Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 6 — Trade calculation rules applying to long-term business
67

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—
5
(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
10
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—
15
(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—
20
(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
25
(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
30
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
35
(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—
40
(a)
they are referable, in accordance with Chapter 4, to any basic life
assurance and general annuity business of the company, or

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 7 — Trading apportionment rules
68

(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
5
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
10
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—
“index-linked gilt-edged security” has the same meaning as it has in
15
sections 400 to 400C of CTA 2009 (see section 399(4) of that Act), and
“index-linked PHI business” means PHI business so far as consisting of
the effecting or carrying out of contracts of long-term insurance under
which the benefits payable are linked to an index of prices published by
the Statistics Board.
20
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
25
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
30
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
35
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”.
40
(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

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 8 — Assets held for purposes of long-term business
69

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-
5
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.
10
(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.
15
(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
20
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
25
(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
30
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—
35
(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.
40
(2)
The long-term business categories in question are—
(a)
assets which are matched to BLAGAB liabilities of the company,

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 8 — Assets held for purposes of long-term business
70

(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
5
(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
10
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.
15
(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
20
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
25
(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
30
(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—
35
(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
40
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),
45
the UK assets which are held by it for the purposes of a particular fund but

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 8 — Assets held for purposes of long-term business
71

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
(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
10
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,
15
(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
20
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—
25
(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
30
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
35
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
40
(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—
45

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 8 — Assets held for purposes of long-term business
72

(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
5
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),
10
(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.
15
(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.
20
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
25
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,
30
(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
35
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),
40
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
45
2009.

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 8 — Assets held for purposes of long-term business
73

(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
5
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
10
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,
15
(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
20
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,
25
(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.
30
(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.
35
(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
40
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
45
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.