Finance Bill (HC Bill 49)

for paragraph (c) substitute—

“(c) a deduction is allowed for the payment by taking it into
account in the calculation at step 1 of section 76 of FA 2012
(management expenses of insurance companies carrying on
basic life assurance and general annuity business).”

225 5In section 836(2) (transferor or associate becomes liable for payment other
than rent), for paragraph (c) substitute—

“(c) a deduction is allowed for the payment by taking it into
account in the calculation at step 1 of section 76 of FA 2012
(management expenses of insurance companies carrying on
10basic life assurance and general annuity business).”

226 (1) Section 839 (deduction under section 76 of ICTA not to exceed commercial
rent) is amended as follows.

(2) In subsection (1), for “the deduction under section 76 of ICTA allowed for”
substitute “the amount to be taken into account as mentioned in section
15835(2)(c) or 836(2)(c) in respect of”.

(3) In subsection (3), for “The deduction” substitute “The amount of the
payment to be taken into account”.

(4) In the heading, omit “under section 76 of ICTA”.

227 (1) Section 840 (carrying forward parts of payments) is amended as follows.

(2) 20In subsection (2), for “allowed as a deduction under section 76 of ICTA is not
allowed” substitute “taken into account as mentioned in section 835(2)(c) or
836(2)(c) is not taken into account”.

(3) In subsection (4), for “a deduction under section 76 of ICTA” substitute “the
calculation at step 1 of section 76 of FA 2012”.

(4) 25In subsection (5), for “allowed as a deduction under section 76 of ICTA”
substitute “taken into account in the calculation at step 1 of section 76 of FA
2012”.

228 In section 860 (relevant corporation tax relief), for paragraph (d) (but not the
“and” at the end of that paragraph) substitute—

“(d) 30a deduction of an amount which for the purposes of section
73 of FA 2012 is an amount of adjusted BLAGAB
management expenses of an insurance company for an
accounting period,”.

229 In section 886 (relevant tax relief), for paragraph (c) substitute—

“(c) 35a deduction of an amount which for the purposes of section
73 of FA 2012 is an amount of adjusted BLAGAB
management expenses of an insurance company for an
accounting period,”.

230 In section 1171(2) (powers under orders and regulations excluded from
40general provision)—

(a) omit the “and” before paragraph (g), and

(b) after that paragraph insert “, and

“(h) Parts

2

45 and

3

of FA 2012.”

231 In section 1173(2) (miscellaneous charges), in Part 3 of the table, omit—

(a) the entry relating to section 436A(1) of ICTA,

(b) the entry relating to section 442A(1) of ICTA,

(c) the entry relating to section 85(1) of FA 1989, and

(d) the entry relating to section 85A(1) of FA 1989.

5Taxation (International and Other Provisions) Act 2010

232 TIOPA 2010 is amended as follows.

233 In section 43(7) (profits attributable to permanent establishments for
purposes of section 42(2)), omit “(within the meaning given by section 431(2)
of ICTA)”.

234 10In section 72(2) (application of section 73(1)), omit paragraph (b) (together
with the “or” before it).

235 In section 96(1) (companies with overseas branches: restriction of credit)—

(a) omit “or section 436A of ICTA”,

(b) omit “, calculated in accordance with the provisions applicable for
15the purposes of section 35 of CTA 2009,” and

(c) for “life assurance business or gross roll-up business” substitute
“non-BLAGAB long-term business”.

236 For section 97 substitute—

“97 Companies with more than one category of business: restriction of
20credit

(1) This section applies if—

(a) an insurance company carries on more than one category of
long-term business in an accounting period, and

(b) there arises to the company in that period any income or gain
25(“the relevant income”) in respect of which credit for foreign
tax is to be allowed under the arrangements.

(2) The amount of the credit for foreign tax which, under the
arrangements, is allowable against corporation tax in respect of so
much of the relevant income as is referable, in accordance with Part

302

of FA 2012, to a particular category of business must not exceed the
fraction of the foreign tax which, in accordance with subsection (3),
is attributable to that category of business.

(3) The fraction of the foreign tax that is attributable to the category of
35business in question is the fraction given by—

where—

• RPRI is the amount of the relevant income referable to the
  category of business in question in accordance with section
  4097A, and

• TRI is the total amount of the relevant income.

