwise be dealt with under that Part, but

(b) does not apply in the case of distributions that are of a capital nature.

112 Index-linked gilt-edged securities

(1) If, for an accounting period, a company has a loan relationship which is represented by an index-linked gilt-edged security, sections 400 to 400C of CTA 2009 (adjustments for changes in index) are not to apply in calculating the profits for the accounting period.

(2) But subsection (1) does not apply to loan relationships of the company that are qualifying PHI loan relationships.

(3) A loan relationship is a “qualifying PHI loan relationship” if

(a) the loan relationship is identified in the records of the company as an asset held for the purposes of index-linked PHI business carried on by the company, and

(b) none of the credits or debits in respect of the loan relationship are referable to BLAGAB,

but see subsection (5) for a case in which a loan relationship meeting the conditions in paragraphs (a) and (b) is not a qualifying PHI loan relationship.

(4) Credits or debits are referable to BLAGAB if—

(a) they are referable, in accordance with Chapter

4

, to any basic life assurance and general annuity business of the company, or

(b) they are taken into account in calculating the profit or loss that is, in accordance with Chapter

7

, allocated to any basic life assurance and general annuity business of the company.

(5) A loan relationship which, but for this subsection, would be a qualifying PHI loan relationship of the company is not a qualifying PHI loan relationship if the value of the loan relationship when added to the value of qualifying PHI loan relationships of the company exceeds the value of the liabilities incurred by the company for the purposes of its index-linked PHI business.

(6) A loan relationship of the company which at any time is a qualifying PHI loan relationship is to be regarded for the purposes of this Part as an asset which is held at that time for the purposes of the company’s long-term business but which is not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds.

(7) In this section—

113 Receipts or expenses relating to long-term business fixed capital

Receipts or expenses which arise from an asset forming part of the long-term business fixed capital of the company are to be left out of account in calculating the profits.

CHAPTER 7 Trading apportionment rules

114 Application of Chapter

(1) This Chapter applies in the case of an insurance company which, as a result of section 66, has—

(a) a business consisting of basic life assurance and general annuity business, and

(b) a non-BLAGAB long-term business.

(2) The rules contained in this Chapter determine—

(a) how to allocate between those two businesses the profits or loss of the long-term business calculated in accordance with generally accepted accounting practice, and

(b) how to allocate the tax adjustments in making the calculations mentioned in subsection (5)(a) and (b).

(3) The amount of the profits or loss mentioned in subsection (2)(a) is referred to in this Chapter as the “accounting profit or loss”.

(4) For the purposes of this Chapter “the tax adjustments” means the adjustments required or authorised by law in calculating for corporation tax purposes the profits of the long-term business (applying the same rules as apply to the

calculation for those purposes of the profits of non-BLAGAB long-term business).

(5) The rules contained in this Chapter have effect for the purpose of—

(a) calculating the BLAGAB trade profit or loss of the company, and

(b) calculating for corporation tax purposes the profits of the non-BLAGAB long-term business carried on by the company.

115 Commercial allocation of accounting profit or loss and tax adjustments

(1) The accounting profit or loss, and the tax adjustments, are to be allocated between the two separate businesses in accordance with an acceptable commercial method adopted by the company.

(2) A method is an “acceptable commercial method” if it secures that the accounting profit or loss, and the tax adjustments, are allocated to the two separate businesses in a way that fairly represents the contribution made by those businesses to the accounting profit or loss as adjusted to take into account the tax adjustments.

(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—

(a) must be consistent with the method adopted for the purposes of section 98 for that period, and

(b) in the case of an overseas life insurance company, must also be consistent with the method for that period for attributing assets in accordance with the provision made by or under Chapter 4 of Part 2 of CTA 2009 to its permanent establishment in the United Kingdom.

CHAPTER 8 Assets held for purposes of long-term business

Transfers of assets from different categories

116 UK life insurance companies

(1) If, at any time in a period of account of a UK life insurance company, an asset (or a part of an asset) held by the company—

(a) ceases to be within one of the long-term business categories, and

(b) comes within another of those categories,

the company is treated for the purposes of corporation tax on chargeable gains as if it had disposed of and immediately re-acquired the asset (or part) at that time for a consideration equal to the fair value of the asset (or part) at that time.

(2) The long-term business categories in question are—

(a) assets which are matched to BLAGAB liabilities of the company,

(b) assets which are matched to other long-term business liabilities of the company,

(c) assets which are held by the company for the purposes of any with-profits fund but which are not matched to its long-term business liabilities, and

(d) assets which are held for the purposes of the company’s long-term business but which are not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds.

