Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
383

Finance Act 2004
112
FA 2004 is amended as follows.
113
In section 196(4) (relief for employers in respect of contributions paid)—
(a)
in the opening words, for “section 76 of ICTA” substitute “section 76
of FA 2012”, and
5
(b)
in paragraph (a), for “brought into account at Step 1 in subsection (7)
of that section to the extent that they otherwise would not be”
substitute “treated as meeting the conditions in section 77(2)(a) and
(c) of that Act to the extent that they would otherwise not meet
them”.
10
114
In section 196A(4)(c) (power to restrict relief), for “brought into account at
Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect
of the employer” substitute “ordinary BLAGAB management expenses of
the employer for an accounting period for the purposes of section 76 of FA
2012”.
15
115
In section 196L(2) (employer asset-backed contributions: supplementary), as
inserted by Part 3 of Schedule 13 to this Act, for paragraph (c) substitute—
“(c)
the contribution being ordinary BLAGAB management
expenses of the employer for an accounting period for the
purposes of section 76 of FA 2012.”
20
116
In section 197(10)(b) (spreading of relief), for “section 76 of ICTA” substitute
“section 76 of FA 2012”.
117
In section 199 (deemed contributions), for subsection (5) substitute—
“(5)
And, for the purposes of section 76 of FA 2012, it is to be treated as
meeting the conditions in section 77(2)(a) and (c) of that Act to the
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extent that it would otherwise not meet them.”
118
In section 199A(10)(c) (indirect contributions), for “brought into account at
Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect
of E” substitute “ordinary BLAGAB management expenses of E for an
accounting period for the purposes of section 76 of FA 2012”.
30
119
In section 200 (no other relief for employers in connection with
contributions), for paragraph (c) substitute—
“(c)
are to count as ordinary BLAGAB management expenses of
the employer for an accounting period for the purposes of
section 76 of FA 2012,”.
35
120   (1)
Section 246 (restriction of deduction for non-contributory provision) is
amended as follows.
      (2)
In subsection (2), for paragraph (c) substitute—
“(c)
are not to count as ordinary BLAGAB management expenses
of the employer for an accounting period for the purposes of
40
section 76 of FA 2012.”
      (3)
In subsection (3)(b), for “section 76 of ICTA” substitute “section 76 of FA
2012”.
121
In section 246A(4)(c) (case where no relief for provision by an employer), for
“brought into account at Step 1 in section 76(7) of ICTA (expenses of
45

Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
384

insurance companies) in respect of the employer” substitute “ordinary
BLAGAB management expenses of the employer for an accounting period
for the purposes of section 76 of FA 2012”.
122
In section 280(1) (abbreviations)—
(a)
omit the “and” before the definition of “CTA 2009”, and
5
(b)
after that definition insert—
““FA 2012” means the Finance Act 2012.”
Finance (No.2) Act 2005
123
F(No.2)A 2005 is amended as follows.
124
In section 18(3)(b) (specific powers relating to authorised unit trusts and
10
open-ended investment companies), for sub-paragraph (iii) (but not the “or”
at the end of it) substitute—
“(iii)
by an insurance company (within the meaning of
section 65 of FA 2012) as assets for the purposes of its
long-term business (within the meaning of section 63
15
of that Act),”.
Income Tax (Trading and Other Income) Act 2005
125
ITTOIA 2005 is amended as follows.
126
In section 48(4A) (car hire)—
(a)
at the end of paragraph (a) insert “or”,
20
(b)
in paragraph (b), after “management),” insert “including as applied
by section 82(4) of FA 2012.”, and
(c)
omit paragraph (c) (together with the “or” before that paragraph).
127
In section 473(2) (policies and contracts to which Chapter 9 of Part 4 applies:
general), in the definition of “capital redemption policy”, for “within the
25
meaning of Chapter 1 of Part 12 of ICTA” substitute “within the meaning
given by section 56(3) of FA 2012”.
128
In section 476(3) (special rules: foreign policies), in the definition of
“overseas life assurance business”, for “same meaning as in Part 12 of ICTA
(see section 431D of that Act)” substitute “meaning given by section 61 of FA
30
2012”.
129
In section 504(7) (part surrenders: payments under guaranteed income
bonds etc), in the definition of “pension business”, for “section 431B of
ICTA” substitute “section 58 of FA 2012”.
130   (1)
Section 531 (gains from contracts for life insurance etc: cases where income
35
tax not treated as paid) is amended as follows.
      (2)
In subsection (3), after paragraph (b) insert—
“(ba)
a contract the effecting or carrying out of which constitutes
protection business within the meaning of section 62 of FA
2012,
40
(bb)
a contract which is not within paragraph (ba) but which, as a
result of subsection (4) of that section, is treated for the
purposes of that section as being made at any time,”.

Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
385

      (3)
In subsection (4), in the definition of “basic life assurance and general
annuity business”, for “Chapter 1 of Part 12 of ICTA (see section 431F)”
substitute “Part 2 of FA 2012 (see sections 57 and 67(5))”.
131
In paragraph 118(2) of Schedule 2 (pre-1 January 2005 contracts for
immediate needs annuities: income tax treated as paid), for the words from
5
“means” to the end substitute “means the application of section 57(2)(d) of
FA 2012”.
Income Tax Act 2007
132
ITA 2007 is amended as follows.
133
In section 564B(1) (meaning of “financial institution”)—
10
(a)
in paragraph (g), for “section 431(2) of ICTA” substitute “section 65
of FA 2012”, and
(b)
in paragraph (h), for “section 431(2) of ICTA” substitute “section
139(1) of FA 2012”.
134
In section 681DP (relevant tax relief), for paragraph (c) substitute—
15
“(c)
a deduction of an amount which for the purposes of section
73 of FA 2012 is adjusted BLAGAB management expenses of
an insurance company for an accounting period,”.
Corporation Tax Act 2009
135
CTA 2009 is amended as follows.
20
136
In section A1(2) (overview of the Corporation Tax Acts)—
(a)
omit paragraph (a), and
(b)
omit the “and” before paragraph (j) and after that paragraph insert—
“(k)
Part 2 of FA 2012 (insurance companies carrying on
long-term business),”.
25
137   (1)
Section 18Q (UK resident insurance companies: profits of foreign permanent
establishments) is amended as follows.
      (2)
In subsection (1), omit “(as defined in section 431(2) of ICTA)”.
      (3)
Omit subsections (2) and (3).
138
For section 24 substitute—
30
“24
Application to insurance companies
(1)
This section makes provision in a case where the non-UK resident
company mentioned in subsection (1) of section 21 is an insurance
company.
(2)
In accordance with the principle in that subsection, the permanent
35
establishment is treated as holding—
(a)
the same or a similar quantity of assets, and
(b)
assets of the same or similar description,

as would have been held by a distinct and separate enterprise acting
as mentioned in paragraphs (a) and (b) of that subsection.
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Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
386

(3)
The assets which the permanent establishment is treated as holding
in accordance with the principle in that subsection may include a
proportion of assets held by the company.
(4)
Nothing in subsection (2) or (3) is to be read as preventing the
application of similar principles to those provided for by that
5
subsection in a case where the non-UK resident company mentioned
in section 21(1) is not an insurance company.
(5)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make other provision about the application of section
21(1) in a case where the non-UK resident company mentioned there
10
is an insurance company.
(6)
The regulations may, in particular, make provision in place of section
21(2)(b) as to the basis on which, in the case of an insurance
company, capital is to be attributed to a permanent establishment in
the United Kingdom.”
15
139
In section 36(3) (farming and market gardening), for “of the company’s long-
term insurance fund” substitute “held by the company for the purposes of
its long-term business”.
140
In section 38(3)(d) (commercial occupation of land other than woodlands),
for “of the company’s long-term insurance fund” substitute “held by the
20
company for the purposes of its long-term business”.
141
In section 39(5)(a) (profits of mines, quarries and other concerns), for “of the
company’s long-term insurance fund” substitute “held by the company for
the purposes of its long-term business”.
142
In section 46(3)(a) (generally accepted accounting practice), omit sub-
25
paragraph (ii) (together with the “or” before it).
143
In section 56(5) (car hire)—
(a)
at the end of paragraph (a), insert “including as applied by section
82(4) of FA 2012, or”, and
(b)
omit paragraph (c) (together with the “or” before that paragraph).
30
144
In section 130(1)(a) (insurers receiving distributions etc), for “life assurance
business” substitute “business in relation to which section 111 of FA 2012
applies”.
145
In section 201 (priority rules: provisions which must be given priority over
Part 3 of Act), after subsection (1) insert—
35
“(1A)
Subsection (1) does not apply in the case of the long-term business of
an insurance company.”
146
In section 203(4) (property businesses)—
(a)
for “section 432AA of ICTA” substitute “section 86 of FA 2012”, and
(b)
for “in the case of” substitute “for the purpose of applying the I - E
40
rules in relation to”.
147   (1)
Section 298 (meaning of trade and purposes of trade) is amended as follows.
      (2)
In subsection (3)—
(a)
at the end of paragraph (a), insert “or”, and
(b)
omit paragraph (c) (together with the “or” before it).
45

Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
387

      (3)
After subsection (5) insert—
“(6)
In the case of activities carried on by a company in the course of any
basic life assurance and general annuity business, provision
corresponding to that made by subsection (3) is made by section 88
of FA 2012 for the purpose of applying the I - E rules.”
5
148   (1)
Section 336 (transfers of loans on group transactions) is amended as follows.
      (2)
In subsection (4), for “is within one of the categories set out in section
440(4)(a), (d) and (e) of ICTA (assets held for certain categories of long-term
business)” substitute “is held for the purposes of a company’s long-term
business”.
10
      (3)
After that subsection insert—
“(4A)
For the purposes of subsection (4)—
(a)
in the case of an overseas life insurance company, ignore
transfers in relation to assets which are not UK assets (within
the meaning of section 117 of FA 2012), and
15
(b)
section 122 of that Act applies as it applies for the purposes of
Chapter 8 of Part 2 of that Act.”
149   (1)
Section 337 (transfers of loans on insurance business transfers) is amended
as follows.
      (2)
After subsection (3) insert—
20
“(3A)
In subsection (3)(b) “qualifying overseas transfer” means so much of
a transfer of the whole or any part of the business of an overseas life
insurance company carried on through a permanent establishment
in the United Kingdom as takes place in accordance with an
authorisation granted outside the United Kingdom for the purposes
25
of Article 14 of the Council Directive of 5 November 2002 concerning
life assurance (2002/83/EC).”
      (3)
In subsection (4)(a), for “the categories set out in section 440(4) of ICTA”
substitute “the applicable categories”.
      (4)
After subsection (4) insert—
30
“(4A)
For the purposes of subsection (4)(a) “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
35
(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.
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(4B)
For the purposes of subsection (4A)—
(a)
“the long-term business categories” has the same meaning as
in section 116 of FA 2012,
(b)
“the UK long-term business categories” and “UK assets” have
the same meanings as in section 117 of that Act, and
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Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
388

