(a) in paragraph (a), for “section 431(2) of ICTA” substitute “section 65
of FA 2012” and for “that section” substitute “section 63 of that Act”,
and

(b) in paragraph (b), for the words from “but” to the end substitute “if
5subsection (3)(a) were omitted from section 65 of that Act.”

165 In section 561(2) (meaning of “investment life insurance contract”), in the
definition of “capital redemption policy”, for “section 431(2ZF) of ICTA”
substitute “section 56(3) of FA 2012”.

166 In section 563(6)(a) (increased non-trading credits for BLAGAB and EEA
10taxed contracts), for “section 88(1) of FA 1989” substitute “section 102(3) of
FA 2012”.

167 (1) Section 591 (conditions A to E mentioned in section 589(5)) is amended as
follows.

(2) In subsection (2)(a), for “life assurance business” substitute “long-term
15business”.

(3) In subsection (2)(b), after “Sourcebook” insert “(within the meaning given by
section 139(4) of FA 2012)”.

168 (1) Section 634 (insurance companies) is amended as follows.

(2) The existing text becomes subsection (1) of that section.

(3) 20In that subsection, omit paragraph (b) (together with the “or” before it).

(4) After that subsection insert—

“(2) 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 (1) is made by section 88
25of FA 2012 for the purpose of applying the I - E rules.”

169 (1) Section 635 (creditor relationships of insurance companies: embedded
derivatives which are options) is amended as follows.

(2) In subsection (1)(a), for “life assurance business” substitute “basic life
assurance and general annuity business”.

(3) 30In subsection (2), for “This Part” substitute “For the purpose of applying the
I - E rules, this Part”.

170 (1) Section 636 (insurance companies: modifications of Chapter 5 (continuity of
treatment on transfers within groups)) is amended as follows.

(2) In subsection (3), after the subsection (2B) which is treated as if it were
35inserted in section 626 insert—

“(2C) In subsection (2B) “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
40authorisation granted outside the United Kingdom for the purposes
of Article 14 of the Council Directive of 5 November 2002 concerning
life assurance (No. 2002/83/EC).”

(3) In subsection (4), for the words from “the asset was within one of the
categories set out in section 440(4)(a), (d) and (e) of ICTA” to the end

substitute “, immediately before or after the transfer, the asset was held for
the purposes of a company’s long-term business (but, in the case of an
overseas life insurance company, ignoring assets which are not UK assets
(within the meaning of section 117 of FA 2012)).”

(4) In subsection (5)(a), for “the categories set out in section 440(4) of ICTA
5(transfers of assets etc)” substitute “the applicable categories”.

(5) After subsection (5) insert—

“(5A) For the purposes of subsection (5)(a) “the applicable categories”
means—

(a) in the case of a UK life insurance company, the long-term
10business categories or a category of assets which are not held
for the purposes of its long-term business, and

(b) in 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
15category of assets which are held by it but which are not UK
assets.”

(6) After subsection (7) insert—

“(8) For the purposes of this section—

(a) “the long-term business categories” has the same meaning as
20in section 116 of FA 2012, and “the UK long-term business
categories” and “UK assets” have the same meanings as in
section 117 of FA 2012, and

(b) section 122 of FA 2012 applies as it applies for the purposes
of Chapter

258

of Part

2

of that Act.”

171 In section 699(3) (list of exceptions to general rule that Part 7 (derivative
30contracts) has priority for corporation tax purposes)—

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

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

172 In section 710 (derivative contracts: other definitions)—

(a) in the definition of “capital redemption policy”, for “section 431(2ZF)
35of ICTA” substitute “section 56(3) of FA 2012”,

(b) in the definition of “contract of insurance”, for “section 431(2) of
ICTA” substitute “section 64 of FA 2012”, and

(c) in the definition of “contract of long-term insurance”, for “section
431(2) of ICTA” substitute “section 64 of FA 2012”.

173 40In section 746(2)(c) (“non-trading credits” and “non-trading debits”), for
“section 901(3)” substitute “section 901”.

174 In section 800(3) (excluded assets: introduction), omit paragraph (b)
(together with the “and” before it).

175 In section 806(3) (assets excluded from Part 8 (intangible fixed assets):
45financial assets), after paragraph (c) (but before the “and” at the end of that
paragraph) insert—

“(ca) assets so far as they are derived from, or are referable to,
contracts or policies of insurance or capital redemption
policies,”.