(3) If the company has more than one with-profits fund within subsection (2)(c), the assets which are held by it for the purposes of a particular fund but which are not matched to its long-term business liabilities are treated as assets within a separate long-term business category.

(4) Subsection (1) does not apply if all the income of the company’s long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(5) If, at any time in a period of account of a UK life insurance company, an asset (or a part of an asset) held by the company—

(a) ceases to be within a category set out in subsection (6), and

(b) comes within the other category set out there,

the company is treated for the purposes of corporation tax as if it had disposed of and immediately re-acquired the asset (or part) for a consideration equal to the fair value of the asset (or part) at that time.

(6) The categories in question are—

(a) assets which are held for the purposes of the company’s long-term business, and

(b) other assets.

117 Overseas life insurance companies: rule corresponding to s.116

(1) If, at any time in a period of account of an overseas life insurance company, an asset (or a part of an asset) held by the company—

(a) ceases to be within one of the UK long-term business categories, and

(b) comes within another of those categories,

the company is treated for the purposes of corporation tax on chargeable gains as if it had disposed of and immediately re-acquired the asset (or part) at that time for a consideration equal to the fair value of the asset (or part) at that time.

(2) The UK long-term business categories in question are—

(a) UK assets which are matched to BLAGAB liabilities of the company,

(b) UK assets which are matched to other long-term business liabilities of the company,

(c) UK assets which are held by the company for the purposes of any with-profits fund but which are not matched to its long-term business liabilities, and

(d) UK assets which are held for the purposes of the company’s long-term business but which are not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds.

(3) If the company has more than one with-profits fund within subsection (2)(c), the UK assets which are held by it for the purposes of a particular fund but

which are not matched to its long-term business liabilities are treated as assets within a separate UK long-term business category.

(4) Subsection (1) does not apply if all the income of the company’s long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(5) If, at any time in a period of account of an overseas life insurance company, an asset (or a part of an asset) held by the company—

(a) ceases to be within a category set out in subsection (6), and

(b) comes within another category set out there,

the company is treated for the purposes of corporation tax as if it had disposed of and immediately re-acquired the asset (or part) for a consideration equal to the fair value of the asset (or part) at that time.

(6) The categories in question are—

(a) UK assets which are held for the purposes of the company’s long-term business,

(b) other UK assets, and

(c) assets which are held by the company but which are not UK assets.

(7) For the purposes of this section and section 118, assets (whether situated in the United Kingdom or elsewhere) are “UK assets” of an overseas life insurance company if, in accordance with the provision made by or under Chapter 4 of Part 2 of CTA 2009, they fall to be attributed to the permanent establishment in the United Kingdom through which the company carries on life assurance business.

118 Transfers of business and transfers within a group

(1) If—

(a) as a result of an insurance business transfer scheme transferring long-term business, a UK life insurance company or an overseas life insurance company acquires an asset, and

(b) the asset (or part of it) is within one of the applicable categories at the time immediately before the acquisition but is not within that category immediately after that time,

the transferor is treated for the purposes of corporation tax on chargeable gains as if it had disposed of and immediately re-acquired the asset (or part) at the time immediately before the acquisition.

(2) The consideration for this deemed disposal and re-acquisition is equal to the fair value of the asset (or part) at that time.

(3) If the transferor or the transferee is an overseas life insurance company, an asset (or part of an asset) is taken as being in the same category immediately before and after the acquisition if the asset (or part)—

(a) was within one category immediately before the acquisition, and

(b) was within a corresponding category immediately after the acquisition.

(4) Subsections (1) to (3) do not apply if all the income of the long-term business of either the transferor or the transferee is chargeable to corporation tax on income under section 35 of CTA 2009.

(5) For the purposes of subsections (1) to (3) “the applicable categories” means—

(a) in the case of a UK life insurance company, the long-term business categories or a category of assets which are not held for the purposes of its long-term business, and

(b) in the case of an overseas life insurance company, the UK long-term business categories, a category of UK assets which are not held for the purposes of its long-term business or a category of assets which are held by it but which are not UK assets.

(6) If—

(a) a UK life insurance company or an overseas life insurance company disposes of or acquires an asset (or part of an asset),

(b) immediately before or after doing so, the asset (or part) is within the applicable category, and

(c) section 171 or 173 of TCGA 1992 (transfers within a group) would, but for this subsection, apply to the disposal or acquisition,

that section does not apply to the disposal or acquisition.

