Session 2012 - 13
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Finance Bill


Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 3 — The I - E basis

54

 

88      

Loan relationships, derivative contracts and intangible fixed assets

(1)   

This section applies if an insurance company has—

(a)   

credits or debits in respect of any loan relationships,

(b)   

credits or debits in respect of any derivative contracts, or

(c)   

credits or debits brought into account by the company under Part 8 of

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CTA 2009 (intangible fixed assets),

   

that are referable, in accordance with Chapter 4, to its basic life assurance and

general annuity business.

(2)   

In the application of the I - E rules in relation to the company’s basic life

assurance and general annuity business—

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(a)   

the loan relationship rules,

(b)   

the derivative contract rules, and

(c)   

the intangible fixed asset rules,

   

have effect as if the activities carried on by the company in the course of its

basic life assurance and general annuity business did not constitute the whole

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or any part of a trade or of a property business.

(3)   

In the application of the I - E rules for an accounting period in relation to the

company’s basic life assurance and general annuity business—

(a)   

BLAGAB credits in respect of its loan relationships for the period are to

count as income for the purposes of those rules only in so far as they

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exceed BLAGAB debits in respect of its loan relationships for the

period, and

(b)   

BLAGAB credits brought into account by the company under Part 8 of

CTA 2009 for the period are to count as income for the purposes of

those rules only in so far as they exceed BLAGAB debits brought into

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account by the company under that Part for the period.

(4)   

References in subsection (3)(a) to BLAGAB credits or BLAGAB debits in

respect of a company’s loan relationships include, as a result of subsection (2)

and section 574 of CTA 2009, BLAGAB credits or BLAGAB debits in respect of

the company’s derivative contracts.

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(5)   

If for an accounting period the BLAGAB debits mentioned in subsection (3)(a)

exceed the BLAGAB credits mentioned there, the excess is dealt with in

accordance with sections 388 to 391 of CTA 2009.

(6)   

If for an accounting period the BLAGAB debits mentioned in subsection (3)(b)

exceed the BLAGAB credits mentioned there, the excess—

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(a)   

is carried forward to the next accounting period, and

(b)   

is treated for the purposes of section 76 as a deemed BLAGAB

management expense for that period.

(7)   

In this section—

“BLAGAB credits”, in relation to a company, means credits arising from

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the company’s long-term business that are referable, in accordance

with Chapter 4, to its basic life assurance and general annuity business,

“BLAGAB debits”, in relation to a company, means debits arising from the

company’s long-term business that are referable, in accordance with

Chapter 4, to its basic life assurance and general annuity business,

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“the loan relationship rules” means the rules set out in Part 5 of CTA 2009

(including provisions of other enactments by reference to which

amounts are to be brought into account for the purposes of that Part),

 
 

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 3 — The I - E basis

55

 

“the derivative contract rules” means the rules set out in Part 7 of CTA

2009, and

“the intangible fixed asset rules” means the rules set out in Part 8 of CTA

2009.

89      

Miscellaneous income and losses

5

(1)   

In the application of the I - E rules for an accounting period in relation to an

insurance company’s basic life assurance and general annuity business,

BLAGAB miscellaneous income of the company for the period is to count as

income for the purposes of those rules only in so far as it exceeds BLAGAB

miscellaneous losses of the company for the period.

10

(2)   

If for an accounting period the BLAGAB miscellaneous losses exceed the

BLAGAB miscellaneous income, the excess—

(a)   

is carried forward to the next accounting period, and

(b)   

is treated for the purposes of section 76 as a deemed BLAGAB

management expense for that period.

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(3)   

In this section—

“BLAGAB miscellaneous income”, in relation to a company, means

income of the company arising from its long-term business which—

(a)   

is chargeable under any provision to which section 1173 of CTA

2010 (miscellaneous charges) applies other than section 752 of

20

CTA 2009 (non-trading gains on intangible fixed assets), and

(b)   

is referable, in accordance with Chapter 4, to the company’s

basic life assurance and general annuity business, and

“BLAGAB miscellaneous losses”, in relation to a company, means losses

of the company arising from its long-term business which—

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(a)   

arise from miscellaneous transactions, and

(b)   

are referable, in accordance with Chapter 4, to the company’s

basic life assurance and general annuity business.

(4)   

For the purposes of subsection (3) a transaction is a “miscellaneous

transaction” if income arising from it would be chargeable under any provision

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to which section 1173 of CTA 2010 applies other than—

(a)   

section 752 of CTA 2009, or

(b)   

regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (offshore

income gains).

(5)   

For the purposes of this section references to income that is chargeable under

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any provision to which section 1173 of CTA 2010 applies are to income that, but

for sections 68 and 69, would be chargeable under that provision.