176 In section 810 (mutual trade or business), omit subsection (2).

177 In section 815 (election to exclude capital expenditure on software), omit
subsection (8).

178 In section 855(4) (further provision about regulations under section 854),
5omit “or section 902”.

179 For section 901 substitute—

“901 Effect of application of the I - E basis: non-trading amounts

In the application of the I - E rules in relation to a company’s basic
life assurance and general annuity business, the provisions of this
10Part need to be read with section 88 of FA 2012 (which provides for
the activities carried on by the company in the course of that business
not to constitute the whole or any part of a trade or of a property
business).”

180 Omit sections 902 (excluded assets) and 903 (elections to exclude capital
15expenditure on computer software) and the italic heading before those
sections.

181 Omit section 904 (transfers of life assurance business: transfers of assets
treated as tax-neutral).

182 In section 906(3) (list of exceptions to general rule that Part 8 has priority for
20corporation tax purposes), omit paragraph (b) (but not the “and” at the end
of that paragraph).

183 In section 931S(3) (company distributions: meaning of “small company”), in
the definition of “insurance company”, for “section 431 of ICTA” substitute
“section 65 of FA 2012”.

184 25In section 931W (provisions which must be given priority over Part 9A),
omit subsection (3).

185 In section 985 (references to a deduction being allowed to a company), for
subsection (4) substitute—

“(4) If—

(a) 30the company is a company in relation to which the I - E rules
apply, and

(b) the expenses are referable, in accordance with Chapter

4

of
35Part

2

of FA 2012, to the company’s basic life assurance and
general annuity business,

the expenses are treated for the purposes of section 76 of that Act as
40ordinary BLAGAB management expenses of the company.”

186 In section 999 (deduction for costs of setting up SAYE option scheme or
CSOP scheme), for subsection (5) substitute—

“(5) If—

(a) the company is a company in relation to which the I - E rules
45apply, and

(b) the expenses are referable, in accordance with Chapter

4

of
Part

502

of FA 2012, to the company’s basic life assurance and
general annuity business,

the expenses are treated for the purposes of section 76 of that Act as
ordinary BLAGAB management expenses of the company.”

187 (1) Section 1000 (deduction for costs of setting up employee share ownership
trust) is amended as follows.

(2) 5In subsection (2), for “subsections (3) and (4)” substitute “subsection (3)”.

(3) Omit subsection (4).

188 In section 1013 (relief if shares acquired by employee or other person: how
relief is given), for subsection (4) substitute—

“(4) If—

(a) 10the employing company is a company in relation to which
the I - E rules apply, and

(b) the relief is referable, in accordance with Chapter

4

of Part

152

of FA 2012, to the employing company’s basic life assurance
and general annuity business,

the amount of relief is treated for the purposes of section 76 of that
20Act as ordinary BLAGAB management expenses of the company
referable to the accounting period.”

189 In section 1021 (relief if employee or other person obtains option to acquire
shares: how relief is given), for subsection (4) substitute—

“(4) If—

(a) 25the employing company is a company in relation to which
the I - E rules apply, and

(b) the relief is referable, in accordance with Chapter

4

of Part

302

of FA 2012, to the employing company’s basic life assurance
and general annuity business,

the amount of relief is treated for the purposes of section 76 of that
35Act as ordinary BLAGAB management expenses of the company
referable to the accounting period.”

190 (1) Section 1080 (entitlement to relief: I minus E basis) is amended as follows.

(2) In subsection (1), for “under the I minus E basis in respect of its life assurance
business” substitute “in respect of its basic life assurance and general
40annuity business in accordance with the I - E rules”.

(3) For subsection (2) substitute—

“(2) If any additional deduction to which the company would otherwise
be entitled under section 1074 is referable, in accordance with
Chapter

454

of Part

2

of FA 2012, to the company’s basic life assurance
and general annuity business, it is to be treated for the purposes of
50section 76 of that Act as a deemed BLAGAB management expense
for the accounting period in question.”

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

191 In section 1083 (refunds of expenditure treated as income chargeable to tax),
omit subsections (4) and (5).

192 55In section 1143(4) (overview of Part 14)—

(a) in paragraph (a), for “life assurance business” substitute “basic life
assurance and general annuity business”, and

(b) in paragraph (b), for ““life assurance company tax credits””
substitute ““BLAGAB tax credits””.

193 (1) Section 1153 (land remediation tax credit: amount of a loss which is
“unrelieved”) is amended as follows.

(2) 5In subsection (3), for the words from “, as a result of section 432AB(3) of
ICTA,” to the end substitute “, as a result of section 87(3) of FA 2012, the loss
is treated for the purposes of section 76 of that Act as a deemed BLAGAB
management expense for the relevant accounting period.”

