Finance Bill (HC Bill 49)

(3) Nothing in this Part that authorises the inclusion of any particular kind of
provision in any order or regulations under this Part is to be read as restricting
the generality of the provision that may be included in the order or regulations.

Minor and consequential amendments and transitional provision

146 5Minor and consequential amendments

Schedule 16 contains minor and consequential amendments.

147 Transitional provision

Schedule 17 contains transitional provision in connection with the coming into
force of this Part.

10Commencement etc

148 Commencement

(1) The provisions of this Part (other than section 149) have effect in relation to
accounting periods of companies beginning on or after 1 January 2013.

(2) Subsection (1) is subject to the operation of any provision of Schedule 17 in
15relation to times before that date.

149 Accounting periods straddling 1 January 2013

(1) If, apart from this section, an insurance company would have had an
accounting period beginning before 1 January 2013 and ending on or after that
date, the accounting period of the company is to end instead on 31 December
202012.

(2) Accordingly, the rules in section 10 of CTA 2009 (end of accounting period) are
subject to this section.

Part 3 Friendly societies carrying on long-term business

25Outline of provisions of Part

150 Overview

(1) This Part makes special provision for corporation tax purposes in relation to
long-term and other business carried on by friendly societies.

(2) Sections 151 and 152 contain provision for applying provisions of the
30Corporation Tax Acts relating to insurance companies so that they also apply
to friendly societies, subject to provision made by regulations.

(3) Sections 153 to 163 make provision for, and in connection with, a special
exemption from corporation tax for BLAGAB or eligible PHI business.

(4) Sections 164 to 169 make provision for, and in connection with, a further
exemption from corporation tax for other business.

(5) The remainder of the Part contains—

(a) provision in relation to certain transfer schemes (see section 170),

(b) 5provision for an exemption from corporation tax for unregistered
friendly societies (see section 171), and

(c) definitions and other supplementary material (see sections 172 to 179).

Long-term business rules to apply to friendly societies

151 Friendly societies subject to same basic rules as mutual insurers

(1) 10The Corporation Tax Acts apply to—

(a) life assurance business carried on by friendly societies, and

(b) other long-term business carried on by friendly societies,

in the same way as they apply respectively to mutual life assurance business
carried on by insurance companies and other long-term business carried on by
15insurance companies.

(2) Subsection (1) does not apply to business which is exempt BLAGAB or eligible
PHI business.

(3) The Treasury may by regulations provide that the Corporation Tax Acts as
applied by subsection (1) have effect subject to such exceptions or other
20modifications as may be prescribed by the regulations.

(4) The regulations may require any part of any business to be treated as a separate
business.

(5) The regulations may make provision having retrospective effect.

(6) The regulations may—

(a) 25make different provision for different cases or circumstances, and

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

152 Friendly societies subject to transfer of business rules

(1) In this section “the transfer of business rules” means—

(a) 30Chapter

10

of Part

2

, and

(b) 35any other provisions of the Corporation Tax Acts that apply on the
transfer from an insurance company to another insurance company of
the whole or part of its life assurance business or of its other long-term
business.

(2) The transfer of business rules apply in the same way—

(a) 40on the transfer of the whole or part of the business of a friendly society
to another friendly society,

(b) on the amalgamation of friendly societies,

(c) on the transfer of the whole or part of the business of a friendly society
to a company which is not a friendly society,

(d) 45on the conversion of a friendly society into a company which is not a
friendly society, and

(e) on the transfer of the whole or part of the business of an insurance
company to a friendly society.

(3) The Treasury may by regulations provide that the transfer of business rules as
applied by subsection (2) have effect subject to such exceptions or other
5modifications as may be prescribed by the regulations.

(4) The regulations may make provision having retrospective effect.

(5) The regulations may—

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

(b) contain incidental, supplementary, consequential, transitional,
10transitory or saving provision.

Exempt BLAGAB or eligible PHI business

153 Exemption for certain BLAGAB or eligible PHI business

(1) A friendly society is not liable to pay corporation tax (whether on income or
chargeable gains) on its profits arising from exempt BLAGAB or eligible PHI
15business.

(2) The exemption applies only if the society makes a claim.

(3) For the meaning of “BLAGAB or eligible PHI business”, see section 154.

(4) For the meaning of “exempt” BLAGAB or eligible PHI business, see section
155.

154 20Meaning of “BLAGAB or eligible PHI business”

(1) In this Part “BLAGAB or eligible PHI business” means—

(a) basic life assurance and general annuity business, and

(b) any PHI business so far as consisting of the effecting or carrying out of
qualifying contracts,

25but see subsections (3) and (4) for some qualifications.