97A Commercial allocation of relevant income to different categories of
long-term business

(1) The amount of the relevant income that, for the purposes of section
97, is to be regarded as referable to a category of business is to be
5determined in accordance with an acceptable commercial method
adopted by the company for the period of account in which the
relevant income arises.

(2) A method is an “acceptable commercial method” if, in all the
circumstances, it can reasonably be regarded as providing a fair
10method for the purposes of section 97 for determining for a period of
account the amount of any income or gain arising in the period that
is referable to a particular category of long-term business carried on
by the company.

(3) The Treasury may make regulations for the purposes of this
15section—

(a) prescribing cases in which a method is, or is not, to be
regarded as an acceptable commercial method, and

(b) prescribing cases in which the only acceptable commercial
method is to be a method prescribed, or of a description
20prescribed, in the regulations.

(4) Subject to any provision made by regulations under subsection (3),
the method adopted for the purposes of this section for a period of
account must be consistent with the method adopted for the
purposes of section 98 or 115 of FA 2012 for that period.”

237 25Omit section 98 (attribution for section 97 purposes if category is gross roll-
up business).

238 In section 99(7) (allocation of expense etc in calculations under section 35 of
CTA 2009), for “98” substitute “97A”.

239 Omit section 102 (interpreting sections 99 to 101 for life assurance or gross
30roll-up business).

240 (1) Section 103 (interpreting sections 99 to 101 for other insurance business) is
amended as follows.

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

(3) In the heading, omit “for other insurance business”.

241 35In section 104(3) (interpreting sections 100 and 101: amounts referable to
category of business), for “98” substitute “97A”.

242 In section 269(6) (insurance activities and insurance-related activities), in the
definition of “contract of insurance”, for “has the same meaning as in
Chapter 1 of Part 12 of ICTA” substitute “has the meaning given by section
4064 of FA 2012”.

243 In section 310(2) (meaning of “carried-forward amount”)—

(a) in paragraph (a), 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
45companies)”, and

(b) omit paragraph (b).

244 In Part 1 of Schedule 11 (index of defined expressions used in Parts 2 and 3
of Act), insert the following entries at the appropriate places—

Finance Act 2011

245 FA 2011 is amended as follows.

246 In paragraph 73(2) of Schedule 19 (bank levy: meaning of “excluded entity”),
for “meaning given by section 431(2) of ICTA” substitute “meanings given
15by sections 65 and 139 of FA 2012 respectively”.

Part 4 Consequential repeals

247 In consequence of the amendments made by Parts 1 to 3 of this Schedule (or
previous amendments made by other enactments), omit the following
20provisions—

(a) in FA 1989—

(i) section 84(4), and

(ii) Schedule 8,

(b) in FA 1990—

(i) 25sections 41 and 42,

(ii) section 45(1) to (7) and (9) to (11),

(iii) section 48,

(iv) paragraphs 1, 4 and 8 of Schedule 6,

(v) Schedule 7, and

(vi) 30paragraphs 4 and 7 of Schedule 9,

(c) in FA 1991—

(i) paragraphs 5 and 12 of Schedule 7, and

(ii) paragraph 15 of Schedule 15,

(d) in TCGA 1992, paragraph 14(22) to (24) of Schedule 10,

(e) 35in FA 1993, section 103(1) and (3),

(f) in FA 1995—

(i) section 51,

(ii) Schedule 8, and

(iii) paragraph 1 of Schedule 9,

(g) 40in FA 1996—

(i) section 163,

(ii) section 167(3) and (10),

(iii) section 168(2),

(iv) paragraph 23 of Schedule 14,

(v) Schedule 31, and

(vi) Schedule 33,

(h) 5in FA 1997, section 67,

(i) in FA 1998—

(i) section 123(5)(a), and

(ii) paragraph 39 of Schedule 5,

(j) in FA 2000, sections 108 and 109,

(k) 10in FA 2003, paragraphs 1, 2, 5, 8, 10, 12, 20, 22 to 24 and 29 of Schedule
33,

(l) in FA 2004—

(i) sections 40 and 41,

(ii) section 44,

(iii) 15Schedule 6,

(iv) paragraphs 5, 8 and 9(2) of Schedule 7, and

(v) paragraph 20 of Schedule 35,

(m) in F(No.2)A 2005, paragraphs 1 to 3, 5, 10, 12 to 15, 17 and 18 of
Schedule 9,

