Finance Bill (HC Bill 49)

the amount of the difference is to be taken into account for the purpose of
calculating the BLAGAB trade profit or loss of the transferee for the accounting
period in which those contracts are transferred.

(7) The difference is to be taken into account—

(a) 5as a receipt (if, when added to the net amount in subsection (6)(b), the
result is the net amount in subsection (6)(a)), and

(b) as an expense (if, when subtracted from the net amount in subsection
(6)(b), the result is the net amount in subsection (6)(a)).

(8) The net amount recognised by an insurance company in respect of the transfer
10of the contracts is determined by subtracting—

(a) the total amount in respect of liabilities relating to the contracts that is
or would be recognised for the purposes of a balance sheet drawn up at
the relevant time by the company in accordance with generally
accepted accounting practice, from

(b) 15the total amount in respect of assets relating to the contracts that is or
would be recognised for those purposes,

and “the relevant time” means the time immediately before the transfer (in the
case of the transferor) and the time immediately after it (in the case of the
transferee).

(9) 20The Treasury may by order amend any of subsections (6) to (8).

(10) This section does not apply to any amount that arises in respect of a transfer so
far as the transfer consists of a with-profits fund transfer.

The reference here to a with-profits fund transfer is a reference to—

• a transfer of business from a with-profits fund to a fund that is not a
  25with-profits fund, or

• a transfer of business from a fund that is not a with-profits fund to a
  with-profits fund.

(11) If this section applies, the provisions of Part 4 of TIOPA 2010 (transfer pricing)
do not apply.

130 30Transfers between non-group companies: present value of in-force business

(1) This section applies if—

(a) under an insurance business transfer scheme, there is a transfer of basic
life assurance and general annuity business (or any part of that
business) from one insurance company to another,

(b) 35either the transferor and transferee are not members of the same group
of companies when the transfer occurs or, if they are, the transfer
consists of or includes a with-profits fund transfer within the meaning
of section 129(10),

(c) the accounts of the transferee drawn up in accordance with generally
40accepted accounting practice include an asset that represents, as at the
time of the transfer, the value of future profits arising from the relevant
transferred business, and

(d) the asset is not one to which Part 8 of CTA 2009 (intangible fixed assets)
applies.

(2) 45Amounts in respect of the asset that are debited or credited in accounts drawn
up by the transferee in accordance with generally accepted accounting practice

are to be taken into account in calculating the BLAGAB trade profit or loss of
the transferee.

(3) In subsection (1)(c) “the relevant transferred business” means—

(a) if the transferor and transferee are not members of the same group of
companies when the transfer occurs, the business (or part of the
5business) transferred under the insurance business transfer scheme,
and

(b) if the transfer consists of or includes a with-profits fund transfer, the
business transferred by the with-profits fund transfer.

(4) For the purposes of subsection (1)(c) no account is to be taken of an asset so far
10as it is regarded for accounting purposes as internally-generated.

(5) This section does not apply so far as section 129(5) applies in relation to the
transfer.

(6) Nothing in this section is to apply in relation to transfers taking place before 1
January 2013.

15Transfers 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
20one 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
25the 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
30accounting 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
35after 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
40entering 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

(b) any arrangement entered into on or after 1 January 2013 with a
5connection (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.

(4) There are to be made such adjustments of any income or gains chargeable to
10corporation 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—

(a) “arrangement” includes any agreement, scheme, transaction or
15understanding (whether or not legally enforceable), and

(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
20section do not include the purposes of that part of its activities.

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
25the insurance business transfer arrangements is not an unallowable
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
30tax advantage for the group.

(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) 35the amount (or total amount) of that increase is at least equal to the
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) 40An application under section 133 must—

(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
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
5longer period as HMRC Commissioners may allow, they need not proceed
further on the application.

(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) 10if they give a notice under subsection (2), within 30 days of that notice
being complied with.

(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.

15Interpretation

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.

CHAPTER 11 20Definitions

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
what is meant by—

(a) 25the “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
that business for the accounting period that, but for sections 68 and 69, would
30be 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.

(4) The company has a “BLAGAB trade loss” for an accounting period if,
35calculated 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
company’s BLAGAB trade profit or loss subject to the provision made by—

(a) 40sections 106 to 108 (policyholder tax),

(b) Chapter

6

(trade calculation rules applying to long-term business),

(c) Chapter

57

(trading apportionment rules), and

(d) sections 129 and 130 (transfers of BLAGAB).

(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
10tax 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
forming part of “the long-term business fixed capital” of an insurance
company.

(2) 15An 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

(b) it is a structural asset of that business.

(3) The reference to a structural asset of a company’s long-term business includes
20shares, 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
13 in the periodical return of the company for the period ending
25immediately 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.

(5) The Treasury may make regulations providing for assets of a company’s long-
30term 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

(1) This section—

(a) 35defines 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
matched to a BLAGAB liability or other long-term business liability.

(2) 40An 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.