(2) A contract is a “qualifying” contract if—

(a) it is made before 1 September 1996, or

(b) it is made on or after that date and it also falls within paragraph I, II or
III of Part 2 of Schedule 1 to the FISMA (Regulated Activities) Order
302001.

(3) A contract made before 1 September 1996 which effects a policy affording
provision for injury, sickness or other infirmity is to be regarded for the
purposes of this Part as forming part of “BLAGAB or eligible PHI business”
only if—

(a) 35the policy also affords assurance for a gross sum independent of injury,
sickness or other infirmity,

(b) at least 60% of the total premiums are attributable to the provision
afforded during injury, sickness or other infirmity, and

(c) there is no bonus or addition which may be declared or accrue upon the
40assurance of the gross sum.

(4) Business is not to be regarded as “BLAGAB or eligible PHI business” of a
friendly society for the purposes of this Part so far as it consists of the assurance
of any annuity the consideration for which consists of sums obtainable—

(a) on the maturity, or

(b) 5on the surrender,

of any other policy of assurance issued by the society which forms part of its
exempt BLAGAB or eligible PHI business.

155 Meaning of “exempt” BLAGAB or eligible PHI business

(1) In this Part “exempt” BLAGAB or eligible PHI business means BLAGAB or
10eligible PHI business other than non-qualifying business.

(2) Business is “non-qualifying” so far as it consists of—

(a) the assurance of gross sums, or the granting of annuities, which meet
the conditions set out in the following table (which vary according to
the date on which the contracts in question were made), or

(b) 15the effecting or carrying out of contracts for the assurance of gross sums
which are made on or after 20 March 1991 and which are expressed at
the outset not to be made in the course of exempt BLAGAB or eligible
PHI business.

(3) This is the table mentioned above—

(4) In applying the limits in the above table in relation to the total premiums
payable in any period of 12 months (in the case of contracts made on or after 1
10September 1987)—

(a) if the premiums are payable more frequently than annually, ignore an
amount equal to 10% of the premiums, and

(b) ignore so much of any premium as is charged on the ground that an
exceptional risk of death or disability is involved.

(5) 15In applying the limits in the above table in the case of contracts made on or after
1 September 1987, ignore any bonus or addition declared upon an annuity.

(6) In applying the limits in the above table in the case of contracts made before 1
September 1987, ignore any bonus or addition which—

(a) is declared upon the assurance of a gross sum or annuity, or

(b) 20accrues upon the assurance of a gross sum or annuity by reference to an
increase in the value of any investments.

(7) In the case of a contract for the assurance of a gross sum under exempt
BLAGAB or eligible PHI business made on or after 1 September 1987 but before
1 May 1995, there is a special rule if the amount payable by way of premium
25under the contract is increased as a result of a variation made—

(a) in the period beginning with 25 July 1991 and ending with 31 July 1992,
or

(b) in the period beginning with 1 May 1995 and ending with 31 March
1996.

(8) 30The rule is that, in relation to any profits relating to the contract as varied, the
contract is to be treated for the purposes of the above table as made at the time
of the variation.

156 Societies with no provision for assuring gross sums exceeding £2,000 etc

(1) This section applies to a friendly society if its rules make no provision for it to
35carry on BLAGAB or eligible PHI business, or other long-term business,
consisting of—

(a) the assurance of gross sums exceeding £2,000, or

(b) the granting of annuities of annual amounts exceeding £416.

(2) The table in section 155 applies in relation to a friendly society to which this
40section applies as if, in the final row of that table—

(a) the reference to £500 were a reference to £2,000, and

(b) the reference to £104 were a reference to £416.

(3) If at any time a friendly society to which this section applies amends its rules
so as to cease to be such a friendly society, any part of its BLAGAB or eligible
45PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI
business,

continues to be exempt BLAGAB or eligible PHI business for the purposes of
this Part.

(4) 5If at any time a friendly society to which this section does not apply amends its
rules so as to become a friendly society to which this section applies, any part
of its BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was not exempt BLAGAB or eligible PHI
10business,

continues not to be exempt BLAGAB or eligible PHI business for the purposes
of this Part.

(5) If at any time a friendly society to which this section does not apply acquires
by way of transfer of engagements or amalgamation from another friendly
15society any BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI
business,

that business continues to be exempt BLAGAB or eligible PHI business for the
20purposes of this Part.

(6) If at any time a friendly society to which this section applies acquires by way
of transfer of engagements or amalgamation from another friendly society any
BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) 25immediately before that time was not exempt BLAGAB or eligible PHI
business,

that business continues not to be exempt BLAGAB or eligible PHI business for
the purposes of this Part.

