Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 10 — Transfers of long-term business
79

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
5
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
10
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
15
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
20
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
25
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
30
(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.
35
(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—
40
(a)
“arrangement” includes any agreement, scheme, transaction or
understanding (whether or not legally enforceable), and

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 10 — Transfers of long-term business
80

(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.
5
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
10
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.
15
(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
20
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—
25
(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
30
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.
35
(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.
40
(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.

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 11 — Definitions
81

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.
5
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
10
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
15
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.
20
(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
25
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).
30
(6)
For the purposes of this section “the ordinary trading rules” means the rules for
calculating the profits of a trade for the purposes of the charge to corporation
tax on income under section 35 of CTA 2009.
137
Meaning of “the long-term business fixed capital”
(1)
This section explains for the purposes of this Part what is meant by an asset
35
forming part of “the long-term business fixed capital” of an insurance
company.
(2)
An asset forms part of “the long-term business fixed capital” of the company
if—
(a)
it is held for the purposes of its long-term business, and
40
(b)
it is a structural asset of that business.

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 11 — Definitions
82

(3)
The reference to a structural asset of a company’s long-term business includes
shares, debts and loans which—
(a)
are held by the company in a fund that is not a with-profits fund, and
(b)
are of a kind that, if they had been held on 31 December 2012, their
value would have been required to be entered in lines 21 to 24 of Form
5
13 in the periodical return of the company for the period ending
immediately before 1 January 2013 (UK insurance dependants and
other insurance dependants).
(4)
For the purposes of subsection (3)(b) “periodical return” has the same meaning
as it has in Chapter 1 of Part 12 of ICTA.
10
(5)
The Treasury may make regulations providing for assets of a company’s long-
term business which are of a description specified in the regulations to be
regarded for the purposes of this section as being, or as not being, structural
assets of that business.
138
Meaning of assets that are “matched to” liabilities
15
(1)
This section—
(a)
defines for the purposes of this Part what is meant by an asset that is
matched to a BLAGAB liability or other long-term business liability
and what is meant by the whole or a part of an asset being matched, and
(b)
explains for those purposes how to work out the part of an asset that is
20
matched to a BLAGAB liability or other long-term business liability.
(2)
An asset is matched to a BLAGAB liability if, in accordance with the applicable
method, some or all of the income or other return arising from that particular
asset is specifically referable to the company’s basic life assurance and general
annuity business.
25
(3)
An asset is matched to another long-term business liability if, in accordance
with the applicable method, some or all of the income or other return arising
from that particular asset is specifically referable to the company’s non-
BLAGAB long-term business.
(4)
The whole of an asset is matched to a BLAGAB liability if, in accordance with
30
the applicable method, the whole of the income or other return arising from
that particular asset is specifically referable to the company’s basic life
assurance and general annuity business.
(5)
A part of an asset is matched to a BLAGAB liability or other long-term business
liability if, in accordance with the applicable method, part of the income or
35
other return arising from that particular asset is specifically referable to the
company’s basic life assurance and general annuity business or (as the case
may be) its non-BLAGAB long-term business.
(6)
A part of an asset is matched to a BLAGAB liability or other long-term business
liability in proportion to the income or other return arising from that particular
40
asset that, in accordance with the applicable method, is specifically referable to
the company’s basic life assurance and general annuity business or (as the case
may be) its non-BLAGAB long-term business.
(7)
For the purposes of this section “the applicable method”—
(a)
in relation to the company’s basic life assurance and general annuity
45
business, means the method adopted for the purposes of section 98