(n) 20in ITTOIA 2005, paragraphs 176 and 178 of Schedule 1,

(o) in FA 2006—

(i) section 86, and

(ii) Schedule 11,

(p) in FA 2007—

(i) 25paragraphs 3, 6, 8 to 14, 16, 17, 19, 21 to 23, 25, 26, 31 to 33, 35
to 38, 57 to 59 and 80 to 84 of Schedule 7,

(ii) paragraphs 2 to 6, 8, 9, 11 to 16, 28 and 29 of Schedule 8,

(iii) paragraphs 1(1) and (3), 3(1) and (3), 4 to 8, 10, 11(3), 12, 15
and 16 of Schedule 9, and

(iv) 30paragraphs 2(1), 4, 11 to 13 and 15(1) to (3) of Schedule 10,

(q) in FA 2008—

(i) paragraph 2 of Schedule 14, and

(ii) paragraphs 1, 2, 4 to 6, 8, 9(2) and (3), 10, 11, 17, 18, 20 to 22,
26, 28(3) and (4), 31 to 34 and 37 of Schedule 17,

(r) 35in CTA 2009, paragraphs 30 to 44, 126 to 154, 282, 307(3)(a) and 341
to 351 of Schedule 1,

(s) in FA 2009—

(i) section 46,

(ii) paragraph 24 of Schedule 7,

(iii) 40paragraph 60 of Schedule 11, and

(iv) paragraphs 1 to 7 of Schedule 23,

(t) in CTA 2010, paragraphs 9, 10, 42 to 51, 213 and 214 of Schedule 1,

(u) in FA 2010, section 47,

(v) in F(No.2)A 2010, section 9,

(w) 45in F(No.3)A 2010, section 15,

(x) in TIOPA 2010, paragraph 34 of Schedule 8, and

(y) in FA 2011, section 56.

Section 147

SCHEDULE 17 Part

2

: transitional provision

Part 1 5Deemed receipts or expenses

General outline of the provision of this Part of this Schedule

1 (1) This Part of this Schedule makes provision, by reference to the 2012 balance
sheet and the 2012 periodical return of an insurance company (see
paragraphs 2 to 4), for deeming amounts to be receipts or expenses of basic
10life assurance and general annuity business, or non-BLAGAB long-term
business, carried on by the company (see paragraphs 9(1) and (2) and 10(1)
and (2)).

(2) Those amounts are determined in accordance with provision made by or
under paragraphs 5 to 8.

(3) 15The deeming is to have effect for the purpose of calculating the BLAGAB
trade profit or loss or (as the case may be) for the purpose of calculating for
corporation tax purposes the profits of the non-BLAGAB long-term business
(see paragraphs 9(3) and 10(3)).

(4) The general rule is that, subject to exceptions, the receipts or expenses are
20treated as arising over a 10-year period (see paragraphs 11 to 15).

(5) Special provision is made in relation to the operation of sections 83YC to
83YF of FA 1989 (see paragraph 16).

(6) Anti-avoidance provision is made by paragraphs 17 to 19.

(7) Provision in relation to overseas life insurance companies is made by
25paragraph 20.

Basic concepts

2 In this Part of this Schedule—

• “the 2012 balance sheet”, in relation to an insurance company, means—

  (a)

  an actual balance sheet of the company drawn up as at the
  30end of 31 December 2012 in accordance with generally
  accepted accounting practice, or

  (b)

  a deemed balance sheet of the company under paragraph 3,
  and

• “the 2012 periodical return”, in relation to an insurance company,
  35means—

  (a)

  an actual periodical return of the company covering a period
  ending immediately before 1 January 2013, or

  (b)

  a deemed periodical return of the company under paragraph
  4.

3 (1) 40This paragraph applies if an insurance company does not have a balance
sheet drawn up as at the end of 31 December 2012 in accordance with
generally accepted accounting practice.

(2) For the purposes of this Part of this Schedule the company is deemed to have
drawn up a balance sheet as at the end of 31 December 2012 in accordance
with generally accepted accounting practice.

(3) For the purposes of this Part of this Schedule the entries shown in this
5deemed balance sheet are deemed to be those entries which would have
been shown in an actual balance sheet of the company drawn up as
mentioned in sub-paragraph (1).