157 Transfers to friendly societies

(1) 30If at any time an insurance business transfer scheme transfers any long-term
business to a friendly society, any BLAGAB or eligible PHI business which
relates to contracts included in the transfer is subsequently not to be capable of
being exempt BLAGAB or eligible PHI business for the purposes of this Part.

(2) This rule does not apply in relation to business relating to contracts to which
35section 158 applied immediately before the transfer had effect.

158 Transfers from friendly societies to insurance companies etc

(1) If at any time an insurance company acquires by way of transfer of
engagements from a friendly society any BLAGAB or eligible PHI business
which—

(a) 40relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI
business,

that business continues to be exempt from corporation tax (whether on income
or chargeable gains) on profits arising from it.

(2) If at any time a friendly society ceases as a result of section 91 of FSA 1992
(conversion into company) to be registered under that Act, any part of its
BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) 5immediately before that time was exempt BLAGAB or eligible PHI
business,

continues to be exempt from corporation tax (whether on income or chargeable
gains) on profits arising from it.

(3) If contracts constituting or forming part of the business of a company covered
10by this section are varied during an accounting period of the company so as to
increase the premiums payable under them, the business relating to those
contracts is not exempt from corporation tax for that or any subsequent
accounting period.

(4) For the purposes of the Corporation Tax Acts any part of a company’s business
15which is exempt from corporation tax as a result of this section is to be treated
as a separate business from any other business carried on by the company.

(5) The Treasury may by regulations provide that, where any part of the business
of a company is exempt from corporation tax as a result of this section, the
Corporation Tax Acts have effect subject to such exceptions or other
20modifications as they consider appropriate.

(6) The regulations may make provision having retrospective effect.

(7) The regulations may—

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

(b) contain incidental, supplementary, consequential, transitional,
25transitory or saving provision.

159 Exception in case of breach of maximum benefits payable to members

(1) The exemption from corporation tax afforded by section 153, 156(3) or (5) or
158 does not apply in relation to so much of the profits arising to a friendly
society or insurance company from any business as is attributable to a policy
30which—

(a) is not a qualifying policy as a result of sub-paragraph (2) of paragraph
6 of Schedule 15 to ICTA and is not an excluded policy, and

(b) would not be a qualifying policy as a result of that sub-paragraph if all
excluded policies were ignored.

(2) 35A policy is an excluded policy if—

(a) it is held otherwise than with the friendly society or insurance
company, or

(b) the person who has the contract effecting the policy acquired the rights
under it on an assignment otherwise than for money or money’s worth.

(3) 40This section does not withdraw the exemption from corporation tax afforded
by section 153, 156(3) or (5) or 158 in relation to profits arising from any part of
a business relating to contracts made on or before 3 May 1966.

Exempt BLAGAB or eligible PHI business: benefits payable by friendly societies etc

160 Maximum benefits payable to members

(1) This section imposes restrictions on the entitlement of a person to have at any
time outstanding contracts with any one or more friendly societies, registered
5branches or insurance companies (“relevant persons”) which are—

(a) for the assurance of gross sums under business which is afforded
exemption from corporation tax under section 153, 156(3) or (5) or 158
(see subsections (2) and (3)), or

(b) for the assurance by way of annuity under business which is afforded
10exemption from corporation tax under any of those provisions (see
subsection (4)).

(2) In the case of contracts for the assurance of gross sums made before 1
September 1987, a person is not entitled to have outstanding at any time with
relevant persons contracts which, taking them all together, are for the
15assurance of more than £750 (but see subsection (9)).

(3) In the case of contracts for the assurance of gross sums at least one of which
was made on or after that date, a person is not entitled to have outstanding at
any time with relevant persons—

(a) contracts under which the total premiums payable in any period of 12
20months exceed £270,

(b) contracts made before 1 May 1995 under which the total premiums
payable in any period of 12 months exceed £200,

(c) contracts made before 25 July 1991 under which the total premiums
payable in any period of 12 months exceed £150, or

(d) 25contracts made before 1 September 1990 under which the total
premiums payable in any period of 12 months exceed £100.

(4) In the case of contracts for the assurance by way of annuity, a person is not
entitled to have at any time outstanding with relevant persons contracts which,
taking them all together, are for the assurance of more than £156 (but see
30subsection (9)).

(5) In applying the limits in this section in relation to the total premiums payable
in any period of 12 months—

(a) if the premiums are payable more frequently than annually, ignore an
amount equal to 10% of the premiums, and

(b) 35ignore so much of any premium as is charged on the ground that an
exceptional risk of death or disability is involved.

