(iv) a payment to the seller of the proceeds of a sale of the
plant or machinery to which subsection (2FC) applies,

if, and to the extent that, the payment is not otherwise brought into
account for tax purposes as income or a disposal receipt by the person
5for whom the benefit is payable (or would not be if that person were
within the charge to tax).

(2FB) For the purposes of subsection (2FA)—

• “payment” includes the provision of any benefit, the assumption
  of any liability and any other transfer of money’s worth (and
  10“payable” is to be construed accordingly);

• “relevant superior lease” means any lease of the plant or
  machinery to which the long funding lease mentioned in
  subsection (1)(a) is inferior.

(2FC) This subsection applies to a sale of the plant or machinery if—

(a) 15a person has entered into a relevant transaction with another
person in respect of the plant or machinery for the purposes of
Chapter 17 of this Part (see section 213) and the sale is within
section 213(1)(a),

(b) the plant or machinery is within section 216(1)(b) (sale and lease
20back), and

(c) the conditions in section 227(2) are met.”

(4) For subsection (2G) substitute—

“(2G) In the case of a lease that is not a transaction at arm’s length, “relevant
rebate” and “relevant lease-related payment” include any amount that
25would reasonably be expected to have fallen within subsection (2F) or,
as the case may be, (2FA) if the lease had been such a transaction.”

(5) The amendments made by this section have effect in relation to cases where the
relevant event occurs on or after 21 March 2012.

Foreign income and gains

47 30Foreign income and gains

Schedule 12 contains provision about the taxation of foreign income and gains.

Pensions

48 Employer asset-backed pension contributions etc

Schedule 13 contains—

(a) 35provision relating to employers who pay contributions under
registered pension schemes and arrangements for which their
contributions are used (directly or indirectly), and

(b) provision amending Chapter 5B of Part 13 of ITA 2007 and Chapter 2 of
Part 16 of CTA 2010 (finance arrangements).

Charitable giving etc

49 Gifts to the nation

Schedule 14 contains provision for a person’s tax liability to be reduced in
return for giving pre-eminent property to the nation.

50 5Gift aid: giving through self-assessment return

(1) Section 429 of ITA 2007 (gift aid: giving through self-assessment return) is
repealed.

(2) The following repeals are made in consequence of subsection (1)—

(a) in section 426 of ITA 2007 (election by donor: gift treated as made in
10previous tax year), omit subsection (8),

(b) in section 538 of that Act (requirement to make claim), omit subsection
(3),

(c) in section 133 of FA 2008 (set-off etc where right to be paid a sum has
been transferred), in subsection (8)(a), omit the words from “except” to
15the end,

(d) in section 472 of CTA 2010 (gifts qualifying for gift aid relief:
corporation tax liability and exemption), omit subsection (5), and

(e) in section 475 of that Act (gifts qualifying for gift aid relief: income tax
treated as paid and exemption), omit subsection (7).

(3) 20Accordingly, the following provisions are also repealed—

(a) section 130(9) of FA 2008, and

(b) paragraph 3(4) of Schedule 8 to FA 2010.

(4) The repeals made by this section are treated as having come into force on 6
April 2012.

51 25Relief for gift aid and other income of charities etc

Schedule 15 contains provision about relief in respect of gifts qualifying for gift
aid relief and other income of charities and other bodies.

52 Meaning of “community amateur sports club”

(1) In section 658 of CTA 2010 (meaning of “community amateur sports club”), for
30subsection (1) substitute—

“(1) A club is entitled to be registered as a community amateur sports club
if conditions A and B are met.

(1A) Condition A is that the club is, and is required by its constitution to be,
a club which—

(a) 35is open to the whole community (see section 659),

(b) is organised on an amateur basis (see section 660), and

(c) has as its main purpose the provision of facilities for, and the
promotion of participation in, one or more eligible sports (see
section 661).

(1B) 40Condition B is that the club meets—

(a) the location condition (see section 661A), and

(b) the management condition (see section 661B).”

