Finance Bill (HC Bill 49)

(6) The amendments made by paragraphs 11 to 16 have effect in relation to
claims whenever made.

Section 146

SCHEDULE 16 Part

52

: minor and consequential amendments

Part 1 Amendments of ICTA

1 ICTA is amended as follows.

2 Omit section 76 (expenses of insurance companies).

3 10Omit section 76ZA (payments for restrictive undertakings).

4 Omit section 76ZB (seconded employees).

5 Omit sections 76ZC to 76ZE (counselling and retraining expenses).

6 Omit sections 76ZF to 76ZJ (redundancy payments etc).

7 Omit section 76ZK (contributions to local enterprise organisations or urban
15regeneration companies).

8 Omit sections 76ZL and 76ZM (unpaid remuneration).

9 Omit section 76ZN (car hire).

10 In section 95ZA(3) (taxation of UK distributions received by insurance
companies), for “life assurance business” substitute “business in relation to
20which section 111 of the Finance Act 2012 applies”.

11 Omit section 431 (interpretative provisions relating to insurance
companies).

12 Omit section 431ZA (election for assets not be foreign business assets).

13 Omit section 431A (amendment of Chapter etc).

14 25Omit section 431B (meaning of “pension business”).

15 Omit section 431BA (meaning of “child trust fund business”).

16 Omit section 431BB (meaning of “individual savings account business”).

17 Omit section 431C (meaning of “life reinsurance business”).

18 Omit sections 431D and 431E (meaning of “overseas life assurance business”
30etc).

19 Omit section 431EA (meaning of “gross roll-up business”).

20 Omit section 431F (meaning of “basic life assurance and general annuity
business”).

21 Omit section 431G (company carrying on life assurance business).

22 Omit section 431H (company carrying on life assurance business and other
insurance business).

23 Omit section 432YA (PHI business — adjustment consequent of change in
Insurance Prudential Sourcebook).

24 5Omit section 432ZA (linked assets).

25 Omit section 432A (apportionment of income and gains).

26 Omit section 432AA (property businesses).

27 Omit section 432AB (losses from property businesses).

28 Omit sections 432B to 432G (apportionment of receipts brought into
10account).

29 Omit section 434 (franked investment income etc).

30 Omit section 434A (computation of losses and limitation on relief).

31 Omit sections 434AZA to 434AZC (reduced loss relief for additions to non-
profit funds).

32 15Omit section 436A (gross roll-up business: separate charge on profits).

33 Omit section 436B (gains referable to gross-roll up business not to be
chargeable gains).

34 Omit sections 437 and 437A (general annuity business).

35 Omit section 438 (pension business: exemption from tax).

36 20Omit section 440 (transfers of assets etc).

37 Omit section 440A (securities).

38 Omit section 440B (modifications where tax charged under s.35 of CTA
2009).

39 Omit section 440C (modifications for change of tax basis).

40 25Omit section 440D (modifications in relation to BLAGAB group reinsurers).

41 Omit section 442 (overseas business of UK companies).

42 Omit section 442A (taxation of investment return where risk reinsured).

43 Omit sections 444A to 444AED (transfers of business).

44 Omit sections 444AF to 444AL (surpluses of mutual and former mutual
30businesses).

45 In Schedule 15 (qualifying policies), in paragraph 24(3)(a), for “section
431(2)” substitute “section 56 of the Finance Act 2012”.

46 Omit Schedule 19ABA (modifications in relation to BLAGAB group
reinsurers).

Part 2 Amendments of FA 1989

47 FA 1989 is amended as follows.

48 In section 67(2) (employee share ownership trusts), for paragraph (b) (and
5the “or” before that paragraph) substitute—

“(b) if the company is an investment company, shall be treated as
expenses of management, or

(c) if the company is a company in relation to which the I - E
rules apply and the sum is referable, in accordance with
10Chapter

4

of Part

2

of the Finance Act 2012, to the company’s
15basic life assurance and general annuity business, shall be
treated for the purposes of section 76 of that Act as ordinary
BLAGAB management expenses of the company.”