(7) For the purposes of subsection (6) “the applicable category” means—

(a) in the case of a UK life insurance company, the category of assets which are held for the purposes of its long-term business, and

(b) in the case of an overseas life insurance company, the category of UK assets which are held for the purposes of its long-term business.

Share pooling rules

119 UK life insurance companies

(1) If the assets of a UK life insurance company include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities so far as matched to BLAGAB liabilities of the company are treated as a separate holding,

(b) so many of the securities so far as matched to other long-term business liabilities of the company are treated as a separate holding,

(c) so many of the securities as are held by the company for the purposes of any with-profits fund but are not matched to its long-term business liabilities are treated as a separate holding,

(d) so many of the securities as are held for the purposes of the company’s long-term business but are not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds are treated as a separate holding, and

(e) any remaining securities are treated as a separate holding which is held otherwise than for the purposes of the company’s long-term business.

(2) If the company has more than one with-profits fund within subsection (1)(c), so many of the securities as are held by it for the purposes of a particular fund but are not matched to its long-term business liabilities are treated as a separate holding for the purposes of corporation tax on chargeable gains.

(3) Subsection (1) does not apply if all the income of the company’s long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(4) In that case, if the company’s assets include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities as are held for the purposes of its long-term business are treated as a separate holding, and

(b) any remaining securities are treated as a separate holding which is held otherwise than for the purposes of its long-term business.

120 Overseas life insurance companies: rule corresponding to s.119

(1) If the assets of an overseas life insurance company include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities so far as UK securities matched to BLAGAB liabilities of the company are treated as a separate holding,

(b) so many of the securities so far as UK securities matched to other long-term business liabilities of the company are treated as a separate holding,

(c) so many of the securities as are UK securities held by the company for the purposes of any with-profits fund but not matched to its long-term business liabilities are treated as a separate holding,

(d) so many of the securities as are UK securities held for the purposes of the company’s long-term business but not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds are treated as a separate holding,

(e) any remaining UK securities are treated as a separate holding which is held otherwise than for the purposes of the company’s long-term business, and

(f) any securities which are held by the company but which are not UK securities are treated as a separate holding.

(2) If the company has more than one with-profits fund within subsection (1)(c), so many of the securities as are UK securities held by it for the purposes of a particular fund but are not matched to its long-term business liabilities are treated as a separate holding for the purposes of corporation tax on chargeable gains.

(3) Subsection (1) does not apply if all the income of the company’s long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(4) In that case, if the company’s assets include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities as are UK securities held for the purposes of its long-term business are treated as a separate holding,

(b) any remaining UK securities are treated as a separate holding which is held otherwise than for the purposes of its long-term business, and

(c) any securities which are held by the company but which are not UK securities are treated as a separate holding.

(5) For the purposes of this section, securities (whether situated in the United Kingdom or elsewhere) are “UK securities” of an overseas life insurance company if, in accordance with the provision made by or under Chapter 4 of Part 2 of CTA 2009, they fall to be attributed to the permanent establishment in the United Kingdom through which the company carries on life assurance business.

121 Sections 119 and 120: supplementary

(1) The applicable pooling rules also apply if the assets of the company in question include securities of a class and but for this section—

(a) some of them would be regarded as a 1982 holding for the purposes of corporation tax on chargeable gains, and

(b) the rest of them would be regarded as a section 104 holding for those purposes.

(2) “The applicable pooling rules” means—

(a) the pooling rules set out in section 119(1)(a) to (e) and (4)(a) and (b), or

(b) the pooling rules set out in section 120(1)(a) to (f) and (4)(a) to (c).

(3) In applying the applicable pooling rules in a case within subsection (1)

(a) the reference in any of the paragraphs in section 119(1) or (4) or 120(1)or (4) to a separate holding is to be read, where necessary, as a reference to a separate 1982 holding and a separate section 104 holding, and

(b) the questions whether that reading is necessary for a paragraph and, if it is, how many securities falling within the paragraph constitute each of the two holdings are determined in accordance with paragraph 12 of Schedule 6 to FA 1990 and the identification rules applying on any subsequent acquisitions and disposals.

(4) If the applicable pooling rules apply, section 105 of TCGA 1992 has effect as if securities regarded as included in different holdings as a result of those rules were securities of different classes.

