Finance Bill (HC Bill 49)

(3) In the heading, for “life assurance business” substitute “long-term
business”.

102 In the heading for Chapter 1 of Part 12, for “LIFE ASSURANCE” substitute
“LONG-TERM”.

103 (1) 5Section 544 (management assets) is amended as follows.

(2) In subsections (1) and (2), for “life assurance business” substitute “long-term
business”.

(3) Omit subsection (3).

104 (1) Section 545 (investment assets) is amended as follows.

(2) 10In subsection (1), for “life assurance business” substitute “long-term
business”.

(3) For subsections (3) to (5) substitute—

“(3) No allowance in respect of an investment asset is to be taken into
account in calculating for corporation tax purposes the profits of any
15non-BLAGAB long-term business carried on by the company.”

105 (1) Section 560 (transfer of insurance company business) is amended as follows.

(2) In subsection (1)(b)(ii), omit the words from “within” to the end.

(3) In subsection (5), after paragraph (d) insert—

“(e) qualifying overseas transfer” means so much of a transfer of
20the whole or any part of the business of an overseas life
insurance company carried on through a permanent
establishment in the United Kingdom as takes place in
accordance with an authorisation granted outside the United
Kingdom for the purposes of Article 14 of the Council
25Directive of 5 November 2002 concerning life assurance
(2002/83/EC).”

106 (1) Schedule A1 (first-year tax credits) is amended as follows.

(2) In paragraph 7—

(a) in sub-paragraph (2), for the words from “which is treated” to the
30end substitute “which, as a result of section 87(3) of FA 2012, is
treated for the purposes of section 76 of that Act as a deemed
BLAGAB management expense for an accounting period”, and

(b) in sub-paragraph (3), for “section 432AA” substitute “section 86” and
for “section 432AB(4)” substitute “section 87(4)”.

(3) 35In paragraph 9—

(a) in sub-paragraph (1), for “life assurance business” substitute “basic
life assurance and general annuity business” and for “under the I
minus E basis” substitute “in accordance with the I - E rules”, and

(b) in sub-paragraph (2), for “section 76(12) of ICTA” substitute “section
4073 of FA 2012”.

(4) In paragraph 14—

(a) in sub-paragraph (2), for “section 76(12) of ICTA” substitute “section
73 of FA 2012”,

(b) in sub-paragraph (3), for “section 76(12)” substitute “section 73”,

(c) in sub-paragraph (5), for “section 76(12) of ICTA” substitute “section
73 of FA 2012”, and

(d) for sub-paragraph (6) substitute—

“(6) Disregard any amounts brought forward from an earlier
5chargeable period which fall to be taken into account in
calculating for the purposes of section 73 of FA 2012 the
amount of adjusted BLAGAB management expenses of the
company for the period in question as a result of—

(a) the previous application of section 73 or 93 of FA
102012, or

(b) the carry forward to the period in question of an
amount under section 391(3) of CTA 2009 (loan
relationship deficit carried forward).”

(5) In paragraph 16—

(a) 15in sub-paragraph (1), for “life assurance business” substitute “basic
life assurance and general annuity business” and for “under the I
minus E basis” substitute “in accordance with the I - E rules”, and

(b) for sub-paragraph (3) substitute—

“(3) For this purpose, no account is to be taken of any amounts
20brought forward from an earlier chargeable period which
fall to be taken into account in calculating for the purposes
of section 73 of FA 2012 the amount of adjusted BLAGAB
management expenses of the company for the period in
question as a result of—

(a) 25the previous application of section 73 or 93 of FA
2012, or

(b) the carry forward to the period in question of an
amount under section 391(3) of CTA 2009 (loan
relationship deficit carried forward).”

(6) 30In paragraph 21—

(a) in sub-paragraph (1)(a), for the words from “treated” to the end
substitute “which, as a result of section 87(3) of FA 2012, is treated for
the purposes of section 76 of that Act as a deemed BLAGAB
management expense for the chargeable period”,

(b) 35in sub-paragraph (1)(b), for “section 76(12) of that Act” substitute
“section 73 of FA 2012”, and

(c) in sub-paragraph (2), for “section 76(12) of ICTA” substitute “section
73 of FA 2012”.