49 Omit section 82 (calculation of profits: bonuses etc).

50 Omit section 82A (calculation of profits: policy holders’ tax).

51 20Omit section 82B (unappropriated surplus on valuation).

52 Omit sections 82D to 82F (treatment of profits: life assurance — adjustment
consequent on change in Insurance Prudential Sourcebook).

53 Omit section 83 (receipts to be taken into account).

54 Omit section 83XA (structural assets).

55 25Omit sections 83YA and 83YB (changes in value of assets brought into
account: non-profit companies).

56 Omit sections 83YC to 83YF (FAFTS).

57 Omit section 83A (meaning of “brought into account”).

58 Omit section 83B (changes in recognised accounts: attribution of amounts
30carried forward under s.432F of ICTA).

59 Omit section 85 (charge of certain receipts of basic life assurance business).

60 Omit section 85A (excess adjusted life assurance trade profits).

61 Omit section 86 (spreading of relief for acquisition expenses).

62 Omit section 88 (corporation tax: policy holders’ share of profits).

63 35Omit section 89 (policy holders’ share of profits).

Part 3 Amendments of other Acts

Finance Act 1950

64 FA 1950 is amended as follows.

65 40In section 39(3)(b)(ii) (treatment for taxation purposes of enemy debts etc
written off during the war), for “an expenses deduction for the purposes of

Step 1 of section 76(7) of the Income and Corporation Taxes Act 1988”
substitute “ordinary BLAGAB management expenses for the purposes of
section 76 of the Finance Act 2012”.

Taxes Management Act 1970

66 TMA 1970 is amended as follows.

67 (1) 5Section 98 (special returns) is amended as follows.

(2) In the first column of the Table—

(a) omit the entry relating to regulations under section 431E(1) of ICTA,
and

(b) at the end insert—

• 10“regulations under section 61(5) of the Finance Act
  2012”.

(3) In the second column of the Table—

(a) omit the entry relating to section 76ZE(4) of ICTA,

(b) omit the entry relating to regulations under section 431E(1) of ICTA,
15and

(c) at the end insert—

• “regulations under section 61(5) of the Finance Act
  2012”.

Inheritance Tax Act 1984

68 20IHTA 1984 is amended as follows.

69 In section 59(3)(b) (qualifying interest in possession), for “Chapter I of Part
XII of the Taxes Act 1988” substitute “Part

2

of the Finance Act 2012”.

25Finance Act 1991

70 FA 1991 is amended as follows.

71 In paragraph 16(1) of Schedule 7 (transitional relief for old general annuity
contracts), for the words from “computation” to “1988” substitute
“application of the I - E rules in relation to an accounting period of an
30insurance company, an amount equal to the lesser of the following amounts
is to be treated (if it is not nil) for the purposes of section 76 of the Finance
Act 2012 as a deemed BLAGAB management expense for the accounting
period”.

Taxation of Chargeable Gains Act 1992

72 35TCGA 1992 is amended as follows.

73 In section 10B (non-resident company with United Kingdom permanent
establishment), after subsection (3) insert—

“(3A) This section applies to an overseas life insurance company in the case
of its long-term business with the omission from subsection (1)(b) of
40the words “situated in the United Kingdom and”.”

74 In section 100(2B)(a) (exemption for authorised unit trusts etc), for “section
431 of the Taxes Act” substitute “section 65 of the Finance Act 2012”.

75 In section 140C (transfer or division of non-UK business), omit subsection
(8).

76 In section 151I(1) (meaning of “financial institution”)—

(a) in paragraph (g), for “section 431(2) of ICTA” substitute “section 65
5of the Finance Act 2012”, and

(b) in paragraph (h), for “section 431(2) of ICTA” substitute “section
139(1) of the Finance Act 2012”.

77 (1) Section 171C (elections under s.171A: insurance companies) is amended as
follows.

(2) 10In subsection (2), for “section 440(3) of the Taxes Act” substitute “section 118
of the Finance Act 2012”.