(4) The generally accepted accounting practice that is to be applicable for the
purposes of sub-paragraphs (2) and (3) is the practice that is actually
10adopted for the accounts of the company drawn up for the period in which
31 December 2012 falls.

4 (1) This paragraph applies if an insurance company does not have a periodical
return covering a period ending immediately before 1 January 2013.

(2) For corporation tax purposes the company is deemed to have a periodical
15return covering the period—

(a) beginning immediately after the last period ending before 1 January
2013 that is covered by a periodical return of the company, and

(b) ending immediately before 1 January 2013.

(3) This deemed periodical return is deemed to contain such entries as would be
20included in an actual periodical return of the company covering the period
beginning and ending as mentioned in sub-paragraph (2)(a) and (b).

(4) For corporation tax purposes the period beginning and ending as mentioned
in sub-paragraph (2)(a) and (b) is deemed to be a period of account of the
company.

25The comparison etc

5 (1) In the case of an insurance company, a comparison must be made between—

(a) the amount attributed to shareholders as at 31 December 2012 (see
sub-paragraphs (2) to (4)), and

(b) the cumulative taxed surplus as at 31 December 2012 (see sub-
30paragraph (5) and (6)).

(2) The amount attributed to shareholders as at 31 December 2012 is—

(a) the amount shown in line 75 of Form 14 of the 2012 periodical return
in respect of the whole of the company’s long-term business, less

(b) the amount (if any) shown in the 2012 balance sheet of the company
35in respect of the fund for future appropriations or unallocated
divisible surplus.

(3) In prescribed cases the amount attributed to shareholders as at 31 December
2012 is to be found by making prescribed adjustments to the amount found
by sub-paragraph (2)(a) and (b).

(4) 40In sub-paragraph (3) “prescribed” means prescribed, or of a description
prescribed, by regulations made by the Treasury.

(5) The cumulative taxed surplus as at 31 December 2012 is found by adding
together the amounts (if any) found by the following paragraphs—

(a) the amount shown in line 13 of Form 14 of the 2012 periodical return
in respect of the whole of the company’s long-term business but
5excluding the amount representing any undistributed
demutualisation surplus of the company for the period of account
ending immediately before 1 January 2013, and

(b) the total amount brought into account for any period of account of
the company as a result of section 83YA(3) of FA 1989 less the total
10amount brought into account for any period of account as a result of
section 83YA(4) of FA 1989 (changes in value of assets brought into
account: non-profit companies).

(6) In sub-paragraph (5)(a) “undistributed demutualisation surplus” means the
undistributed demutualisation surplus of the company for the period of
15account in question for the purposes of section 444AF of ICTA.

(7) The difference between the amount attributed to shareholders as at 31
December 2012 and the cumulative taxed surplus as at 31 December 2012 is
referred to in this Part of this Schedule as “the total transitional difference”.

(8) If the amount attributed to shareholders as at 31 December 2012 exceeds the
20cumulative taxed surplus as at 31 December 2012, the total transitional
difference is a positive figure.

(9) If the cumulative taxed surplus as at 31 December 2012 exceeds the amount
attributed to shareholders as at 31 December 2012, the total transitional
difference is a negative figure.

6 (1) 25The insurance company—

(a) must, by comparing amounts shown in the 2012 periodical return
with amounts shown in the 2012 balance sheet, determine the
particular items that, when taken together, result in the total
transitional difference, and

(b) 30must allocate a positive or negative amount to each of those items.

(2) The positive or negative amounts allocated to those items in accordance with
this paragraph must, when added together, equal the total transitional
difference.

(3) The Treasury may make regulations prescribing—

(a) 35the way in which the comparison or determination under sub-
paragraph (1)(a) must be done, and

(b) the method for making the allocation under sub-paragraph (1)(b).

(4) The provision that may be made by regulations under sub-paragraph (3)(a)
includes provision prescribing descriptions of amounts which are, or are
40not, to be compared with each other.

7 (1) Each of the items determined in accordance with paragraph 6(1)(a) is a
“relevant computational item” for the purposes of this Part of this Schedule
except in so far as it consists of an excluded item.