(2) In consequence of the amendment made by subsection (1), omit paragraph 31
of Schedule 6 to FA 2010.

(3) The amendments made by this section are treated as having come into force on
56 April 2010.

Other provisions

53 Site restoration payments

(1) In section 168 of ITTOIA 2005 (site restoration payments), at the beginning of
subsection (2) insert “Subject to subsection (3A),”.

(2) 10For subsection (3) of that section substitute—

“(3) The deduction is allowed—

(a) (if the payment is made, whether directly or indirectly, to a
connected person) for the period of account in which that part
of the restoration work to which the payment relates is
15completed, or

(b) (in any other case) for the period of account in which the
payment is made.

(3A) But no deduction is allowed if the payment arises from arrangements—

(a) to which the person carrying on the trade is a party, and

(b) 20the main purpose, or one of the main purposes, of which is to
obtain a deduction under this section.”

(3) At the end of that section insert—

“(7) Arrangements” includes any agreement, understanding, scheme,
transaction or series of transactions (whether or not legally
25enforceable).”

(4) In section 145 of CTA 2009 (site restoration payments), at the beginning of
subsection (2) insert “Subject to subsection (3A),”.

(5) For subsection (3) of that section substitute—

“(3) The deduction is allowed—

(a) 30(if the payment is made, whether directly or indirectly, to a
connected person) for the period of account in which that part
of the restoration work to which the payment relates is
completed, or

(b) (in any other case) for the period of account in which the
35payment is made.

(3A) But no deduction is allowed if the payment arises from arrangements—

(a) to which the company carrying on the trade is a party, and

(b) the main purpose, or one of the main purposes, of which is to
obtain a deduction under this section.”

(6) At the end of that section insert—

“(7) Arrangements” includes any agreement, understanding, scheme,
transaction or series of transactions (whether or not legally
enforceable).”

(7) 5The amendments made by this section have effect in relation to any site
restoration payment made on or after 21 March 2012, other than a payment
made pursuant to an unconditional obligation in a contract made before 21
March 2012.

(8) An unconditional obligation is an obligation which may not be varied or
10extinguished by the exercise of a right (whether or not under the contract).

54 Changes of accounting policy

(1) In section 227 of ITTOIA 2005 (adjustment on change of accounting basis:
income tax)—

(a) in subsection (3)(a) for “relevant change of accounting approach”
15substitute “change of accounting policy”, and

(b) for subsection (4) substitute—

“(4) A “change of accounting policy” includes, in particular—

(a) a change from using UK generally accepted accounting
practice to using generally accepted accounting practice
20with respect to accounts prepared in accordance with
international accounting standards, and

(b) a change from using generally accepted accounting
practice with respect to accounts prepared in
accordance with international accounting standards to
25using UK generally accepted accounting practice.”

(2) In section 180 of CTA 2009 (adjustment on change of accounting basis:
corporation tax)—

(a) in subsection (3)(a) for “relevant change of accounting approach”
substitute “change of accounting policy”, and

(b) 30for subsection (4) substitute—

“(4) A “change of accounting policy” includes, in particular—

(a) a change from using UK generally accepted accounting
practice to using generally accepted accounting practice
with respect to accounts prepared in accordance with
35international accounting standards, and

(b) a change from using generally accepted accounting
practice with respect to accounts prepared in
accordance with international accounting standards to
using UK generally accepted accounting practice.”

(3) 40Corresponding amendments are to be treated as having been made in section
64 of FA 2002.

(4) In consequence of the amendment made by subsection (1)(b), omit paragraph
2 of Schedule 6 to F(No.2)A 2005.

(5) The amendments made by this section have effect in relation to a change of
45basis if the new basis—

(a) is adopted for a period of account which begins on or after 1 January
2012, or

(b) is adopted for a period of account which begins before 1 January 2012
and the adoption is in consequence of the issue, revocation,
5amendment or recognition of, or withdrawal of recognition from, an
accounting standard by an accounting body on or after 1 January 2012.