(c)
section 122 of that Act applies as it applies for the purposes of
Chapter 8 of Part 2 of that Act.”
150   (1)
Section 386 (overview of Chapter 10 of Part 5 (insurance companies)) is
amended as follows.
      (2)
In subsection (2)—
5
(a)
in paragraph (a), after “apply” insert “for the purposes of the I - E
rules” and at the end insert “and”, and
(b)
omit paragraph (c) (together with the “and” before it).
      (3)
In subsection (3)—
(a)
in paragraph (a), omit “or of BLAGAB”,
10
(b)
in paragraph (a), after “trade)” insert “and section 88 of FA 2012
(equivalent rule for activities carried on in the course of BLAGAB)”,
and
(c)
in paragraph (f), for “as expenses of insurance companies at Step 1 of
section 76(7) of ICTA” substitute “as ordinary BLAGAB
15
management expenses”.
151
In section 387(1) (treatment of deficit on BLAGAB: introduction), after
“apply” insert “for the purposes of the I - E rules”.
152
In section 388(3) (basic rule: deficit set off against income and gains of deficit
period), for “before any expenses deduction under section 76 of ICTA
20
(expenses of insurance companies)” substitute “in accordance with step 4 in
section 73 of FA 2012 (that is to say, before any deduction for the adjusted
BLAGAB management expenses of the company for the deficit period)”.
153
In section 389 (claim to carry back deficit), after subsection (2) insert—
“(2A)
If any of the claim amount is carried back in accordance with this
25
section to an accounting period, the amount which is so carried back
is to be left out of account for the purpose of applying section 93 of
FA 2012 in the case of that period.”
154   (1)
Section 390 (meaning of “available profits”) is amended as follows.
      (2)
In subsection (4), for the words from “which is” to the end substitute “of the
30
BLAGAB credits in respect of the company’s loan relationships that count as
income for the purposes of the I - E rules for that period (as determined by
section 88(3) and (4))”.
      (3)
In subsection (5)—
(a)
in step 1(a), for “so much of the expenses deduction for the period
35
given by Step 8 in section 76(7) of ICTA (expenses of insurance
companies) as is referable to BLAGAB” substitute “the amount for
the purposes of section 73 of FA 2012 of the adjusted BLAGAB
management expenses of the company for the period”,
(b)
in step 1(b), for “so referable” substitute “referable to BLAGAB”,
40
(c)
in step 2(a), for the words from “so referable” to “ICTA” substitute
“which could be applied in determining for the purposes of section
73 of FA 2012 the amount of the adjusted BLAGAB management
expenses of the company for the period”, and
(d)
in step 2(b), for “so referable” substitute “referable to BLAGAB”.
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Finance Bill
Schedule 16 — Part 2: minor and consequential amendments
Part 3 — Amendments of other Acts
389

      (4)
For subsection (6) substitute—
“(6)
In the case of any claim under section 389, references in subsection
(5) to the amount for the purposes of section 73 of FA 2012 of the
adjusted BLAGAB management expenses of the company for the
period are references to that amount as determined on the
5
assumptions in subsections (7) and (8).”
155
In section 391 (carry forward of surplus deficit to next accounting period),
for subsection (3) substitute—
“(3)
Any deficit so carried forward is treated for the purposes of section
76 of FA 2012 as a deemed BLAGAB management expense for the
10
next period.”
156
Omit sections 393 and 394 (insurance companies: determination of questions
requiring apportionments) and the italic heading before those sections.
157
In section 399 (index-linked gilt-edged securities), at the end insert—
“(6)
In the case of insurance companies, the application of sections 400 to
15
400C is subject to section 112 of FA 2012.”
158
In section 464(3) (list of exceptions to general rule that Part 5 (loan
relationships) has priority for corporation tax purposes), omit paragraph (h)
(but not the “and” at the end of that paragraph).
159
In section 471(3) (connections between persons: creditors who are insurance
20
companies carrying on BLAGAB), for “is linked for that period to that
business” substitute “is matched for that period to a BLAGAB liability”.
160
In section 472(4)(b) (meaning of “control”), for “of an insurance company’s
long-term insurance fund” substitute “held by an insurance company for the
purposes of its long-term business”.
25
161
In section 473(3)(b) (meaning of “major interest”), for “of an insurance
company’s long-term insurance fund” substitute “held by an insurance
company for the purposes of its long-term business”.
162
In section 486(4) (exclusion of exchange gains and losses in respect of tax
debts etc), for paragraph (c) substitute—
30
“(c)
as ordinary BLAGAB management expenses within the
meaning of section 77 of FA 2012 (insurance companies
carrying on basic life assurance and general annuity
business).”
163
In section 502(1) (meaning of “financial institution”)—
35
(a)
in paragraph (g), for “section 431(2) of ICTA” substitute “section 65
of FA 2012”, and
(b)
in paragraph (h), for “section 431(2) of ICTA” substitute “section
139(1) of FA 2012”.
164
In section 560(4) (investment life insurance contracts: introduction)—
40
(a)
in paragraph (a), for “section 431(2) of ICTA” substitute “section 65
of FA 2012” and for “that section” substitute “section 63 of that Act”,
and
(b)
in paragraph (b), for the words from “but” to the end substitute “if
subsection (3)(a) were omitted from section 65 of that Act.”
45