(5) In this section—

(6) In this section and sections 119 and 120 “securities” means—

(a) shares,

(b) securities of a company, and

(c) any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

Long-term business fixed capital

122 Assets forming part of long-term business fixed capital

For the purposes of this Chapter assets that form part of the long-term business fixed capital of an insurance company are to be regarded as assets held by the company otherwise than for the purposes of its long-term business.

CHAPTER 9 Relief for BLAGAB trade losses etc

The reliefs

123 Relief for BLAGAB trade losses against total profits

(1) Section 37 of CTA 2010 (relief for trade losses against total profits) is to apply in relation to a BLAGAB trade loss for an accounting period as it applies in relation to any other loss made in a trade for an accounting period.

(2) Subsection (1) applies despite the fact that, had there been a BLAGAB trade profit for the accounting period, that profit would not have been charged to tax under section 35 of CTA 2009 and the I - E rules would have been applicable instead.

124 Carry forward of BLAGAB trade losses against subsequent profits

(1) This section applies if an insurance company carrying on basic life assurance and general annuity business makes a BLAGAB trade loss for an accounting period.

(2) Relief is available under this section for that part of the BLAGAB trade loss (“the unrelieved loss”) for which no relief is given under section 37 of CTA 2010 (as applied by section 123).

(3) The relief for the unrelieved loss is to be given as follows.

(4) The unrelieved loss is to be carried forward to subsequent accounting periods (so long as the company continues to carry on basic life assurance and general annuity business).

(5) For the purposes of—

(a) section 93 (minimum profits charge), and

(b) section 104 (policyholders’ rate of tax),

the BLAGAB trade profit of any such period is reduced by the unrelieved loss so far as that loss cannot be used under this subsection to reduce the BLAGAB trade profit of an earlier period.

(6) Relief under this section is subject to restriction or modification in accordance with section 137(7) of CTA 2010 and other applicable provisions of the Corporation Tax Acts.

125 Group relief

(1) Part 5 of CTA 2010 (group relief) is to apply in relation to a BLAGAB trade loss for an accounting period as it applies in relation to any other loss made in a trade for an accounting period.

(2) Subsection (1) applies despite the fact that, had there been a BLAGAB trade profit for the accounting period, that profit would not have been charged to tax under section 35 of CTA 2009 and the I - E rules would have been applicable instead.

(3) If for an accounting period an insurance company has—

(a) an I - E profit, and

(b) losses or other amounts within section 99(1)(d) to (g) of CTA 2010,

the company’s gross profits of the accounting period for the purposes of section 105 of that Act (restriction on surrender of those amounts) are not to include the policyholders’ share of the I - E profit (as determined for the purposes of section 102).

Restrictions

126 Restrictions in respect of non-trading deficit

The amount of a BLAGAB trade loss for an accounting period of an insurance company that is available for relief under—

(a) section 37 of CTA 2010 (as applied by section 123), or

(b) Part 5 of CTA 2010 (group relief) (as applied by section 125),

is to be reduced by the amount of any non-trading deficit which the company has for the accounting period under section 388 of CTA 2009 (loan relationships and derivative contracts).

127 No relief against policyholders’ share of I - E profit

(1) This section applies in the case of an insurance company carrying on basic life assurance and general annuity business.

(2) None of the following reliefs are to be given against the policyholders’ share of any I - E profit of the company for any accounting period (as determined for the purposes of section 102).

(3) The reliefs in question are—

(a) relief under section 37 of CTA 2010 (including as applied by section 123),

(b) relief under Chapter 2 or 4 of Part 4 of CTA 2010 (loss relief),

(c) relief under Part 5 of CTA 2010 (group relief) (including as applied by section 125),

(d) relief in respect of any qualifying charitable donation,

(e) relief in respect of any amount representing a non-trading deficit on the company’s loan relationships calculated otherwise than by reference to debits and credits referable, in accordance with Chapter

4

, to its basic life assurance and general annuity business.

(4) If the company’s basic life assurance and general annuity business is mutual business, subsection (3)(d) does not apply.

CHAPTER 10 Transfers of long-term business

Transfers of BLAGAB

128 Relief for transferee in respect of transferor’s BLAGAB expenses

(1) This section applies if, under an insurance business transfer scheme, there is a transfer of basic life assurance and general annuity business (or any part of that business) from one insurance company to another.

