(h) section 1244 (contributions to local enterprise organisations or urban
regeneration companies).

(4) If—

(a) an employer’s liability to corporation tax for an accounting period is
5determined on the assumption that a deduction for expenditure is
allowed as a result of the application by this section of section 1238(1)
to (3) of CTA 2009, and

(b) the deduction would not otherwise have been allowed,

section 75(2) to (4) of CTA 2009 (retraining courses: recovery of tax) apply.

(5) 10If—

(a) an amount is treated as an ordinary BLAGAB management expense as
a result of the application by this section of section 1242 of CTA 2009,
and

(b) the amount would otherwise be regarded as an acquisition expense for
15the purposes of section 79,

the expense is not to be so regarded.

(6) Section 1253 of CTA 2009 (contributions to local enterprise organisations or
urban regeneration companies: disqualifying benefits) applies in the case of
amounts treated, as a result of the application by this section of section 1244 of
20that Act, as ordinary BLAGAB management expenses as it applies in the case
of amounts for which a deduction has been made under section 1219 of that Act
as a result of section 1244 of that Act.

(7) For the purposes of this section—

(a) references in any relevant permissive rule to a company carrying on
25business that consists wholly or partly of making investments or to a
company with investment business are to be read as references to a
company carrying on basic life assurance and general annuity business,

(b) references in any relevant permissive rule to an amount being
deductible under section 1219 of CTA 2009 are to be read as references
30to an amount being deductible as an ordinary BLAGAB management
expense,

(c) section 1239 of CTA 2009 is to be treated as having effect with the
omission of subsection (1)(c),

(d) the reference in section 1240(4) of CTA 2009 to sections 1224 to 1227 of
35that Act is to be read as a reference to section 77(8) and (9) of this Act,
and

(e) section 1243 of CTA 2009 is to be treated as having effect with the
omission of subsection (1)(c).

(8) An amount is treated as an ordinary BLAGAB management expense as a result
40of this section only so far as it would not otherwise be regarded as an ordinary
BLAGAB management expense.

82 Restrictions in relation to ordinary BLAGAB management expenses

(1) This section applies in relation to an amount which is (or, but for this section,
would be) regarded for the purposes of section 76 as an ordinary BLAGAB
45management expense of an insurance company.

(2) Section 1249(1) and (2) of CTA 2009 (unpaid remuneration) apply for the
purpose of determining the period of account for which the amount is debited

in the accounts of the company for the purposes of section 77; but this
subsection is subject to the operation of section 79.

(3) Section 1249(1) and (3) of CTA 2009 apply for the purpose of determining
whether the amount is to be regarded as an ordinary BLAGAB management
expense of the company.

(4) 5Section 1251(1) and (2) of CTA 2009 (car hire) apply for the purpose of
determining the amount of the ordinary BLAGAB management expense of the
company.

(5) For the purposes of subsections (2) to (4)—

(a) references in section 1249 or 1251 of CTA 2009 to a company with
10investment business are to be read as references to a company carrying
on basic life assurance and general annuity business (and, accordingly,
the reference in section 1251(1) to total profits is to be read as a reference
to profits of basic life assurance and general annuity business), and

(b) references in section 1249 or 1251 of CTA 2009 to an amount being
15deductible under section 1219 of CTA 2009 are to be read as references
to an amount being deductible as an ordinary BLAGAB management
expense.

(6) If—

(a) an amount is reduced as a result of subsection (4) or a corresponding
20rule,

(b) subsequently there is a rebate (however described) of the hire charges,
and

(c) an amount representing the rebate is deductible as a reversed expense
or taken into account in calculating the amount of an I - E receipt under
25section 92,

the amount that would otherwise be so deductible or taken into account is
reduced by 15%.

(7) If—

(a) an amount is reduced as a result of subsection (4) or a corresponding
30rule,

(b) subsequently a debt in respect of any of the hire charges is released
otherwise than as part of a statutory insolvency arrangement, and

(c) an amount representing the release is deductible as a reversed expense,

the amount that would otherwise be so deductible is reduced by 15%.