(3) In subsection (3)(b), for “part of that company’s long-term insurance fund”
substitute “held for the purposes of the company’s long-term business”.

(4) In subsection (4), for the words from “as arising” to the end substitute “for
15the purposes of section 210A (ring-fencing of losses) as a non-BLAGAB
chargeable gain or (as the case may be) a non-BLAGAB allowable loss”.

(5) Omit subsection (5).

78 In section 185 (deemed disposal of assets on company ceasing to be UK
resident), after subsection (4) insert—

“(4A) 20Subsection (4) applies to an overseas life insurance company in the
case of its long-term business with—

(a) the omission from paragraph (a) of the words “are situated in
the United Kingdom and”; and

(b) the omission from paragraph (b) of the words “are so situated
25and”.”

79 In section 204(10)(a) (policies of insurance and non-deferred annuities), for
“Chapter 1 of Part 12 of the Taxes Act” substitute “section 56(3) of the
Finance Act 2012”.

80 (1) Section 210A (ring-fencing of losses) is amended as follows.

(2) 30For subsection (2) substitute—

“(2) Non-BLAGAB allowable losses accruing to an insurance company
are allowable as a deduction from the shareholders’ share (if any) of
the BLAGAB chargeable gains accruing to the company (but are not
otherwise allowable as a deduction from the BLAGAB chargeable
35gains accruing to the company).”

(3) For subsections (10) and (10A) substitute—

“(10) For the purposes of this section the “shareholders’ share” of
BLAGAB chargeable gains or BLAGAB allowable losses accruing to
an insurance company in an accounting period is determined as
40follows.

(10A) If the company has an I - E profit for the accounting period—

(a) find the percentage (including, if applicable, nil) of the I - E
profit that is not represented by the policyholders’ share of

that profit as determined in accordance with section 103 of
the Finance Act 2012, and

(b) then multiply that percentage by the amount of the BLAGAB
chargeable gains or BLAGAB allowable losses.

The result is the shareholder’s share of the BLAGAB chargeable
5gains or BLAGAB allowable losses.

(10B) If the company does not have an I - E profit for the accounting period,
the shareholders’ share of the BLAGAB chargeable gains or
BLAGAB allowable losses is nil.

(10C) In determining for the purposes of subsections (10A) and (10B)
10whether or not the company has an I - E profit for an accounting
period, assume that non-BLAGAB allowable losses cannot be
deducted to any extent from BLAGAB chargeable gains (and,
accordingly, assume that section 95 is not included in the Finance Act
2012).”

(4) 15In subsection (11)—

(a) for “the policy holders’ share” substitute “the shareholders’ share”,
and

(b) for “subsection (10)” substitute “subsections (10) to (10C)”.

(5) Omit subsection (12).

(6) 20In subsection (13)—

(a) in the definitions of “BLAGAB allowable losses” and “BLAGAB
chargeable gains”, for “(in accordance with section 432A of the Taxes
Act)” substitute “, in accordance with Chapter

4

25 of Part

2

of the
Finance Act 2012,”, and

(b) omit the definitions of “the relevant profits” and “the policy holders’
30share of the relevant profits” (together with the “and” before the
definition of “the relevant profits”).

81 (1) Section 210B (disposal and acquisition of section 440A securities) is
amended as follows.

(2) In subsection (1)—

(a) 35in the opening words, for “section 440A securities” (in both places)
substitute “section 119 or 120 securities”, and

(b) in paragraphs (a) and (b), for “chargeable section 440A holding”
substitute “chargeable section 119 or 120 holding”.

(3) In subsection (7)(a), for “linked assets” substitute “assets wholly matched to
40BLAGAB liabilities and the assets are”.