(6) In this section—

• “accounting body” means the International Accounting Standards Board,
  the Accounting Standards Board, or a successor body to either of those
  10Boards;

• “accounting standard” includes any statement of practice, guidance or
  other similar document.

Part 2 Insurance companies carrying on long-term business

CHAPTER 1 15Introductory

Outline of provisions of Part

55 Overview

(1) This Part makes special provision for corporation tax purposes in relation to
life assurance business and other long-term business carried on by insurance
20companies.

(2) Chapter

1

explains some of the key concepts for the purposes of this Part,
including the concept of basic life assurance and general annuity business
25(abbreviated to “BLAGAB”).

(3) Chapter

2

—

(a) provides for the profits of BLAGAB to be subject to a charge to
30corporation tax on the I - E basis as the profits of a separate business,
and

(b) provides for the profits of other long-term business to be charged to
corporation tax under section 35 of CTA 2009 as the profits of a single
trade.

(4) 35Chapter

3

sets out the rules applicable to the I - E charge (which operate in part
by reference to the calculation of an insurance company’s BLAGAB trade profit
or loss).

(5) 40Chapter

4

sets out rules for determining for the purposes of the I - E charge how
to apportion items to an insurance company’s basic life assurance and general
annuity business.

(6) 45Chapter

5

—

(a) provides for the policyholders’ share of the I - E profit to be charged at
the policyholders’ rate (the basic rate of income tax), and

(b) 50provides for policyholder tax to be taken into account in calculating an
insurance company’s BLAGAB trade profit or loss.

(7) Chapter

6

contains special rules that are to apply for the purpose of calculating
an insurance company’s BLAGAB trade profit or loss or the profits of an
5insurance company’s other long-term business.

(8) Chapter

7

sets out rules for determining for the purposes of that calculation
how to allocate items between BLAGAB and other long-term business.

(9) 10The remainder of the Part contains—

(a) provision in relation to assets held for the purposes of an insurance
company’s long-term business (see Chapter

8

),

(b) 15provision for relieving BLAGAB trade losses and restrictions in relation
to the policyholders’ share of an I - E profit (see Chapter

9

),

(c) provision in relation to the transfer of BLAGAB or other long-term
20business (see Chapter

10

), and

(d) definitions and other supplementary material (see Chapters

11

25 and

12

).

Meaning of “life assurance business”

56 Meaning of “life assurance business”

(1) 30This section defines for the purposes of this Part what is meant by “life
assurance business”.

(2) Business is “life assurance business” if—

(a) it consists of the effecting or carrying out of contracts of insurance
which fall within paragraph I, II, III or VII(b) of Part 2 of Schedule 1 to
35the FISMA (Regulated Activities) Order 2001, or

(b) it is capital redemption business (see subsection (3)).

(3) Business is “capital redemption business” if it consists of the effecting on the
basis of actuarial calculations, and the carrying out, of contracts under which,
in return for one or more fixed payments, a sum of a specified amount (or a
40series of sums of a specified amount) become payable at a future time or over
a period.

Meaning of “basic life assurance and general annuity business”

57 Meaning of “basic life assurance and general annuity business”

(1) This section defines for the purposes of this Part what is meant by “basic life
45assurance and general annuity business”.

(2) “Basic life assurance and general annuity business” means life assurance
business other than—

(a) pension business (which is defined for the purposes of this section by
section 58),

(b) 50child trust fund business (which is defined for the purposes of this
section by section 59),

(c) individual savings account business (which is defined for the purposes
of this section by section 60),

(d) business which consists of the effecting or carrying out of immediate
55needs annuities (within the meaning of section 725 of ITTOIA 2005),

(e) re-insurance of life assurance business other than excluded business,

(f) overseas life assurance business (which is defined for the purposes of
this section by section 61), or

(g) protection business (which is defined for the purposes of this section by
section 62).

(3) 5In subsection (2)(e) “excluded business” means business of any description
excluded for the purposes of this section by regulations made by HMRC
Commissioners.