(7) In paragraph 22—

(a) 40in sub-paragraph (1), for “life assurance business” substitute “basic
life assurance and general annuity business” and for “under the I
minus E basis” substitute “in accordance with the I - E rules”, and

(b) for sub-paragraph (2) substitute—

“(2) For the purposes of those rules, the total amount which
45may—

(a) be carried forward under section 73 of FA 2012
from a chargeable period in which the company
claims a first-year tax credit, and

(b) be brought into account for the next chargeable
period in accordance with step 5 in section 76 of FA
2012,

is treated as reduced by the amount of the loss
5surrendered.”

107 (1) Part 2 of Schedule 1 (index of defined expressions) is amended as follows.

(2) Omit the entry for “life assurance business”.

(3) Insert the following entries at the appropriate places—

30Finance Act 2003

108 FA 2003 is amended as follows.

109 Omit section 156 (overseas life insurance companies).

Income Tax (Earnings and Pensions) Act 2003

110 ITEPA 2003 is amended as follows.

111 35In section 357(3) (business entertainment and gifts: exception where
employer’s expenses disallowed), for paragraph (b) substitute—

“(b) the ordinary BLAGAB management expenses of the
employer for the purposes of section 76 of FA 2012.”

Finance Act 2004

112 FA 2004 is amended as follows.

113 In section 196(4) (relief for employers in respect of contributions paid)—

(a) in the opening words, for “section 76 of ICTA” substitute “section 76
5of FA 2012”, and

(b) in paragraph (a), for “brought into account at Step 1 in subsection (7)
of that section to the extent that they otherwise would not be”
substitute “treated as meeting the conditions in section 77(2)(a) and
(c) of that Act to the extent that they would otherwise not meet
10them”.

114 In section 196A(4)(c) (power to restrict relief), for “brought into account at
Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect
of the employer” substitute “ordinary BLAGAB management expenses of
the employer for an accounting period for the purposes of section 76 of FA
152012”.

115 In section 196L(2) (employer asset-backed contributions: supplementary), as
inserted by Part 3 of Schedule 13 to this Act, for paragraph (c) substitute—

“(c) the contribution being ordinary BLAGAB management
expenses of the employer for an accounting period for the
20purposes of section 76 of FA 2012.”

116 In section 197(10)(b) (spreading of relief), for “section 76 of ICTA” substitute
“section 76 of FA 2012”.

117 In section 199 (deemed contributions), for subsection (5) substitute—

“(5) And, for the purposes of section 76 of FA 2012, it is to be treated as
25meeting the conditions in section 77(2)(a) and (c) of that Act to the
extent that it would otherwise not meet them.”

118 In section 199A(10)(c) (indirect contributions), for “brought into account at
Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect
of E” substitute “ordinary BLAGAB management expenses of E for an
30accounting period for the purposes of section 76 of FA 2012”.

119 In section 200 (no other relief for employers in connection with
contributions), for paragraph (c) substitute—

“(c) are to count as ordinary BLAGAB management expenses of
the employer for an accounting period for the purposes of
35section 76 of FA 2012,”.

120 (1) Section 246 (restriction of deduction for non-contributory provision) is
amended as follows.

(2) In subsection (2), for paragraph (c) substitute—

“(c) are not to count as ordinary BLAGAB management expenses
40of the employer for an accounting period for the purposes of
section 76 of FA 2012.”

(3) In subsection (3)(b), for “section 76 of ICTA” substitute “section 76 of FA
2012”.

121 In section 246A(4)(c) (case where no relief for provision by an employer), for
45“brought into account at Step 1 in section 76(7) of ICTA (expenses of

insurance companies) in respect of the employer” substitute “ordinary
BLAGAB management expenses of the employer for an accounting period
for the purposes of section 76 of FA 2012”.

122 In section 280(1) (abbreviations)—

(a) omit the “and” before the definition of “CTA 2009”, and

(b) 5after that definition insert—

• ““FA 2012” means the Finance Act 2012.”

Finance (No.2) Act 2005

123 F(No.2)A 2005 is amended as follows.

124 In section 18(3)(b) (specific powers relating to authorised unit trusts and
10open-ended investment companies), for sub-paragraph (iii) (but not the “or”
at the end of it) substitute—

“( iii) by an insurance company (within the meaning of
section 65 of FA 2012) as assets for the purposes of its
long-term business (within the meaning of section 63
15of that Act),”.