(8) 35For the purposes of subsections (6) and (7)—

• “corresponding rule” means section 56(2) or 1251(2) of CTA 2009 or
  section 48(2) of ITTOIA 2005,

• “deductible as a reversed expense” means deductible at step 4 in section
  76 as an expense reversed in an accounting period, and

• 40“statutory insolvency arrangement” has the meaning given by section
  1319(1) of CTA 2009.

83 General annuity business

(1) This section applies if an insurance company pays qualifying BLAGAB
annuities in an accounting period.

(2) 45An amount equal to the difference between—

(a) the total amount of those annuities paid by the company in the
accounting period, and

(b) the total of the amounts exempt under section 717 of ITTOIA 2005
(exemption for part of purchased life annuity payments) contained in
5those annuities so paid,

is treated for the purposes of section 76 as a deemed BLAGAB management
expense for the accounting period.

(3) An annuity is a “qualifying BLAGAB annuity” if—

(a) it is referable to the company’s basic life assurance and general annuity
10business, and

(b) it is paid under a contract made by the company in an accounting
period beginning on or after 1 January 1992 (but see section 85).

(4) For the purposes of this section the amounts exempt under section 717 of
ITTOIA 2005 are so much of the payments under the qualifying BLAGAB
15annuities as would be within the exemption under that section if—

(a) section 718 of ITTOIA 2005 were omitted, and

(b) the exemption under section 717 of ITTOIA 2005 applied in relation to
companies as well as individuals.

(5) If a qualifying BLAGAB annuity (“the actual annuity”) is a steep-reduction
20annuity, the calculations required by subsection (2)(a) and (b) are to be made
as if—

(a) the contract for the actual annuity provided instead for the annuities
identified below (“the deemed annuities”), and

(b) the consideration for each of the deemed annuities were equal to an
25apportionment of the consideration for the actual annuity on a just and
reasonable basis.

(6) The deemed annuities are—

(a) an annuity the payments in respect of which are confined to payments
in respect of the actual annuity that fall to be made at the earliest time
30for the making in respect of that annuity of a reduced payment within
section 84(1)(c), and

(b) an annuity the payments in respect of which are all the payments in
respect of the actual annuity other than those mentioned in paragraph
(a).

(7) 35If a deemed annuity within subsection (6)(b) (“the later annuity”) would itself
be a steep-reduction annuity, the deemed annuities—

(a) do not include the later annuity, but

(b) include instead the annuities which would be identified by subsection
(6) (with as many further applications of this subsection as may be
40necessary for securing that none of the deemed annuities is a steep-
reduction annuity) if references in that subsection to the actual annuity
were to the later annuity.

(8) This section needs to be read with section 84 (meaning of “steep-reduction
annuity” etc).

84 45General annuity business: meaning of “steep-reduction annuity” etc

(1) For the purposes of section 83 an annuity is a “steep-reduction annuity” if—

(a) the amount of any payment in respect of it (but not its term) depends
on a contingency other than the duration of a human life or lives,

(b) the annuitant is entitled to payments of different amounts at different
times, and

(c) 5the payments include a payment (“a reduced payment”) of an amount
which is substantially smaller than the amount of at least one of the
earlier payments.

(2) If there are different intervals between the payments, it is to be assumed for the
purposes of subsection (1)(b) and (c)—

(a) 10that the annuitant’s entitlement, after the first payment, to payments is
an entitlement to payments at yearly intervals on the anniversary of the
first payment, and

(b) that the amount to which the annuitant is assumed to be entitled is
equal to the annuitant’s assumed entitlement for the year ending with
15the anniversary in question.

(3) For this purpose the annuitant’s assumed entitlement for a year is determined
as follows—

(a) the annuitant’s entitlement to each payment is taken to accrue at a
constant rate during the interval between the previous payment and
20that payment, and

(b) the annuitant’s assumed entitlement for a year is taken to be equal to
the total amount which, in accordance with paragraph (a), is treated as
accruing in the year.