(3) In subsections (4) to (6), for “section 76(12) of ICTA” substitute “section 73 of
10FA 2012”.

(4) In subsection (7), for paragraph (b) substitute—

“(b) 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 relevant accounting period
15as a result of—

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

(ii) the carry forward to the relevant accounting period of
an amount under section 391 of this Act (surplus
20deficit).”

(5) In subsection (8)—

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

(b) in the words after that paragraph, for “section 432AB(4) of ICTA”
25substitute “section 87(4) of FA 2012”.

194 (1) Section 1158 (restriction on losses carried forward where tax credit claimed)
is amended as follows.

(2) In subsection (3)—

(a) for paragraph (a) substitute—

“(a) 30as a result of section 87(3) of FA 2012, a company’s UK
property business loss is treated for the purposes of
section 76 of that Act as a deemed BLAGAB
management expense for the accounting period,” and

(b) in paragraph (b), for “section 76(12) of ICTA” substitute “section 73
35of FA 2012”.

(3) In subsection (4), for “section 76(12) of ICTA” substitute “section 73 of FA
2012”.

195 In the heading for Chapter 4 of Part 14, for “LIFE ASSURANCE BUSINESS”
substitute “BLAGAB”.

196 40Omit section 1159 (limitation on relief under Chapter 2 of Part 14: insurance
companies) and the italic heading before that section.

197 In section 1160 (provision in respect of I minus E basis)—

(a) for “The remaining provisions of this Chapter apply” substitute
“This Chapter applies”, and

(b) for “under the I minus E basis in respect of its life assurance
business” substitute “in respect of its basic life assurance and general
annuity business in accordance with the I - E rules”.

198 (1) Section 1161 (relief in respect of I minus E basis: expenses payable) is
5amended as follows.

(2) In subsection (6), for “section 76(7) of ICTA” substitute “section 76 of FA
2012”.

(3) In subsection (7)(a), for “life assurance business” substitute “basic life
assurance and general annuity business”.

199 (1) 10Section 1162 (additional relief) is amended as follows.

(2) In subsection (3), for the words from “as expenses payable” to the end
substitute “for the purposes of section 76 of FA 2012 as deemed BLAGAB
management expenses for the accounting period”.

(3) In subsection (4)(b), for the words from “which” to the end substitute “of the
15expenditure which, for the purposes of section 76 of FA 2012, is not an
ordinary BLAGAB management expense of the company referable to the
accounting period as a result of the application of section 77(2)(b) of that
Act”.

200 In the italic heading before section 1164, for “Life assurance” substitute
20“BLAGAB”.

201 (1) Section 1164 (entitlement to tax credit) is amended as follows.

(2) In subsections (1) and (2)—

(a) for “a life assurance company tax credit” substitute “a BLAGAB tax
credit”, and

(b) 25for “qualifying life assurance business loss” substitute “qualifying
BLAGAB loss”.

(3) In subsections (3) and (4), for “a life assurance company tax credit” substitute
“a BLAGAB tax credit”.

202 (1) Section 1165 (meaning of “qualifying life assurance business loss”) is
30amended as follows.

(2) In subsection (1)—

(a) in the opening words, for ““qualifying life assurance business loss””
substitute ““qualifying BLAGAB loss””, and

(b) in paragraph (b), for “section 76(12) of ICTA (unrelieved expenses
35carried forward)” substitute “section 73 of FA 2012 as excess
BLAGAB expenses”.

(3) In subsection (2), for “section 76(12) of ICTA” substitute “section 73 of FA
2012 as excess BLAGAB expenses”.

(4) In subsection (3), for paragraph (b) substitute—

“(b) 40taken 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 relevant accounting period
as a result of—

(i) the previous application of section 73 or 93 of FA
452012, or

(ii) the carry forward to the relevant accounting period of
an amount under section 391 of this Act (surplus
deficit).”

(5) In subsection (4), for “qualifying life assurance business loss” substitute
5“qualifying BLAGAB loss”.

(6) In the heading, for ““qualifying life assurance business loss”” substitute
““qualifying BLAGAB loss””.

203 In section 1166(1) (amount of tax credit)—

(a) for “life assurance company tax credit” substitute “BLAGAB tax
10credit”, and

(b) for “qualifying life assurance business loss” substitute “qualifying
BLAGAB loss”.