(4) For subsection (8) substitute—

“(8) In this section—

• “BLAGAB internal linked fund” means an internal linked fund
  all the assets appropriated to which are matched wholly to
  45BLAGAB liabilities,

• “chargeable section 119 or 120 holding” means a holding which
  is a separate holding as a result of section 119(1)(a), (c) or (d)
  or section 120(1)(a), (c) or (d) of the Finance Act 2012 (and
  section 121(1) and (2) of that Act),

Finance BillPage 376

• “internal linked fund”, in relation to an insurance company,
  means an account—

  (a)

  to which assets matched to the company’s life
  assurance liabilities are appropriated by the
  5company, and

  (b)

  which may be divided into units the value of which is
  determined by the company by reference to the value
  of those assets, and

• “section 119 or 120 securities” means securities within the
  10meaning of section 119 or 120 of the Finance Act 2012 (see
  section 121(6)).”

(5) In the heading, for “section 440A securities” substitute “section 119 or 120
securities”.

82 In section 210C(2) (losses on disposal of authorised investment fund assets
15to connected manager), in the definition of “authorised investment fund
assets”, for “of the company’s long-term insurance fund consisting of”
substitute “held by the company for the purposes of its long-term business
that consist of”.

83 (1) Section 211 (transfers of business) is amended as follows.

(2) 20In subsection (2)—

(a) in paragraph (a), for “of the transferor’s long-term insurance fund”
substitute “held by the transferor for the purposes of its long-term
business”, and

(b) in paragraph (b), for “of the transferee’s long-term insurance fund”
25substitute “held by the transferee for the purposes of its long-term
business”.

(3) In subsection (2A), for “structural assets within the meaning of section 83XA
of the Finance Act 1989” substitute “assets which formed part of the long-
term business fixed capital of the company in question”.

(4) 30After subsection (3) insert—

“(4) Subsection (2) does not apply in relation to assets which are referable
to the long-term business of the transferor if all the income of the
transferor’s long-term business is chargeable to corporation tax on
income under section 35 of CTA 2009.”

84 35In section 211ZA(10) (transfers of business: transfer of unused losses), for
“(in accordance with section 432A of the Taxes Act)” substitute “, in
accordance with Chapter

4

of Part

402

of the Finance Act 2012,”.

85 (1) Section 212 (annual deemed disposal of holdings of unit trusts etc) is
amended as follows.

(2) In subsection (1), for “of an insurance company’s long-term insurance fund”
45substitute “held by an insurance company for the purposes of its long-term
business”.

(3) Omit subsection (2).

(4) At the end insert—

“(9) This section applies to an overseas life insurance company as if
references in subsection (1) to assets were to such of the assets
concerned as are UK assets.

(10) 5Assets (whether situated in the United Kingdom or elsewhere) are
“UK assets” if, in accordance with the provision made by or under
Chapter 4 of 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.”

86 (1) 10Section 213 (spreading of gains and losses under section 212) is amended as
follows.

(2) In subsection (1A), for “(in accordance with section 432A of the Taxes Act)”
substitute “, in accordance with Chapter

4

15 of Part

2

of the Finance Act 2012,”.

(3) After subsection (4) insert—

“(4ZA) Subsection (4) applies in relation to an overseas life insurance
20company with the insertion after “long-term business” of the words
“in the United Kingdom through a permanent establishment”.”

87 After section 213 insert—

“213A Power to modify ss.212 and 213 etc in case of CFCs that are offshore
funds

(1) 25The Treasury may make regulations for the purpose mentioned in
subsection (2) in any case where—

(a) an insurance company to which the I - E rules apply is
deemed to make a disposal under section 212 of an interest in
an offshore fund,

(b) 30the offshore fund is a CFC, and

(c) there is (or, but for the regulations, would be) a CFC charge
on the insurance company referable to its relevant interest in
the CFC for the accounting period in which the disposal is
deemed to have been made.

(2) 35The regulations are to be made for the purpose of modifying the
operation of—

(a) section 212 or 213,

(b) the CFC rules, or

(c) the I - E rules,

40in relation to any accounting period of the insurance company so as
to reduce the charge to tax.

(3) The regulations may—

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

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

(4) The provision that may be made as a result of subsection (3)(b)
includes provision modifying any other provision of the Corporation
Tax Acts.