(2) An item is “an excluded item” in so far as it—

(a) 45represents an amount forming part of the company’s deferred
acquisition costs which is included in its 2012 balance sheet and

which has been taken into account in calculating its life assurance
trade profits,

(b) represents an amount which is included in the company’s 2012
balance sheet as an asset in respect of the value of future profits
arising from a business (or part of a business) transferred to the
5company (but excluding an asset so far as it is regarded for
accounting purposes as internally-generated),

(c) represents an outstanding contingent loan or an outstanding re-
insurance amount,

(d) represents an asset to which Part 8 of CTA 2009 (intangible fixed
10assets) applies for an accounting period of the company beginning
on or after 1 January 2013, or

(e) falls within a description of item excluded for the purposes of this
paragraph by regulations made by the Treasury.

(3) In sub-paragraph (2)(c) “outstanding contingent loan” means the total
15amount of the credits brought into account by the company as part of total
income—

(a) for the period of account ending immediately before 1 January 2013,
or

(b) for any earlier period of account,

20in respect of money debts so far as those debts have not been repaid before
that date.

(4) In sub-paragraph (2)(c) “outstanding re-insurance amount” means the total
of the amounts which would (but for section 83YF(2) of FA 1989) have been
taken into account in calculating the company’s life assurance trade
25profits—

(a) for the period of account ending immediately before 1 January 2013,
or

(b) for any earlier period of account,

in respect of the re-insurance of relevant liabilities (within the meaning of
30section 83YC of FA 1989) to the extent that they have not ceased to be re-
insured before that date.

(5) In this paragraph “life assurance trade profits” means profits arising from
life assurance business calculated in accordance with the provisions
applicable for the purposes of the taxation of such profits under section 35 of
35CTA 2009 (charge on trade profits).

(6) For any accounting period beginning on or after 1 January 2013, an amount
is not to be taken into account—

(a) in calculating the BLAGAB trade profit or loss of any basic life
assurance and general annuity business, or

(b) 40in calculating for corporation tax purposes the profits of non-
BLAGAB long-term business,

in so far as the amount consists of an excluded item as a result of falling
within sub-paragraph (2)(a) to (d) or, in a case where the regulations provide
for the application of this sub-paragraph, within sub-paragraph (2)(e).

8 (1) 45Each relevant computational item must be apportioned between—

(a) any basic life assurance and general annuity business carried on by
the company as at 31 December 2012,

(b) any gross roll-up business carried on by the company as at that date,
and

(c) any PHI business carried on by the company as at that date.

(2) The Treasury may make regulations for apportioning for the purposes of
5this Part of this Schedule relevant computational items between those
businesses (including provision for the whole amount of a relevant
computational item to be apportioned to one of those businesses).

(3) A relevant computational item (or a part of a relevant computational item)
allocated in accordance with this paragraph to the company’s basic life
10assurance and general annuity business or gross roll-up business is dealt
with in accordance with paragraph 9 or 10.

(4) But a relevant computational item (or a part of a relevant computational
item) allocated in accordance with this paragraph to the company’s PHI
business is ignored in the application of the remaining provisions of this Part
15of this Schedule.

Deemed receipts or expenses of BLAGAB or non-BLAGAB long-term business

9 (1) If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s basic life
assurance and general annuity business is a positive amount, the item (or
20part of the item) is to be treated as a receipt of that business.

(2) If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s basic life
assurance and general annuity business is a negative amount, the item (or
part of the item) is to be treated as an expense of that business.

(3) 25Receipts and expenses within this paragraph are to be taken into account, in
accordance with the provisions of this Part of this Schedule, in calculating
the BLAGAB trade profit or loss of that business for accounting periods
beginning on or after 1 January 2013.

(4) Receipts within this paragraph are to count as excluded receipts for the
30purposes of section 92.

10 (1) If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s gross roll-up
business is a positive amount, the item (or part of the item) is to be treated
as a receipt of the company’s non-BLAGAB long-term business.

(2) 35If a relevant computational item (or a part of a relevant computational item)
allocated in accordance with paragraph 8 to the company’s gross roll-up
business is a negative amount, the item (or part of the item) is to be treated
as an expense of the company’s non-BLAGAB long-term business.

(3) Receipts and expenses within this paragraph are to be taken into account, in
40accordance with the provisions of this Part of this Schedule, in calculating
for corporation tax purposes the profits of the company’s non-BLAGAB
long-term business for accounting periods beginning on or after 1 January
2013.