204 In section 1167(1) and (3)(a) (payment of tax credit etc), for “a life assurance
company tax credit” substitute “a BLAGAB tax credit”.

205 (1) 15Section 1168 (restriction on carrying forward expenses payable where tax
credit claimed) is amended as follows.

(2) In subsection (1), for “a life assurance company tax credit” substitute “a
BLAGAB tax credit”.

(3) In subsection (2)—

(a) 20for “section 76 of ICTA” substitute “section 73 of FA 2012”,

(b) for “subsection (12) of that section” substitute “that section as excess
BLAGAB expenses”, and

(c) for “Step 7 in subsection (7) of that section” substitute “step 5 in
section 76 of FA 2012”.

(4) 25In subsection (3), for “qualifying life assurance business loss” substitute
“qualifying BLAGAB loss”.

206 In section 1169(2) (artificially inflated claims for relief or tax credit)—

(a) in paragraph (c), for “life assurance business” substitute “basic life
assurance and general annuity business”, and

(b) 30in paragraph (d), for “life assurance company tax credits” substitute
“BLAGAB tax credits”.

207 After section 1223 insert—

“1223A Exception for basic life assurance and general annuity business

(1) Sections 1219 to 1223 do not apply in relation to an accounting period
35of an insurance company with investment business so far as the
business consists of basic life assurance and general annuity
business.

(2) See instead the rules set out in Chapter

3

40 of Part

2

of FA 2012.”

208 (1) Section 1251 (car hire) is amended as follows.

(2) In subsection (3), after “subsection (2)” insert “(including as applied by
45section 82(4) of FA 2012)”.

(3) In subsection (5)—

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

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

209 In section 1288(4) (unpaid remuneration)—

(a) in paragraph (a), after “business),” insert “including as applied by
section 82 of FA 2012”, and

(b) 5omit paragraph (b) (together with the “and” before it).

210 (1) Section 1297 (life assurance business) is amended as follows.

(2) In subsection (1), for “section 76 of ICTA applies (expenses of companies
carrying on life assurance business)” substitute “the I - E rules apply”.

(3) In subsection (2), for “section 86 of FA 1989” substitute “section 79 of FA
102012”.

(4) In subsection (4)—

(a) for “purposes of section 86 of FA 1989” substitute “purpose of
calculating the adjusted BLAGAB management expenses of the
company for the purposes of section 73 of FA 2012”, and

(b) 15for “payable for that period which fall to be included at Step 1 in
section 76(7) of ICTA” substitute “debited, in accordance with
generally accepted accounting practice, in the accounts drawn up by
the company for that period”.

(5) In subsection (5)(a), for “an amount being brought into account under
20section 76 of ICTA as expenses payable” substitute “an amount constituting
ordinary BLAGAB management expenses of the company for the purposes
of section 76 of FA 2012”.

(6) For the heading substitute “Basic life assurance and general annuity
business”.

211 25In section 1298(2) (business entertainment and gifts), for paragraph (c)
substitute—

“(c) expenses to which this section applies are not to be regarded
as constituting ordinary BLAGAB management expenses of
the company for the purposes of section 76 of FA 2012.”

212 30In section 1304 (crime-related payments), for subsection (3) substitute—

“(3) Expenses to which subsection (4) or (5) applies are not to be regarded
as constituting ordinary BLAGAB management expenses of a
company for the purposes of section 76 of FA 2012.”

213 (1) Schedule 2 (transitionals and savings) is amended as follows.

(2) 35In paragraph 139—

(a) in sub-paragraph (3), for the words from “Section 76ZE” to “section
75)” substitute “Section 81(4) of FA 2012 (which, in the case of
companies carrying on basic life assurance and general annuity
business, applies section 75(2) to (4))”,

(b) 40in that sub-paragraph, for “condition in subsection (1) of that
section” substitute “conditions in paragraphs (a) and (b) of that
subsection”, and

(c) in sub-paragraph (4), for “and section 76ZE of ICTA” substitute
“(including as applied by section 81(4) of FA 2012)”.

(3) In paragraph 140(1)(b), for “section 76ZL of ICTA” substitute “the
application by section 82 of FA 2012 of section 1249(1) to (3) of this Act”.