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 11 — Definitions
83

which has effect in relation to the period of account in which the income
or other return arises, and
(b)
in relation to the company’s non-BLAGAB long-term business, means
the method adopted for the purposes of section 115 which has effect in
relation to the period of account in which the income or other return
5
arises.
(8)
For the purposes of this section any income or other return arising from an
asset is to be regarded as specifically referable to a category of business in
accordance with the applicable method in so far as that method is adopted in
relation to the income or other return in consequence of a contractual
10
requirement imposed on the company relating to the category of business in
question.
139
Minor definitions
(1)
In this Part—
“closing”, in relation to a period of account, means the position at the end
15
of the period of account,
“derivative contract” has the same meaning as in Part 7 of CTA 2009,
“fair value”—
(a)
in relation to money, means its amount, and
(b)
in relation to other assets, means the amount which an
20
independent person selling the assets would get,
“HMRC Commissioners” means the Commissioners for Her Majesty’s
Revenue and Customs,
“insurance business transfer scheme” means—
(a)
a scheme falling within section 105 of FISMA 2000, including an
25
excluded scheme falling within Case 2, 3, 4 or 5 of subsection (3)
of that section, or
(b)
a scheme which would fall within that subsection but for
subsection (1)(b) of that section,
“insurance special purpose vehicle” means an undertaking which—
30
(a)
assumes risks from insurance or re-insurance undertakings,
and
(b)
fully funds its exposures to those risks through the proceeds of
a debt issue or other financing mechanism where the repayment
rights of the providers of the mechanism are subordinated to
35
the re-insurance obligations of the undertaking,
“liabilities”, in relation to an insurance company, means—
(a)
the mathematical reserves of the company as determined in
accordance with section 1.2 of the Insurance Prudential
Sourcebook, and
40
(b)
liabilities of the company (whose value falls to be determined in
accordance with section 1.3 of the General Prudential
Sourcebook) which arise from deposit back arrangements,
“overseas life insurance company” means an insurance company which is
not resident in the United Kingdom but which carries on life assurance
45
business in the United Kingdom through a permanent establishment
there,
“re-insurance” includes retrocession,

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 11 — Definitions
84

“UK life insurance company” means an insurance company other than an
overseas life insurance company,
“with-profits fund” has the meaning given by the Prudential Sourcebook
(Insurers).
(2)
In this Part any reference to the debiting or crediting of an amount in accounts
5
drawn up by an insurance company is a reference to bringing in the amount as
a debit or credit in—
(a)
the company’s profit and loss account, income statement or statement
of comprehensive income (or other comprehensive income),
(b)
a statement of total recognised gains and losses, or
10
(c)
any other statement of items used in calculating the company’s income
or gains, or its losses or expenses, for accounting purposes,

irrespective of how any account or statement within any of paragraphs (a) to
(c) is described or otherwise referred to.
(3)
For this purpose—
15
“credit” means an amount which for accounting purposes increases or
creates a profit, or reduces a loss, for a period of account, and
“debit” means an amount which for accounting purposes reduces a profit,
or increases or creates a loss, for a period of account.
(4)
In this section—
20
“deposit back arrangements” means arrangements by which an amount is
deposited by the re-insurer under a contract of re-insurance with the
cedant,
“the Insurance Prudential Sourcebook” means the Insurance Prudential
Sourcebook made by the Financial Services Authority under FISMA
25
2000,
“the General Prudential Sourcebook” means the General Prudential
Sourcebook made by the Financial Services Authority under FISMA
2000, and
“the Prudential Sourcebook (Insurers)” means the Interim Prudential
30
Sourcebook for Insurers made by the Financial Services Authority
under FISMA 2000.
140
Abbreviations
(1)
In this Part—
“FISMA 2000” means the Financial Services and Markets Act 2000, and
35
“FISMA (Regulated Activities) Order 2001” means the Financial Services
and Markets Act 2000 (Regulated Activities) Order 2001.
(2)
For abbreviations of other Acts, see section 226.
141
Index of defined terms, etc
(1)
In this Part the following expressions are defined or otherwise explained by the
40
provisions indicated—

Finance Bill
Part 2 — Insurance companies carrying on long-term business
Chapter 11 — Definitions
85

Expression
Where explained

basic life assurance and general annuity
sections 57 and 67(5)

business (abbreviated to “BLAGAB”)

BLAGAB trade loss
section 136

BLAGAB trade profit
section 136

5

closing
section 139(1)

contract of insurance
section 64

contract of long-term insurance
section 64

debiting or crediting an amount in accounts
section 139(2) and (3)

drawn up by a company

10

derivative contract
section 139(1)

excess BLAGAB expenses
section 73

fair value
section 139(1)

HMRC Commissioners
section 139(1)

I - E profit
section 73

15

the I - E rules
section 70(1) and (2)

insurance business transfer scheme
section 139(1)

insurance company
section 65

insurance special purpose vehicle
section 139(1)

liabilities
section 139(1)

20

life assurance business
section 56

long-term business
section 63(1)

long-term business fixed capital
section 137

matched (in case of assets matched to a
section 138

BLAGAB liability or other long-term business

25

liability)

non-BLAGAB long-term business
sections 66 and 67

non-taxable distributions
section 94(4) and (5)

overseas life insurance company
section 139(1)

PHI business
section 63(2)

30

re-insurance
section 139(1)

UK life insurance company
section 139(1)