(4) In the case of an annuity to which subsection (2) applies, the reference in
25section 83(6)(a) to the making of a reduced payment is to be read as a reference
to the making of a payment which (applying subsection (3)(a)) is taken to
accrue at a rate that is substantially less than the rate at which at least one of
the earlier payments is taken to accrue.

(5) If—

(a) 30a question arises whether a payment is substantially smaller than, or
accrues at a rate substantially less than, an earlier payment, and

(b) the annuitant or (as the case may be) every annuitant is an individual
who is beneficially entitled to all the rights conferred on him or her as
such an annuitant,

35the question is determined without regard to so much of the difference
between the amounts or rates as is referable to a reduction falling to be made
as a result of a death.

(6) If the amount of any one or more of the payments depends on a contingency,
the annuitant’s entitlement to the payments is determined for the purposes of
40section 83 and this section according to whatever is the most likely outcome in
relation to the contingency (applying any relevant actuarial principles).

(7) If an agreement or other arrangement has effect for varying the rights of the
annuitant in relation to a payment, the payment is taken for the purposes of
section 83 and this section to be a payment of the amount to which the
45annuitant is entitled in accordance with the agreement or other arrangement.

(8) For the purposes of this section references to a contingency include a
contingency consisting wholly or partly in the exercise of an option.

85 General annuity business: payments made in pre-1992 accounting periods

(1) If—

(a) a payment in respect of an annuity is made by an insurance company
under a group annuity contract made in a pre-1992 accounting period,
5and

(b) the company’s liabilities first include an amount in respect of that
annuity in a post-1992 accounting period,

the payment is treated for the purposes of section 83(3)(b) as if the contract had
been made in a post-1992 accounting period.

(2) 10If—

(a) a payment in respect of an annuity is made by a re-insurer under a re-
insurance treaty made in a pre-1992 accounting period, and

(b) the re-insurer’s liabilities first include an amount in respect of that
annuity in a post-1992 accounting period,

15the payment is, as respects the re-insurer, treated for the purposes of section
83(3)(b) as if the treaty had been made in a post-1992 accounting period.

(3) In this section—

• “a pre-1992 accounting period” means an accounting period beginning
  before 1 January 1992,

• 20“a post-1992 accounting period” means an accounting period beginning
  on or after 1 January 1992,

• “group annuity contract” means a contract under which the insurance
  company undertakes to become liable to pay annuities to or in respect
  of persons who may subsequently be specified or otherwise ascertained
  25under or in accordance with the contract (whether or not annuities
  under the contract are also payable to or in respect of persons who are
  specified or ascertained at the time the contract is made), and

• “re-insurance treaty” means a contract under which one insurance
  company is obliged to cede, and another (referred to in this section as a
  30“re-insurer”) to accept, the whole or part of a risk of a class or
  description to which the contract relates.

Special rules applying to I - E basis

86 Separate property businesses for BLAGAB etc

(1) This section modifies the rules in sections 208 and 209 of CTA 2009 (basic
35meaning of UK and overseas property business) for the purpose of applying
the I - E rules in relation to an insurance company.

(2) The company is treated as carrying on separate UK property businesses or
overseas property businesses in accordance with the following provisions.

(3) The exploitation of land held otherwise than for the purposes of the company’s
40long-term business is treated as a separate business from the exploitation of
land held for those purposes.

(4) In the case of the exploitation of land held for the purposes of the company’s
long-term business, each of the following is treated as a separate business—

(a) the exploitation of land which is matched to BLAGAB liabilities of the
45company,

(b) the exploitation of land which is matched to other long-term business
liabilities of the company, and

(c) the exploitation of land so far as it is not matched to long-term business
liabilities of the company.

(5) 5In the case of land part of which is matched to a BLAGAB liability or other
long-term business liability, only the part of the land in question is to count for
the purposes of this section as matched to the liability in question.

(6) In this section “land” means any estate, interest or right in or over land.

87 Losses from property businesses where land held for long-term business

(1) 10This section applies for the purpose of applying the I - E rules in relation to an
insurance company if, in an accounting period, the company makes a loss in
any of its separate UK property businesses or overseas property businesses
within section 86(4).