58 Section 57: meaning of “pension business”

(1) This section defines for the purposes of the definition of “basic life assurance
10and general annuity business” given by section 57 what is meant by “pension
business”.

(2) Life assurance business is “pension business” if—

(a) it consists of the effecting or carrying out of contracts entered into for
the purposes of a registered pension scheme, or

(b) 15it is the re-insurance of business within paragraph (a).

(3) Subsection (4) applies if the pension scheme ceases to be a registered pension
scheme as a result of the withdrawal of its registration under section 157 of FA
2004.

(4) The company’s life assurance business that was pension business when the
20scheme was a registered pension scheme is treated as ceasing to be pension
business at the beginning of the company’s period of account in which the
scheme so ceases to be a registered pension scheme.

(5) If—

(a) immediately before 6 April 2006 an annuity contract fell within any of
25the descriptions of contracts specified in section 431B(2) of ICTA as it
had effect immediately before that date, but

(b) the contract does not fall to be regarded for the purposes of this section
as having been entered into for the purposes of a registered pension
scheme,

30the contract is treated for the purposes of this section as having been entered
into for those purposes.

59 Section 57: meaning of “child trust fund business”

(1) This section defines for the purposes of the definition of “basic life assurance
and general annuity business” given by section 57 what is meant by “child trust
35fund business”.

(2) Life assurance business is “child trust fund business” if it consists of the
effecting or carrying out of child trust fund policies.

(3) But the re-insurance of business consisting of the effecting or carrying out of
child trust fund policies is not “child trust fund business”.

(4) 40In this section “child trust fund policy” means a policy of life insurance which
is an investment under a child trust fund (within the meaning of the Child
Trust Funds Act 2004).

60 Section 57: meaning of “individual savings account business”

(1) This section defines for the purposes of the definition of “basic life assurance
and general annuity business” given by section 57 what is meant by
“individual savings account business”.

(2) 5Life assurance business is “individual savings account business” if it consists
of the effecting or carrying out of individual savings account policies.

(3) But the re-insurance of business consisting of the effecting or carrying out of
individual savings account policies is not “individual savings account
business”.

(4) 10In this section “individual savings account policy” means a policy of life
insurance which is an investment of a kind specified in regulations made as a
result of section 695(1) of ITTOIA 2005.

61 Section 57: meaning of “overseas life assurance business”

(1) This section defines for the purposes of the definition of “basic life assurance
15and general annuity business” given by section 57 what is meant by “overseas
life assurance business”.

(2) Life assurance business is “overseas life assurance business” if—

(a) it consists of the effecting or carrying out of contracts with
policyholders or annuitants who are not resident in the United
20Kingdom, and

(b) it does not consist of excluded business,

but the re-insurance of business that meets the conditions in paragraphs (a)
and (b) is not “overseas life assurance business”.

(3) For this purpose “excluded business” means—

(a) 25business which is pension business within the meaning of section 58,

(b) business which is child trust fund business within the meaning of
section 59,

(c) business which is individual savings account business within the
meaning of section 60, or

(d) 30business of any description excluded by regulations made by HMRC
Commissioners.

(4) HMRC Commissioners may by regulations—

(a) make provision as to the circumstances in which a trustee who is a
policyholder or annuitant residing in the United Kingdom is to be
35treated for the purposes of this section as not residing there, and

(b) provide that nothing in Chapter 9 of Part 4 of ITTOIA 2005 is to apply
to a policy or contract which constitutes overseas life assurance
business as a result of provision made under paragraph (a).

(5) HMRC Commissioners may by regulations make provision for giving effect to
40this section.