(5) In this section—

• “CFC” and “CFC charge” have the same meanings as in Part 9A
  of TIOPA 2010 (see section 371VA),

• “the CFC rules” means the rules contained in that Part, and

• 5“offshore fund” has the meaning given by section 355 of TIOPA
  2010.”

88 (1) Schedule 7AC (exemptions for disposals by companies with substantial
shareholdings) is amended as follows.

(2) In paragraph 6(1)(c), for “section 440(1) or (2) of the Taxes Act” substitute
10“any of sections 116 to 118 of the Finance Act 2012”.

(3) Paragraph 17 is amended as follows.

(4) In sub-paragraph (2), for “of its long-term insurance fund” substitute “held
by it for the purposes of its long-term business”.

(5) In sub-paragraph (3)(b), for “of its long-term insurance fund” substitute “for
15the purposes of its long-term business”.

(6) In sub-paragraph (4), for “as assets of its long-term insurance fund”
substitute “for the purposes of its long-term business”.

(7) In sub-paragraph (4A)—

(a) for “of the investing company’s long-term insurance fund”
20substitute “held by the investing company for the purposes of its
long-term business”,

(b) for “as assets of its long-term insurance fund” substitute “for the
purposes of its long-term business”, and

(c) for “a structural asset, or structural assets, within the meaning of
25section 83XA of the Finance Act 1989” substitute “an asset or assets
which formed part of the long-term business fixed capital of the
company in question”.

(8) In the italic heading before that paragraph, for “insurance company’s long-
term insurance fund” substitute “insurance company held for the purposes of its
30long-term business”.

89 In paragraph 1 of Schedule 7AD (gains of insurance company from venture
capital investment partnership), for “the assets of the long-term insurance
fund of an insurance company (“the company”)” substitute “the assets held
by an insurance company (“the company”) for the purposes of its long-term
35business”.

Finance Act 1993

90 FA 1993 is amended as follows.

91 In section 91 (deemed disposals of unit trusts by insurance companies), omit
subsection (2).

40Finance Act 1999

92 FA 1999 is amended as follows.

93 In section 81(8) (acquisitions disregarded under insurance companies
concession), in the definition of “insurance company”, for “meaning of

Chapter I of Part XII of the Taxes Act 1988” substitute “meaning given by
section 65 of the Finance Act 2012”.

Capital Allowances Act 2001

94 CAA 2001 is amended as follows.

95 In section 19(5) (special leasing of plant or machinery), for “life assurance
5business” substitute “long-term business”.

96 In the italic heading before section 254, for “Life assurance” substitute “Long-
term”.

97 In section 254(1) (introductory), for “life assurance business” substitute
“long-term business”.

98 10For section 255 substitute—

“255 Apportionment of allowances and charges

(1) This section applies if the long-term business of the company
consists of—

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

(b) 15non-BLAGAB long-term business.

(2) In that case—

(a) any allowance to which the company is entitled for a
chargeable period in respect of a management asset, and

(b) any charge to which it is liable for a chargeable period in
20respect of a management asset,

must be apportioned between the businesses in accordance with
Chapter

7

of Part

252

of FA 2012.”

99 (1) Section 256 (different giving effect rules for different categories of business)
is amended as follows.

(2) In subsection (1)(b)—

(a) 30for “under the I minus E basis” substitute “in accordance with the I -
E rules”, and

(b) for “its life assurance business” substitute “that business”.

(3) In subsection (2)(a), for the words from “as expenses payable” to “section
76(7) of ICTA” substitute “for the purposes of section 76 of FA 2012 as
35deemed BLAGAB management expenses for the chargeable period in
question”.

(4) Omit subsections (3) and (4).

(5) In the heading, for “different categories of business” substitute
“BLAGAB”.

100 40In section 257(2) (supplementary), for paragraphs (a) and (b) substitute—

“(a) section 93(5) of FA 2012 (minimum profits test), or

(b) section 103 of FA 2012 (rules for determining policyholders’
share of I - E profit).”

101 (1) Section 261 (special leasing: life assurance business) is amended as follows.

(2) 45For “life assurance business” substitute “long-term business”.