214 In Schedule 4 (index of defined expressions)—

(a) in the entry for “basic life assurance and general annuity business”,
5for “section 431F of ICTA (as applied by section 431(2) of that Act)”
substitute “sections 57 and 67(5) of FA 2012 (as applied by section
141(2) of that Act)”,

(b) omit the entry for “deposit back arrangements”,

(c) omit the entry for “gross roll-up business”,

(d) 10in the entry for “the I minus E basis”, for “I minus E basis” substitute
“I - E rules” and for “section 431(2) of ICTA” substitute “section 70(1)
and (2) of FA 2012 (as applied by section 141(2) of that Act)”,

(e) in the entry for “insurance business transfer scheme”, for “section
431(2) of ICTA” substitute “section 139(1) of FA 2012 (as applied by
15section 141(2) of that Act)”,

(f) in the entry for “insurance company”, for “section 431(2) of ICTA”
substitute “section 65 of FA 2012 (as applied by section 141(2) of that
Act)”,

(g) omit the entry for “the Insurance Prudential Sourcebook”,

(h) 20in the entry for “life assurance business”, for “section 431(2) of ICTA”
substitute “section 56 of FA 2012 (as applied by section 141(2) of that
Act)”,

(i) omit the entry for “linked assets”,

(j) in the entry for “long-term business”, for “section 431(2) of ICTA”
25substitute “section 63 of FA 2012 (as applied by section 141(2) of that
Act)”,

(k) omit the entry for “long-term insurance fund”,

(l) in the entry for “overseas life insurance company”, for “section 431(2)
of ICTA” substitute “section 139(1) of FA 2012 (as applied by section
30141(2) of that Act)”, and

(m) omit the entry for “qualifying overseas transfer”.

Corporation Tax Act 2010

215 CTA 2010 is amended as follows.

216 In section 17(3) (interpretation of Chapter: meaning of “carried-forward
35amount”)—

(a) in paragraph (f), for “section 76(12) or (13) of ICTA (certain expenses
of insurance companies)” substitute “section 73 or 93 of FA 2012 for
use at step 5 in section 76 of that Act (the I - E basis for insurance
companies)”, and

(b) 40omit paragraph (g).

217 In section 54(2) (non-UK resident company: receipts of interest, dividends or
royalties), for the words from “any of these provisions—” to the end
substitute “section 37 or 45”.

218 In Chapter 4 of Part 4 (property losses), after section 67A insert—

“Insurance companies

67B Exclusion in the case of property businesses of insurance companies

(1) This Chapter does not apply for the purpose of applying the I - E
5rules in relation to a loss made by an insurance company in any of its
separate UK property businesses or overseas property businesses
within section 86(4) of FA 2012.

(2) But in the case of a loss which is referable, in accordance with
Chapter

104

of Part

2

of that Act, to the company’s basic life assurance
and general annuity business, see section 87(3) and (4) of that Act.”

219 15In section 606(5) (groups), in the definition of “insurance company”, for
“section 431(2) of ICTA” substitute “section 65 of FA 2012”.

220 (1) Section 783 (treatment of payer of manufactured dividend) is amended as
follows.

(2) In subsection (6), for the words from “as if” to the end substitute “for the
20purposes of section 76 of FA 2012 as a deemed BLAGAB management
expense for the accounting period in which it is paid.”

(3) In subsection (7)—

(a) in paragraph (a), for “under section 432A of ICTA” substitute “in
accordance with Chapter

254

of Part

2

of FA 2012”, and

(b) in paragraph (b), for “under section 432A of ICTA” substitute “in
30accordance with that Chapter”.

221 (1) Section 785 (treatment of payer: REITs) is amended as follows.

(2) In subsection (4), for the words from “as if” to the end substitute “for the
purposes of section 76 of FA 2012 as a deemed BLAGAB management
expense for the accounting period in which it is paid.”

(3) 35In subsection (5)(b), for “under section 432A of ICTA” substitute “in
accordance with Chapter

4

of Part

2

40 of FA 2012”.

222 (1) Section 791 (treatment of payer of manufactured overseas dividend) is
amended as follows.

(2) In subsection (6), for the words from “as if” to the end substitute “for the
purposes of section 76 of FA 2012 as a deemed BLAGAB management
45expense for the accounting period in which it is paid.”

(3) In subsection (7)—

(a) in paragraph (a), for “under section 432A of ICTA” substitute “in
accordance with Chapter

4

50 of Part

2

of FA 2012”, and

(b) in paragraph (b), for “under section 432A of ICTA” substitute “in
accordance with that Chapter”.

223 55In section 799(5) (manufactured payments under arrangements with
unallowable purpose), for paragraph (a) substitute—

“(a) section 77(4)(e) or (f) of FA 2012 (ordinary BLAGAB
management expenses: excluded amounts),”.

224 In section 835(2) (transferor or associate becomes liable for payment of rent),