(6) Regulations under subsection (5) may—

(a) provide that, in prescribed circumstances, any prescribed issue as to
whether business is, or is not, overseas life assurance business (or
overseas life assurance business of a particular kind) is to be
45determined by reference to prescribed matters,

(b) require companies to obtain certificates, undertakings, information or
declarations from any person for the purposes of the regulations,

(c) make provision for dealing with cases where any issue within
paragraph (a) is (for any reason) wrongly determined, including
5provision allowing for charges to tax to be imposed (with or without
limits on time) on the insurance company concerned or on the
policyholders or annuitants concerned,

(d) require companies to supply information and make available books,
documents and other records for inspection by officers of Revenue and
10Customs, and

(e) make provision (including provision imposing penalties) for
contravention of, or non-compliance with, the regulations.

(7) The matters that may be prescribed under subsection (6)(a) include—

(a) the giving of certificates or undertakings,

(b) 15the giving or possession of information, and

(c) the making of declarations.

(8) Regulations under this section may—

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

(b) contain incidental, supplementary, consequential, transitional,
20transitory or saving provision (including provision amending any
enactment or instrument made under any enactment).

62 Section 57: meaning of “protection business”

(1) This section defines for the purposes of the definition of “basic life assurance
and general annuity business” given by section 57 what is meant by “protection
25business”.

(2) Life assurance business is “protection business” if it consists of the effecting or
carrying out of any contract of long-term insurance in relation to which the
following conditions are met—

(a) the benefits payable cannot exceed the amount of premiums paid
30except on death or in respect of incapacity due to injury, sickness or
other infirmity, and

(b) the contract is made on or after 1 January 2013.

(3) For the purposes of subsection (2)(a) ignore—

(a) any benefit (other than a payment of money) that, when the contract is
35entered into, is provided as an inducement for entering into the
contract and that is not repayable (to any extent) in any circumstances,

(b) any case where the amount by which the benefits can exceed the
amount of premiums paid is an insignificant proportion of those
premiums, and

(c) 40any case which a reasonable person, as the policyholder under the
policy effected by the contract, can reasonably regard as highly unlikely
to arise.

(4) If at any time—

(a) a contract is varied otherwise than as a result of the operation of, or the
45exercise of rights conferred by, provisions forming part of the contract
or a connected arrangement, and

(b) as a result of the variation the contract becomes, or ceases to be, one in
respect of which the condition in subsection (2)(a) is met,

the contract is to be treated for the purposes of this section as ending at that
time and a new contract (on the varied terms) is to be treated for those
5purposes as being made immediately after that time.

(5) For this purpose a “connected arrangement”, in relation to a contract, means
any agreement or other arrangement entered into in connection with the
making of the contract.

(6) If—

(a) 10a contract (“the new contract”) is made on or after 1 January 2013 as a
result of the operation of, or the exercise of rights conferred by,
provisions of a contract (“the old contract”) made before that date, and

(b) the provisions of the new contract were (or could have been)
determined by reference to provisions of the old contract when the old
15contract was made,

the new contract is to be regarded for the purposes of this section as if it were
made before 1 January 2013.

Meaning of “long-term business” and “PHI business”

63 Meaning of “long-term business” and “PHI business”

(1) 20For the purposes of this Part “long-term business” means—

(a) life assurance business, or

(b) other business which consists of the effecting or carrying out of
contracts of long-term insurance.

(2) For the purposes of this Part “PHI business” means the other business
25mentioned in subsection (1)(b).

Meaning of contract of “insurance” or “long-term insurance” and “insurance company”

64 Meaning of “contract of insurance” and “contract of long-term insurance”

For the purposes of this Part—

• “contract of insurance” has the meaning given by article 3(1) of the FISMA
  30(Regulated Activities) Order 2001, and

• “contract of long-term insurance” means a contract which falls within Part
  2 of Schedule 1 to that Order.

65 Meaning of “insurance company”

(1) This section defines for the purposes of this Part what is meant by an
35“insurance company”.

(2) A person who carries on the activity of effecting or carrying out contracts of
insurance is an “insurance company” if—

(a) the person has permission under Part 4 of FISMA 2000 to carry on that
activity,

(b) 40the person is of the kind mentioned in paragraph 5(d) or (da) of
Schedule 3 to FISMA 2000 (EEA passport rights) and carries on that