90      

Investment return where risk in respect of policy or contract re-insured

(1)   

This section applies if an insurance company re-insures any risk in respect of a

policy or contract attributable to its basic life assurance and general annuity

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business.

(2)   

For the purposes of the I - E rules the investment return on the policy or

contract is treated as accruing to the company while the risk remains re-

insured by the company under the re-insurance arrangement.

(3)   

The investment return that is treated as accruing to the company—

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Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 3 — The I - E basis

56

 

(a)   

is treated for the purposes of those rules as income that is referable, in

accordance with Chapter 4, to the company’s basic life assurance and

general annuity business, and

(b)   

is, accordingly, brought into account for the purposes of those rules at

step 1 in section 73.

5

(4)   

HMRC Commissioners may make provision by regulations as to the amount

of investment return that is treated as accruing in each accounting period

during which the re-insurance arrangement is in force.

(5)   

HMRC Commissioners may by regulations exclude from the operation of this

section—

10

(a)   

such descriptions of insurance company,

(b)   

such descriptions of policies or contracts, and

(c)   

such descriptions of re-insurance arrangement,

   

as may be prescribed by the regulations.

(6)   

Nothing in this section applies in relation to the re-insurance of a policy or

15

contract where the policy or contract was made, and the re-insurance

arrangement effected, before 29 November 1994.

91      

Regulations under section 90(4): supplementary provision

(1)   

This section applies to regulations under section 90(4).

(2)   

The regulations may provide for the calculation of the investment return

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treated as accruing to a company in respect of a policy or contract in an

accounting period to be made by reference to—

(a)   

the total amount of sums paid (by way of premium or otherwise) by the

company to the re-insurer during the accounting period and any earlier

accounting periods,

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(b)   

the total amount of sums paid (by way of commission or otherwise) by

the re-insurer to the company during the accounting period and any

earlier accounting periods,

(c)   

the total amount of the net investment return treated as accruing to the

company in any earlier accounting periods, that is to say, net of tax at

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such rate as may be prescribed by the regulations, and

(d)   

such percentage rate of return as may be prescribed by the regulations.

(3)   

The regulations may make provision dealing with the transfer of the re-

insurance arrangement from one insurance company to another.

(4)   

The regulations must provide that the amount of investment return treated as

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accruing in respect of a policy or contract in the final accounting period during

which the policy or contract is in force is the amount, ascertained in accordance

with the regulations, by which the overall profit exceeds the total amount

treated as accruing in earlier accounting periods.

(5)   

“The overall profit” means the profit over the whole period during which the

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policy or contract, and the re-insurance arrangement, were in force.

(6)   

If the overall profit is less than the total amount treated as accruing in earlier

accounting periods, the difference—

(a)   

must be set off against amounts treated as a result of section 90 as

accruing in the final accounting period from other policies or contracts,

45

and

 
 

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 3 — The I - E basis

57

 

(b)   

if not fully set off as mentioned in paragraph (a), may be carried

forward for set-off against amounts treated as a result of that section as

accruing in subsequent accounting periods.

(7)   

The regulations may—

(a)   

make different provision for different cases or circumstances, and

5

(b)   

contain incidental, supplementary, consequential, transitional,

transitory or saving provision.

(8)   

An example of the kind of supplementary provision within subsection (7)(b) is

provision requiring payments made during an accounting period to be treated

as made on such date or dates as may be prescribed by the regulations.

10

Deemed I - E receipts

92      

Certain BLAGAB trading receipts to count as deemed I - E receipts

(1)   

This section applies if—

(a)   

an insurance company has receipts that are taken into account in

calculating its BLAGAB trade profit or loss (see section 136) for an

15

accounting period,

(b)   

the receipts would not fall within the charge to corporation tax apart

from this section, and

(c)   

the receipts are not excluded receipts.

(2)   

The appropriate amount of the receipts is an I - E receipt of the company for the

20

accounting period.

(3)   

The “appropriate amount” of the receipts is found by deducting expenses from

the receipts so far as is necessary for calculating the full amount of the profits.

(4)   

Chapter 1 of Part 20 of CTA 2009 (general rules for restricting deductions) is to

apply to that calculation.

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(5)   

The following receipts are “excluded” receipts—

(a)   

premiums,

(b)   

sums received under re-insurance contracts (but see subsection (6) for

exceptions),

(c)   

sums which do not fall within the charge to corporation tax because of

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an exemption,

(d)   

payments received under the Financial Services Compensation

Scheme, and

(e)   

payments received from other insurance companies to enable the

company to meet its obligations to policyholders.

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(6)   

A sum received under a re-insurance contract is not an excluded receipt if—

(a)   

it is a re-insurance commission (however described), or

(b)   

it is a sum calculated to any extent by reference to the ordinary

BLAGAB management expenses of the company referable to the

accounting period (within the meaning of section 77).

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Revised 9 May 2012