(2) Acquisition expenses relief is to be given to the transferee for any acquisition expenses for which, on the assumptions set out below, that relief would have been given to the transferor for an accounting period starting after the date of the transfer.

(3) “Acquisition expenses relief” means relief given, in accordance with section 79(spreading of acquisition expenses), at step 3 in section 76.

(4) For the transferee’s first accounting period ending after the date of the transfer, acquisition expenses relief for the acquisition expenses within subsection (2) is to be determined as if that period had started with the date after the date of the transfer.

(5) Relief at step 5 in section 76 is to be given to the transferee for any excess BLAGAB expenses for which, on the assumptions set out below, that relief would have been given to the transferor for an accounting period starting after the date of the transfer.

(6) For the purposes of this section it is to be assumed that—

(a) the transferor had continued to carry on the transferred business after the transfer, and

(b) the transferor had an accounting date ending with the date of the transfer (if that would not otherwise be the case).

(7) If the transfer is a transfer of part of the business, references in this section to any expenses are to be read as references to the appropriate part of the expenses.

(8) Any relief given to the transferee as a result of this section is instead of any relief that would otherwise have been given to the transferor.

129 Intra-group transfers and demutualisation

(1) This section applies if—

(a) under an insurance business transfer scheme, there is a transfer of basic life assurance and general annuity business (or any part of that business) from one insurance company to another, and

(b) the transfer is a relevant intra-group transfer or is in connection with a demutualisation.

(2) A transfer is a “relevant intra-group transfer” if—

(a) the transferor and transferee are members of the same group of companies when the transfer occurs, and

(b) the transferee is within the charge to corporation tax in relation to the transfer.

(3) A transfer is “in connection with a demutualisation” if—

(a) it is for the purposes of the conversion of a company (under the law of any territory) from one without share capital to one with share capital (without any change of legal personality), or

(b) it is a transfer by a mutual life insurance company of all, or substantially all, of its basic life assurance and general annuity business to an insurance company which is not a mutual life insurance company,

and for the purposes of paragraph (b) a “mutual life insurance company” means an insurance company which carries on mutual life assurance business.

(4) For the purpose of calculating the BLAGAB trade profit or loss of the transferor for any accounting period, any amount in respect of the transfer that is debited or credited in accounts drawn up by the transferor in accordance with generally accepted accounting practice is to be ignored.

(5) For the purpose of calculating the BLAGAB trade profit or loss of the transferee for any accounting period, any amount in respect of the transfer that is debited or credited in accounts drawn up by the transferee in accordance with generally accepted accounting practice is to be ignored.

(6) If this section applies, the provisions of Part 4 of TIOPA 2010 (transfer pricing) do not apply.

130 Transfers between non-group companies: present value of in-force business

(1) This section applies if—

(a) under an insurance business transfer scheme, there is a transfer of basic life assurance and general annuity business (or any part of that business) from one insurance company to another,

(b) the transferor and transferee are not members of the same group of companies when the transfer occurs,

(c) the accounts of the transferee drawn up in accordance with generally accepted accounting practice include an asset that represents, as at the time of the transfer, the value of future profits arising from the business (or part of the business) transferred, and

(d) the asset is not one to which Part 8 of CTA 2009 (intangible fixed assets) applies.

(2) Amounts in respect of the asset that are debited or credited in accounts drawn up by the transferee in accordance with generally accepted accounting practice are to be taken into account in calculating the BLAGAB trade profit or loss of the transferee.

(3) For the purposes of subsection (1)(c) no account is to be taken of an asset so far as it is regarded for accounting purposes as internally-generated.

(4) This section does not apply in any case where section 129(5) applies in relation to the transferee.

(5) Nothing in this section is to apply in relation to transfers taking place before 1 January 2013.

Transfers of non-BLAGAB long-term business

131 Application of ss. 129 and 130 to transfers of non-BLAGAB long-term business

(1) This section applies if, under an insurance business transfer scheme, there is a transfer of non-BLAGAB long-term business (or any part of that business) from one insurance company to another.

(2) If, for the purposes of section 129, the transfer—

(a) is a relevant intra-group transfer, or

(b) is in connection with a demutualisation,

section 129 applies for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business of the transferor or transferee for any accounting period.

(3) If the conditions in section 130(1)(b) to (d) are met in the case of the transfer, section 130 applies for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business of the transferee for any accounting period.

