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

58

 

Minimum profits charge

93      

Minimum profits test

(1)   

This section applies if an insurance company has a BLAGAB trade profit for an

accounting period.

(2)   

A comparison must be made between—

5

(a)   

the I - E profit or excess BLAGAB expenses for the accounting period,

and

(b)   

the BLAGAB trade profit for the accounting period,

   

adjusted as need be in accordance with sections 94 and 124.

(3)   

In making the calculation required by subsection (2)(a), it is to be assumed that

10

this Chapter has effect with the omission of subsection (5)(a) (but, apart from

that, all the other rules in this Chapter have effect for the purposes of that

calculation).

(4)   

If there are excess BLAGAB expenses for the accounting period, the amount of

the excess is treated for the purposes of this section as a negative figure equal

15

to that amount.

(5)   

If, for the accounting period, the adjusted BLAGAB trade profit exceeds the

adjusted I - E profit or excess BLAGAB expenses—

(a)   

an amount equal to the difference is an I - E receipt of the company for

the accounting period (see section 73), and

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(b)   

the same amount is carried forward to the company’s next accounting

period as an expense (see section 76).

94      

Adjustment of I - E profit or excess BLAGAB expenses

(1)   

This section applies if the BLAGAB trade profit for the accounting period

includes non-taxable distributions receivable by the company in that period

25

that are referable, in accordance with Chapter 7, to the company’s basic life

assurance and general annuity business.

(2)   

For the purposes of section 93(5) (the comparison of the BLAGAB trade profit

with the I - E profit or excess BLAGAB expenses), the calculation required by

section 73 is performed again but adding to the amount of “I” found by step 4

30

the total amount of the non-taxable distributions receivable by the company in

the accounting period that are so referable.

(3)   

Accordingly, once an adjustment is made in accordance with subsection (2), an

amount of excess BLAGAB expenses for the accounting period might become

an adjusted I - E profit for that period.

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(4)   

For the purposes of this Part “non-taxable distributions” means distributions

that are exempt for the purposes of Part 9A of CTA 2009 (company

distributions).

(5)   

For the purposes of this Part the amount of a non-taxable distribution does not

include any amount withheld from it on account of tax payable under the laws

40

of a territory outside the United Kingdom.

 
 

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

59

 

Non-BLAGAB allowable losses

95      

Use of non-BLAGAB allowable losses to reduce I - E profit

(1)   

This section applies if—

(a)   

an insurance company has an I - E profit for an accounting period, and

(b)   

non-BLAGAB allowable losses have accrued to the company that are

5

available for deduction in accordance with section 210A(2) of TCGA

1992 from the shareholders’ share of BLAGAB chargeable gains that

have accrued to the company.

(2)   

Those losses may be deducted from those gains in accordance with that

provision so as to reduce the amount of the I - E profit for the accounting period

10

to nil but no further.

(3)   

For the purposes of subsection (1)(a), assume that non-BLAGAB allowable

losses cannot be deducted from any BLAGAB chargeable gains (and,

accordingly, ignore the effect of this section).

Overseas life insurance companies

15

96      

Expenses referable to exempt FOTRA profits

(1)   

This section applies if the profits for an accounting period of the basic life

assurance and general annuity business carried on by an overseas life

insurance company in the United Kingdom consist of or include exempt

FOTRA profits.

20

(2)   

In making the calculation required by step 1 of section 76 for the accounting

period, ignore so much of the ordinary BLAGAB management expenses of the

company as are referable to exempt FOTRA profits.

(3)   

The relevant proportion of those expenses is to be regarded for the purposes of

this section as referable to exempt FOTRA profits.

25

(4)   

The relevant proportion is—

FOTRA

FOTRA + I

   

where—

FOTRA is the amount of the exempt FOTRA profits arising in the

accounting period, and

I is the amount of I found by the calculations required by step 4 in section

30

73 in relation to the company’s basic life assurance and general annuity

business for the accounting period.

(5)   

In this section “exempt FOTRA profits” means profits in respect of which no

liability to corporation tax arises as a result of section 1279 of CTA 2009.

 
 

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 4 — Apportionment rules for I - E charge

60

 

Chapter 4

Apportionment rules for I - E charge

Introduction

97      

Application of Chapter

(1)   

This Chapter applies in the case of an insurance company that carries on—

5

(a)   

basic life assurance and general annuity business, and

(b)   

other business.

(2)   

This Chapter contains rules for determining for the purposes of Chapter 3—

(a)   

the credits or other income, the debits or other losses and the expenses

that are referable to the company’s basic life assurance and general

10

annuity business, and

(b)   

the chargeable gains and allowable losses accruing on the disposal of

assets (or parts of assets) that are referable to the company’s basic life

assurance and general annuity business.

Allocation of income, losses and expenses

15

98      

Commercial allocation

(1)   

This section makes provision for determining—

(a)   

the credits or other income and the debits or other losses arising from

the company’s long-term business, and

(b)   

the expenses incurred in the course of the company’s long-term

20

business,

   

that, for the purposes of Chapter 3, are to be regarded as referable to its basic

life assurance and general annuity business.