(6) In applying the limits in this section, ignore —

(a) any bonus or addition which is declared upon an assurance of a gross
sum or annuity or which accrues upon an assurance of a gross sum or
40annuity by reference to an increase in the value of any investments,

(b) any policy of insurance or annuity contract by means of which the
benefits to be provided under an occupational pension scheme (within
the meaning of section 150(5) of FA 2004) are secured,

(c) any annuity contract which constitutes, or is issued or held in
45connection with, a registered pension scheme other than one within
paragraph (b), and

(d) any increase in a benefit under a friendly society contract (within the
meaning given by section 6 of the Decimal Currency Act 1969) resulting

from the adoption of a scheme prescribed or approved under
subsection (3) of that section.

(7) In the case of a contract for the assurance of a gross sum made on or after 1
September 1987 but before 1 May 1995, there is a special rule if the amount
payable by way of premium under the contract is increased as a result of a
5variation made—

(a) in the period beginning with 25 July 1991 and ending with 31 July 1992,
or

(b) in the period beginning with 1 May 1995 and ending with 31 March
1996.

(8) 10The rule is that, in relation to times when the contract has effect as varied, the
contract is to be treated for the purposes of this section as made at the time of
variation.

(9) If a person’s outstanding contracts with relevant persons were contracts which
were all made before 14 March 1984—

(a) 15subsection (2) has effect as if the reference to £750 were a reference to
£2,000, and

(b) subsection (4) has effect as if the reference to £156 were a reference to
£416.

161 Section 160: supplementary

(1) 20This section makes further provision for the purposes of section 160 the
application of which depends on whether or not a friendly society is an old
society.

(2) For the purposes of this Part an “old society” means—

(a) a registered friendly society which was registered before 4 February
251966,

(b) a registered friendly society which was registered in the period
beginning with that date and ending with 3 May 1966 and which on or
before 3 May 1966 carried on any life or endowment business (within
the meaning of section 29 of FA 1966), or

(c) 30an incorporated friendly society which, before its incorporation, was a
registered friendly society within paragraph (a) or (b).

(3) In applying the limits in section 160(3) in relation to the total premiums
payable in any period of 12 months, ignore £10 of the premiums payable under
any contract made before 1 September 1987 by an old society.

(4) 35In applying the limits in section 160(3), the premiums under any contract for
an annuity which was made before 1 June 1984 by a friendly society other than
an old society are to be dealt with as if the contract were for the assurance of a
gross sum.

(5) In applying the limits in section 160 in any case where a person has outstanding
40with relevant persons one or more contracts made after 13 March 1984 and one
or more contracts made on or before that date, any contract for an annuity
which was made before 1 June 1984 by a friendly society other than an old
society is to be regarded—

(a) as a contract for the annual amount concerned, and

(b) 45as a contract for the assurance of a gross sum equal to 75% of the total
premiums which would be payable under the contract if it were to run

for its full term or, as the case may be, if the member concerned were to
die at the age of 75.

162 Section 160: statutory declarations

A friendly society, registered branch or insurance company may require a
person to make and sign a statutory declaration—

(a) 5that the total amount assured under outstanding contracts entered into
by that person with any one or more friendly societies, registered
branches or insurance companies (taken together) does not exceed the
limits set out in section 160, and

(b) that the total premiums under those contracts do not exceed those
10limits.

Exempt BLAGAB or eligible PHI business: directions to old societies

163 Directions given to old societies

(1) HMRC Commissioners may give a direction under this section to an old
society.

(2) 15The Commissioners may give the direction if—

(a) the society begins to carry on exempt BLAGAB or eligible PHI business
or, in their opinion, begins to carry on exempt BLAGAB or eligible PHI
business on an enlarged scale or of a new character, and

(b) it appears to them, having regard to the restrictions placed on
20qualifying policies issued by friendly societies other than old societies
by paragraphs 3(1)(b) and 4(3)(b) of Schedule 15 to ICTA, that for the
protection of the revenue it is expedient to give the direction.

(3) The direction is that (and has the effect that) the society is to be treated for the
purposes of this Part and Schedule 15 to ICTA as a friendly society other than
25an old society with respect to business carried on after the date of the direction.

(4) The society may appeal against the direction on the ground that—

(a) it has not begun to carry on business as mentioned in subsection (2)(a),
or

(b) the direction is not necessary for the protection of the revenue.

(5) 30The appeal must be made within 30 days of the date on which the direction is
given.

(6) If a registered friendly society in respect of which a direction is in force under
this section becomes an incorporated friendly society, the direction continues
to have effect, so that for the purposes of this Part and Schedule 15 to ICTA it
35is treated as a friendly society other than an old society.

Exemption for other business

164 Societies registered before 1 June 1973, etc

(1) A registered friendly society which is a qualifying society is not liable to pay
corporation tax (whether on income or chargeable gains) on its profits other
40than those arising from—