(2) The provisions of Chapter 4 of Part 4 of CTA 2010 (loss relief: property
15businesses) do not apply to the loss.

(3) So far as the loss is referable, in accordance with Chapter

4

, to the company’s
basic life assurance and general annuity business, it is treated for the purposes
20of section 76 as a deemed BLAGAB management expense for the accounting
period.

(4) If the company has two or more separate property businesses within section
86(4), then for the purposes of subsection (3) the loss in question is taken to be
the total net loss after—

(a) 25setting the losses from the businesses which are referable, in
accordance with Chapter

4

, to the company’s basic life assurance and
general annuity business, against

(b) 30the profits from the businesses which are so referable.

88 Loan relationships, derivative contracts and intangible fixed assets

(1) This section applies if an insurance company has—

(a) credits or debits in respect of any loan relationships,

(b) credits or debits in respect of any derivative contracts, or

(c) 35credits or debits brought into account by the company under Part 8 of
CTA 2009 (intangible fixed assets),

that are referable, in accordance with Chapter

4

, to its basic life assurance and
40general annuity business.

(2) In the application of the I - E rules in relation to the company’s basic life
assurance and general annuity business—

(a) the loan relationship rules,

(b) the derivative contract rules, and

(c) 45the intangible fixed asset rules,

have effect as if the activities carried on by the company in the course of its
basic life assurance and general annuity business did not constitute the whole
or any part of a trade or of a property business.

(3) In the application of the I - E rules for an accounting period in relation to the
50company’s basic life assurance and general annuity business—

(a) BLAGAB credits in respect of its loan relationships for the period are to
count as income for the purposes of those rules only in so far as they
exceed BLAGAB debits in respect of its loan relationships for the
period, and

(b) 5BLAGAB credits brought into account by the company under Part 8 of
CTA 2009 for the period are to count as income for the purposes of
those rules only in so far as they exceed BLAGAB debits brought into
account by the company under that Part for the period.

(4) References in subsection (3)(a) to BLAGAB credits or BLAGAB debits in
10respect of a company’s loan relationships include, as a result of subsection (2)
and section 574 of CTA 2009, BLAGAB credits or BLAGAB debits in respect of
the company’s derivative contracts.

(5) If for an accounting period the BLAGAB debits mentioned in subsection (3)(a)
exceed the BLAGAB credits mentioned there, the excess is dealt with in
15accordance with sections 388 to 391 of CTA 2009.

(6) If for an accounting period the BLAGAB debits mentioned in subsection (3)(b)
exceed the BLAGAB credits mentioned there, the excess—

(a) is carried forward to the next accounting period, and

(b) is treated for the purposes of section 76 as a deemed BLAGAB
20management expense for that period.

(7) In this section—

• “BLAGAB credits”, in relation to a company, means credits arising from
  the company’s long-term business that are referable, in accordance
  with Chapter

  254

  , to its basic life assurance and general annuity business,

• “BLAGAB debits”, in relation to a company, means debits arising from the
  company’s long-term business that are referable, in accordance with
  Chapter

  304

  , to its basic life assurance and general annuity business,

• “the loan relationship rules” means the rules set out in Part 5 of CTA 2009
  (including provisions of other enactments by reference to which
  amounts are to be brought into account for the purposes of that Part),

• 35“the derivative contract rules” means the rules set out in Part 7 of CTA
  2009, and

• “the intangible fixed asset rules” means the rules set out in Part 8 of CTA
  2009.

89 Miscellaneous income and losses

(1) 40In the application of the I - E rules for an accounting period in relation to an
insurance company’s basic life assurance and general annuity business,
BLAGAB miscellaneous income of the company for the period is to count as
income for the purposes of those rules only in so far as it exceeds BLAGAB
miscellaneous losses of the company for the period.

(2) 45If for an accounting period the BLAGAB miscellaneous losses exceed the
BLAGAB miscellaneous income, the excess—

(a) is carried forward to the next accounting period, and

(b) is treated for the purposes of section 76 as a deemed BLAGAB
management expense for that period.