Income Tax (Trading and Other Income) Act 2005

125 ITTOIA 2005 is amended as follows.

126 In section 48(4A) (car hire)—

(a) at the end of paragraph (a) insert “or”,

(b) 20in paragraph (b), after “management),” insert “including as applied
by section 82(4) of FA 2012.”, and

(c) omit paragraph (c) (together with the “or” before that paragraph).

127 In section 473(2) (policies and contracts to which Chapter 9 of Part 4 applies:
general), in the definition of “capital redemption policy”, for “within the
25meaning of Chapter 1 of Part 12 of ICTA” substitute “within the meaning
given by section 56(3) of FA 2012”.

128 In section 476(3) (special rules: foreign policies), in the definition of
“overseas life assurance business”, for “same meaning as in Part 12 of ICTA
(see section 431D of that Act)” substitute “meaning given by section 61 of FA
302012”.

129 In section 504(7) (part surrenders: payments under guaranteed income
bonds etc), in the definition of “pension business”, for “section 431B of
ICTA” substitute “section 58 of FA 2012”.

130 (1) Section 531 (gains from contracts for life insurance etc: cases where income
35tax not treated as paid) is amended as follows.

(2) In subsection (3), after paragraph (b) insert—

“(ba) a contract the effecting or carrying out of which constitutes
protection business within the meaning of section 62 of FA
2012,

(bb) 40a contract which is not within paragraph (ba) but which, as a
result of subsection (4) of that section, is treated for the
purposes of that section as being made at any time,”.

(3) In subsection (4), in the definition of “basic life assurance and general
annuity business”, for “Chapter 1 of Part 12 of ICTA (see section 431F)”
substitute “Part

2

5 of FA 2012 (see sections 57 and 67(5))”.

131 In paragraph 118(2) of Schedule 2 (pre-1 January 2005 contracts for
immediate needs annuities: income tax treated as paid), for the words from
“means” to the end substitute “means the application of section 57(2)(d) of
FA 2012”.

10Income Tax Act 2007

132 ITA 2007 is amended as follows.

133 In section 564B(1) (meaning of “financial institution”)—

(a) in paragraph (g), for “section 431(2) of ICTA” substitute “section 65
of FA 2012”, and

(b) 15in paragraph (h), for “section 431(2) of ICTA” substitute “section
139(1) of FA 2012”.

134 In section 681DP (relevant tax relief), for paragraph (c) substitute—

“(c) a deduction of an amount which for the purposes of section
73 of FA 2012 is adjusted BLAGAB management expenses of
20an insurance company for an accounting period,”.

Corporation Tax Act 2009

135 CTA 2009 is amended as follows.

136 In section A1(2) (overview of the Corporation Tax Acts)—

(a) omit paragraph (a), and

(b) 25omit the “and” before paragraph (j) and after that paragraph insert—

“(k) Part

2

of FA 2012 (insurance companies carrying on
long-term business),”.

137 (1) 30Section 18Q (UK resident insurance companies: profits of foreign permanent
establishments) is amended as follows.

(2) In subsection (1), omit “(as defined in section 431(2) of ICTA)”.

(3) Omit subsections (2) and (3).

138 For section 24 substitute—

“24 35Application to insurance companies

(1) This section makes provision in a case where the non-UK resident
company mentioned in subsection (1) of section 21 is an insurance
company.

(2) In accordance with the principle in that subsection, the permanent
40establishment is treated as holding—

(a) the same or a similar quantity of assets, and

(b) assets of the same or similar description,

as would have been held by a distinct and separate enterprise acting
as mentioned in paragraphs (a) and (b) of that subsection.

(3) The assets which the permanent establishment is treated as holding
in accordance with the principle in that subsection may include a
proportion of assets held by the company.

(4) Nothing in subsection (2) or (3) is to be read as preventing the
5application of similar principles to those provided for by that
subsection in a case where the non-UK resident company mentioned
in section 21(1) is not an insurance company.

(5) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make other provision about the application of section
1021(1) in a case where the non-UK resident company mentioned there
is an insurance company.

(6) The regulations may, in particular, make provision in place of section
21(2)(b) as to the basis on which, in the case of an insurance
company, capital is to be attributed to a permanent establishment in
15the United Kingdom.”