Transfers of long-term business: anti-avoidance

132 Anti-avoidance

(1) This section applies if—

(a) under an insurance business transfer scheme, there is a transfer on or after 1 January 2013 from one insurance company to another of basic life assurance and general annuity business (or any part of that business) or non-BLAGAB long-term business (or any part of that business), and

(b) the main purpose, or one of the main purposes, of a company (“C”) in entering into one or more of the arrangements included in the insurance business transfer arrangements is an unallowable purpose.

(2) The “insurance business transfer arrangements” consist of—

(a) the insurance business transfer scheme under which the transfer is made, and

(b) any arrangement entered into on or after 1 January 2013 with a connection (direct or indirect) to that scheme.

(3) A purpose is an “unallowable purpose” if—

(a) it consists of securing a tax advantage for C or any other company, or

(b) it is not amongst C’s business or other commercial purposes.

(4) There are to be made such adjustments of any income or gains chargeable to corporation tax as are required to negate any tax advantage arising to C or any other company so far as referable to the unallowable purpose on a just and reasonable apportionment.

(5) For the purposes of this section—

(a) “arrangement” includes any agreement, scheme, transaction or understanding (whether or not legally enforceable), and

(b) section 1139 of CTA 2010 (meaning of “tax advantage”) applies, but reading references to tax as references to corporation tax.

(6) If C is not within the charge to corporation tax in respect of a part of its activities, C’s business or other commercial purposes for the purposes of this section do not include the purposes of that part of its activities.

133 Clearance procedure

(1) Section 132 does not apply if, on an application by C, HMRC Commissioners give a notice under this section stating that they are satisfied—

(a) that C’s main purpose in entering into the arrangements included in the insurance business transfer arrangements is not an unallowable purpose or none of C’s main purposes in entering into those arrangements is an unallowable purpose, or

(b) that the transferor and the transferee are members of the same group of companies when the transfer occurs and that the transfer produces no tax advantage for the group.

(2) For this purpose the transfer produces no tax advantage for the group if—

(a) as a result of the insurance business transfer arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group, and

(b) the amount (or total amount) of that increase is at least equal to the amount (or total amount) of the reduction in the liability to corporation tax of the transferor or the transferee that arises as a result of those arrangements.

134 Section 133: supplementary

(1) An application under section 133 must—

(a) be in writing, and

(b) contain particulars of the insurance business transfer arrangements.

(2) HMRC Commissioners may by notice require C to provide further particulars in order to enable them to determine the application.

(3) A requirement may be imposed under subsection (2) within 30 days of the receipt of the application or of any further particulars required under that subsection.

(4) If a notice under that subsection is not complied with within 30 days or such longer period as HMRC Commissioners may allow, they need not proceed further on the application.

(5) HMRC Commissioners must give notice to C of their decision on an application under section 133—

(a) within 30 days of receiving the application, or

(b) if they give a notice under subsection (2), within 30 days of that notice being complied with.

(6) If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of HMRC Commissioners, any resulting notice under section 133 is void.

Interpretation

135 Meaning of “group” of companies

For the purposes of this Chapter whether or not at any time companies are members of the same group of companies is to be determined in accordance with section 170(2) to (11) of TCGA 1992.

CHAPTER 11 Definitions

136 Meaning of “BLAGAB trade profit” and “BLAGAB trade loss”

(1) In relation to the carrying on by an insurance company of basic life assurance and general annuity business, this section explains for the purposes of this Part what is meant by—

(a) the “BLAGAB trade profit” of the company, and

(b) the “BLAGAB trade loss” of the company.

(2) The company has a “BLAGAB trade profit” for an accounting period if, calculated in accordance with the ordinary trading rules, there are profits of that business for the accounting period that, but for sections 68 and 69, would be chargeable to corporation tax on income under section 35 of CTA 2009 (charge to tax on trade profits).

(3) The amount of the BLAGAB trade profit is the amount of those profits that, but for those sections, would be so chargeable.

(4) The company has a “BLAGAB trade loss” for an accounting period if, calculated in accordance with the ordinary trading rules, the company makes a loss in that business for the accounting period in a case where, had there been profits, they would, but for those sections, have been so chargeable.

(5) The ordinary trading rules have effect for the purpose of calculating the company’s BLAGAB trade profit or loss subject to the provision made by—

(a) sections 106 to 108 (policyholder tax),

(b) Chapter

6

(trade calculation rules applying to long-term business),

(c) Chapter

7

(trading apportionment rules), and

(d) sections 129 and 130 (transfers of BLAGAB).

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