(2)   

Those items are to be determined in accordance with an acceptable commercial

method adopted by the company for the period of account in which the income

25

or losses arise or the expenses are incurred.

(3)   

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

Chapter 3 for determining for a period of account what is referable to the

company’s basic life assurance and general annuity business.

30

(4)   

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

35

regulations.

(5)   

Subject to any provision made by regulations under subsection (4), 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

115 for that period, and

40

(b)   

in the case of an overseas life insurance company, must also be

consistent with the method for that period for attributing assets in

 
 

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 4 — Apportionment rules for I - E charge

61

 

accordance with the provision made by or under Chapter 4 of Part 2 of

CTA 2009 to its permanent establishment in the United Kingdom.

(6)   

In this section “debits or other losses” means—

(a)   

losses in any separate UK property business carried on by the company

which is within section 86(4),

5

(b)   

losses in any separate overseas business carried on by the company

which is within section 86(4),

(c)   

debits in respect of any loan relationships of the company,

(d)   

debits in respect of any derivative contracts of the company,

(e)   

debits brought into account by the company under Part 8 of CTA 2009

10

(intangible fixed assets), and

(f)   

losses of the company which arise from miscellaneous transactions (as

defined by section 89(4)).

Allocation of chargeable gains and allowable losses on disposals of assets

99      

Application of sections 100 and 101

15

(1)   

Sections 100 and 101 apply for determining the chargeable gains or allowable

losses that, for the purposes of Chapter 3, are to be regarded as referable to a

company’s basic life assurance and general annuity business whenever it

disposes of assets held for the purposes of its long-term business (including

cases where, as a result of Chapter 8 or any other provision of the Corporation

20

Tax Acts, it is deemed to make a disposal).

(2)   

Expressions that are used in sections 100 and 101 and in TCGA 1992 have the

same meaning in those sections as they have for the purposes of that Act.

100     

Assets wholly or partly matched to BLAGAB liabilities

(1)   

If, immediately before the disposal, the whole of the asset was matched to a

25

BLAGAB liability, the whole of the gain or loss is referable to the company’s

basic life assurance and general annuity business.

(2)   

If, immediately before the disposal, a part of the asset was matched to a

BLAGAB liability, the appropriate portion of the gain or loss is referable to the

company’s basic life assurance and general annuity business.

30

(3)   

“The appropriate proportion” means the proportion equal to the proportion of

the asset matched to the BLAGAB liability.

(4)   

If, as a result of Chapter 8, there is a disposal of a part of an asset where the part

concerned is matched to a BLAGAB liability, the whole of the gain or loss is

referable to the company’s basic life assurance and general annuity business.

35

(5)   

The concept of the whole or a part of an asset being matched to a BLAGAB

liability is explained by section 138.

101     

Commercial allocation for disposals not wholly dealt with by section 100

(1)   

This section applies if, in the case of the disposal—

(a)   

no part of the gain or loss is dealt with by section 100, or

40

(b)   

section 100 deals with only a proportion of the gain or loss.

 
 

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 5 — I - E profit: policyholders’ rate of tax

62

 

(2)   

The gain or loss, or (as the case may be) the remaining proportion of the gain

or loss, which is referable to the company’s basic life assurance and general

annuity business is determined in accordance with an acceptable commercial

method adopted by the company for the period of account in which the

disposal is made.

5

(3)   

A method is an “acceptable commercial method” if it secures that gains or

losses are referable to the company’s basic life assurance and general annuity

business in a way that fairly represents the contribution that the assets in

question have made to that business during the period in which they have been

held for the purposes of the company’s long-term business.

10

(4)   

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

15

regulations.

(5)   

Subject to any provision made by regulations under subsection (4), 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 the method adopted for the purposes of section

20

115 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.

25

Chapter 5

I - E profit: policyholders’ rate of tax

Tax rate on policyholders’ share of I - E profit

102     

Policyholders’ rate of tax on policyholders’ share of I - E profit

(1)   

This section applies if an insurance company has an I - E profit for an

30

accounting period.

(2)   

The rate of corporation tax chargeable for a financial year on the policyholders’

share (if any) of the I - E profit is the policyholders’ rate of tax.

(3)   

The policyholders’ rate of tax is the rate at which income tax at the basic rate is

charged for the tax year that begins on 6 April in the financial year.

35

(4)   

The policyholders’ share of the I - E profit is determined in accordance with

section 103.

(5)   

The policyholders’ share of the I - E profit for an insurance company’s

accounting period is to be left out of account in determining for the purposes

of Part 3 of CTA 2010 (companies with small profits)—

40

(a)   

the augmented profits of the company for the accounting period, and

(b)   

the taxable total profits of the company for the accounting period.

 
 

 
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Revised 9 May 2012