139 In section 36(3) (farming and market gardening), for “of the company’s long-
term insurance fund” substitute “held by the company for the purposes of
its long-term business”.

140 In section 38(3)(d) (commercial occupation of land other than woodlands),
20for “of the company’s long-term insurance fund” substitute “held by the
company for the purposes of its long-term business”.

141 In section 39(5)(a) (profits of mines, quarries and other concerns), for “of the
company’s long-term insurance fund” substitute “held by the company for
the purposes of its long-term business”.

142 25In section 46(3)(a) (generally accepted accounting practice), omit sub-
paragraph (ii) (together with the “or” before it).

143 In section 56(5) (car hire)—

(a) at the end of paragraph (a), insert “including as applied by section
82(4) of FA 2012, or”, and

(b) 30omit paragraph (c) (together with the “or” before that paragraph).

144 In section 130(1)(a) (insurers receiving distributions etc), for “life assurance
business” substitute “business in relation to which section 111 of FA 2012
applies”.

145 In section 201 (priority rules: provisions which must be given priority over
35Part 3 of Act), after subsection (1) insert—

“(1A) Subsection (1) does not apply in the case of the long-term business of
an insurance company.”

146 In section 203(4) (property businesses)—

(a) for “section 432AA of ICTA” substitute “section 86 of FA 2012”, and

(b) 40for “in the case of” substitute “for the purpose of applying the I - E
rules in relation to”.

147 (1) Section 298 (meaning of trade and purposes of trade) is amended as follows.

(2) In subsection (3)—

(a) at the end of paragraph (a), insert “or”, and

(b) 45omit paragraph (c) (together with the “or” before it).

(3) After subsection (5) insert—

“(6) In the case of activities carried on by a company in the course of any
basic life assurance and general annuity business, provision
corresponding to that made by subsection (3) is made by section 88
5of FA 2012 for the purpose of applying the I - E rules.”

148 (1) Section 336 (transfers of loans on group transactions) is amended as follows.

(2) In subsection (4), for “is within one of the categories set out in section
440(4)(a), (d) and (e) of ICTA (assets held for certain categories of long-term
business)” substitute “is held for the purposes of a company’s long-term
10business”.

(3) After that subsection insert—

“(4A) For the purposes of subsection (4)—

(a) in the case of an overseas life insurance company, ignore
transfers in relation to assets which are not UK assets (within
15the meaning of section 117 of FA 2012), and

(b) section 122 of that Act applies as it applies for the purposes of
Chapter

8

of Part

202

of that Act.”

149 (1) Section 337 (transfers of loans on insurance business transfers) is amended
as follows.

(2) After subsection (3) insert—

“(3A) 25In subsection (3)(b) “qualifying overseas transfer” means so much of
a transfer of the whole or any part of the business of an overseas life
insurance company carried on through a permanent establishment
in the United Kingdom as takes place in accordance with an
authorisation granted outside the United Kingdom for the purposes
30of Article 14 of the Council Directive of 5 November 2002 concerning
life assurance (2002/83/EC).”

(3) In subsection (4)(a), for “the categories set out in section 440(4) of ICTA”
substitute “the applicable categories”.

(4) After subsection (4) insert—

“(4A) 35For the purposes of subsection (4)(a) “the applicable categories”
means—

(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) 40in 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 purposes of its long-term business or a
category of assets which are held by it but which are not UK
assets.

(4B) 45For the purposes of subsection (4A)—

(a) “the long-term business categories” has the same meaning as
in section 116 of FA 2012,

(b) “the UK long-term business categories” and “UK assets” have
the same meanings as in section 117 of that Act, and

(c) section 122 of that Act applies as it applies for the purposes of
Chapter

8

of Part

52

of that Act.”

150 (1) Section 386 (overview of Chapter 10 of Part 5 (insurance companies)) is
amended as follows.

(2) In subsection (2)—

(a) 10in paragraph (a), after “apply” insert “for the purposes of the I - E
rules” and at the end insert “and”, and

(b) omit paragraph (c) (together with the “and” before it).