(3) An asset is matched to another long-term business liability if, in accordance
45with 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
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) 5A 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
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) 10A 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
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) 15For the purposes of this section “the applicable method”—

(a) in relation to the company’s basic life assurance and general annuity
business, means the method adopted for the purposes of section 98
which has effect in relation to the period of account in which the income
or other return arises, and

(b) 20in 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
arises.

(8) For the purposes of this section any income or other return arising from an
25asset 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
requirement imposed on the company relating to the category of business in
question.

139 30Minor definitions

(1) In this Part—

• “closing”, in relation to a period of account, means the position at the end
  of the period of account,

• “derivative contract” has the same meaning as in Part 7 of CTA 2009,

• 35“fair value”—

  (a)

  in relation to money, means its amount, and

  (b)

  in relation to other assets, means the amount which an
  independent person selling the assets would get,

• “HMRC Commissioners” means the Commissioners for Her Majesty’s
  40Revenue and Customs,

• “insurance business transfer scheme” means—

  (a)

  a scheme falling within section 105 of FISMA 2000, including an
  excluded scheme falling within Case 2, 3, 4 or 5 of subsection (3)
  of that section, or

  (b)

  45a scheme which would fall within that subsection but for
  subsection (1)(b) of that section,

• “insurance special purpose vehicle” means an undertaking which—

  Finance BillPage 86

  (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
  5rights of the providers of the mechanism are subordinated to
  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
  10Sourcebook, and

  (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
  15not resident in the United Kingdom but which carries on life assurance
  business in the United Kingdom through a permanent establishment
  there,

• “re-insurance” includes retrocession,

• “UK life insurance company” means an insurance company other than an
  20overseas 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
drawn up by an insurance company is a reference to bringing in the amount as
25a 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

(c) any other statement of items used in calculating the company’s income
30or 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—

• “credit” means an amount which for accounting purposes increases or
  35creates 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—

• “deposit back arrangements” means arrangements by which an amount is
  40deposited 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
  2000,

• 45“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
  Sourcebook for Insurers made by the Financial Services Authority
  50under FISMA 2000.

140 Abbreviations

(1) In this Part—

• “FISMA 2000” means the Financial Services and Markets Act 2000, and

• “FISMA (Regulated Activities) Order 2001” means the Financial Services
  5and 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
provisions indicated—

(2) The expressions in the above table have the same meaning in any other
20provision of the Corporation Tax Acts that makes special provision in relation
to—

(a) insurance companies,

(b) any category of life assurance business carried on by insurance
companies, or

(c) 25long-term business carried on by insurance companies.

CHAPTER 12 Supplementary

Powers conferred on Treasury or HMRC Commissioners

142 Power to amend Part

2

etc

(1) 30If, in consequence of the exercise of any power under FISMA 2000, they
consider it expedient to do so, the Treasury may by order amend—

(a) this Part, or

(b) any other provision of the Corporation Tax Acts that makes special
provision in relation to insurance companies, any category of life
35assurance business carried on by insurance companies or long-term
business carried on by insurance companies.

(2) An order under subsection (1) may be made so as to have effect in relation to—

(a) any period ending on or before the day on which the order is made, or

(b) any period beginning before and ending after that day,

40but only if the power under FISMA 2000 is exercised so as to have effect in
relation to the period.

(3) An order under subsection (1) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional,
45transitory or saving provision.

143 Power to amend definition of “insurance business transfer scheme” etc

(1) If, in consequence of any amendment of section 105 of FISMA 2000 (insurance
business transfer schemes), they consider it expedient to do so, the Treasury
may by order amend—

(a) 5the definition of “insurance business transfer scheme” given by section
139, or

(b) any other provision of the Corporation Tax Acts that makes special
provision in relation to insurance companies, any category of life
assurance business carried on by insurance companies or long-term
10business carried on by insurance companies.

(2) An order under subsection (1) may be made so as to have effect in relation to—

(a) any period ending on or before the day on which the order is made, or

(b) any period beginning before and ending after that day,

but only if the amendment of section 105 of FISMA 2000 has effect in relation
15to that period.

(3) An order under subsection (1) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional,
transitory or saving provision.

144 20Power to modify provisions applying to overseas life insurance companies

(1) The Treasury may by regulations provide for the Corporation Tax Acts to have
effect in relation to overseas life insurance companies subject to such
exceptions and other modifications as may be prescribed by the regulations.

(2) The power under subsection (1) includes power to make provision in place of,
25and in consequence to repeal or revoke, any provision in relation to overseas
life insurance companies which is made by or under—

(a) this Part, or

(b) any other provision of the Corporation Tax Acts.

(3) Regulations under subsection (1) may be made so as to have effect in relation
30to any period ending on or after the day on which the regulations are made.

(4) Regulations under subsection (1) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional,
transitory or saving provision.

(5) 35The power to make consequential provision conferred by subsection (4)(b)
includes power to amend any provision made by or under any Act.

145 Orders and regulations

(1) Any power of the Treasury or HMRC Commissioners to make any order or
regulations under this Part is exercisable by statutory instrument.

(2) 40Any statutory instrument containing any order or regulations made by the
Treasury or HMRC Commissioners under this Part is subject to annulment in
pursuance of a resolution of the House of Commons.