(3) In subsection (3)—

(a) in paragraph (a), omit “or of BLAGAB”,

(b) 15in paragraph (a), after “trade)” insert “and section 88 of FA 2012
(equivalent rule for activities carried on in the course of BLAGAB)”,
and

(c) in paragraph (f), for “as expenses of insurance companies at Step 1 of
section 76(7) of ICTA” substitute “as ordinary BLAGAB
20management expenses”.

151 In section 387(1) (treatment of deficit on BLAGAB: introduction), after
“apply” insert “for the purposes of the I - E rules”.

152 In section 388(3) (basic rule: deficit set off against income and gains of deficit
period), for “before any expenses deduction under section 76 of ICTA
25(expenses of insurance companies)” substitute “in accordance with step 4 in
section 73 of FA 2012 (that is to say, before any deduction for the adjusted
BLAGAB management expenses of the company for the deficit period)”.

153 In section 389 (claim to carry back deficit), after subsection (2) insert—

“(2A) If any of the claim amount is carried back in accordance with this
30section to an accounting period, the amount which is so carried back
is to be left out of account for the purpose of applying section 93 of
FA 2012 in the case of that period.”

154 (1) Section 390 (meaning of “available profits”) is amended as follows.

(2) In subsection (4), for the words from “which is” to the end substitute “of the
35BLAGAB credits in respect of the company’s loan relationships that count as
income for the purposes of the I - E rules for that period (as determined by
section 88(3) and (4) of FA 2012)”.

(3) In subsection (5)—

(a) in step 1(a), for “so much of the expenses deduction for the period
40given by Step 8 in section 76(7) of ICTA (expenses of insurance
companies) as is referable to BLAGAB” substitute “the amount for
the purposes of section 73 of FA 2012 of the adjusted BLAGAB
management expenses of the company for the period”,

(b) in step 1(b), for “so referable” substitute “referable to BLAGAB”,

(c) 45in step 2, for paragraph (a) (together with the “and” at the end of it)
substitute—

“(a) so much of the amount for the purposes of section
73 of FA 2012 of the adjusted BLAGAB
management expenses of the company for the
50period as, on the assumption that the company had
no BLAGAB non-trading loan relationships profits

for the period, could be subtracted at step 6 under
that section without producing a negative amount,
and”, and

(d) in step 2(b), for “so referable” substitute “referable to BLAGAB”.

(4) For subsection (6) substitute—

“(6) 5In the case of any claim under section 389, references in subsection
(5) to the amount for the purposes of section 73 of FA 2012 of the
adjusted BLAGAB management expenses of the company for the
period are references to that amount as determined on the
assumptions in subsections (7) and (8).”

155 10In section 391 (carry forward of surplus deficit to next accounting period),
for subsection (3) substitute—

“(3) Any deficit so carried forward is treated for the purposes of section
76 of FA 2012 as a deemed BLAGAB management expense for the
next period.”

156 15Omit sections 393 and 394 (insurance companies: determination of questions
requiring apportionments) and the italic heading before those sections.

157 In section 399 (index-linked gilt-edged securities), at the end insert—

“(6) In the case of insurance companies, the application of sections 400 to
400C is subject to section 112 of FA 2012.”

158 20In section 464(3) (list of exceptions to general rule that Part 5 (loan
relationships) has priority for corporation tax purposes), omit paragraph (h)
(but not the “and” at the end of that paragraph).

159 In section 471(3) (connections between persons: creditors who are insurance
companies carrying on BLAGAB), for “is linked for that period to that
25business” substitute “is matched for that period to a BLAGAB liability”.

160 In section 472(4)(b) (meaning of “control”), for “of an insurance company’s
long-term insurance fund” substitute “held by an insurance company for the
purposes of its long-term business”.

161 In section 473(3)(b) (meaning of “major interest”), for “of an insurance
30company’s long-term insurance fund” substitute “held by an insurance
company for the purposes of its long-term business”.

162 In section 486(4) (exclusion of exchange gains and losses in respect of tax
debts etc), for paragraph (c) substitute—

“(c) as ordinary BLAGAB management expenses within the
35meaning of section 77 of FA 2012 (insurance companies
carrying on basic life assurance and general annuity
business).”

163 In section 502(1) (meaning of “financial institution”)—

(a) in paragraph (g), for “section 431(2) of ICTA” substitute “section 65
40of FA 2012”, and

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

164 In section 560(4) (investment life insurance contracts: introduction)—