(3) 50In this section—

Finance BillPage 57

• “BLAGAB miscellaneous income”, in relation to a company, means
  income of the company arising from its long-term business which—

  (a)

  is chargeable under any provision to which section 1173 of CTA
  2010 (miscellaneous charges) applies other than section 752 of
  5CTA 2009 (non-trading gains on intangible fixed assets), and

  (b)

  is referable, in accordance with Chapter

  4

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

• 10“BLAGAB miscellaneous losses”, in relation to a company, means losses
  of the company arising from its long-term business which—

  (a)

  arise from miscellaneous transactions, and

  (b)

  are referable, in accordance with Chapter

  4

  15, to the company’s
  basic life assurance and general annuity business.

(4) For the purposes of subsection (3) a transaction is a “miscellaneous
transaction” if income arising from it would be chargeable under any provision
to which section 1173 of CTA 2010 applies other than—

(a) 20section 752 of CTA 2009, or

(b) regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (offshore
income gains).

(5) For the purposes of this section references to income that is chargeable under
any provision to which section 1173 of CTA 2010 applies are to income that, but
25for sections 68 and 69, would be chargeable under that provision.

90 Investment return where risk in respect of policy or contract re-insured

(1) This section applies if an insurance company re-insures any risk in respect of a
policy or contract attributable to its basic life assurance and general annuity
business.

(2) 30For the purposes of the I - E rules the investment return on the policy or
contract is treated as accruing to the company while the risk remains re-
insured by the company under the re-insurance arrangement.

(3) The investment return that is treated as accruing to the company—

(a) is treated for the purposes of those rules as income that is referable, in
35accordance with Chapter

4

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

(b) is, accordingly, brought into account for the purposes of those rules at
40step 1 in section 73.

(4) HMRC Commissioners may make provision by regulations as to the amount
of investment return that is treated as accruing in each accounting period
during which the re-insurance arrangement is in force.

(5) HMRC Commissioners may by regulations exclude from the operation of this
45section—

(a) such descriptions of insurance company,

(b) such descriptions of policies or contracts, and

(c) such descriptions of re-insurance arrangement,

as may be prescribed by the regulations.

(6) 50Nothing in this section applies in relation to the re-insurance of a policy or
contract where the policy or contract was made, and the re-insurance
arrangement effected, before 29 November 1994.

91 Regulations under section 90(4): supplementary provision

(1) This section applies to regulations under section 90(4).

(2) The regulations may provide for the calculation of the investment return
treated as accruing to a company in respect of a policy or contract in an
5accounting period to be made by reference to—

(a) the total amount of sums paid (by way of premium or otherwise) by the
company to the re-insurer during the accounting period and any earlier
accounting periods,

(b) the total amount of sums paid (by way of commission or otherwise) by
10the re-insurer to the company during the accounting period and any
earlier accounting periods,

(c) the total amount of the net investment return treated as accruing to the
company in any earlier accounting periods, that is to say, net of tax at
such rate as may be prescribed by the regulations, and

(d) 15such percentage rate of return as may be prescribed by the regulations.

(3) The regulations may make provision dealing with the transfer of the re-
insurance arrangement from one insurance company to another.

(4) The regulations must provide that the amount of investment return treated as
accruing in respect of a policy or contract in the final accounting period during
20which the policy or contract is in force is the amount, ascertained in accordance
with the regulations, by which the overall profit exceeds the total amount
treated as accruing in earlier accounting periods.

(5) “The overall profit” means the profit over the whole period during which the
policy or contract, and the re-insurance arrangement, were in force.

(6) 25If the overall profit is less than the total amount treated as accruing in earlier
accounting periods, the difference—

(a) must be set off against amounts treated as a result of section 90 as
accruing in the final accounting period from other policies or contracts,
and

(b) 30if not fully set off as mentioned in paragraph (a), may be carried
forward for set-off against amounts treated as a result of that section as
accruing in subsequent accounting periods.

(7) The regulations may—

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

(b) 35contain incidental, supplementary, consequential, transitional,
transitory or saving provision.

(8) An example of the kind of supplementary provision within subsection (7)(b) is
provision requiring payments made during an accounting period to be treated
as made on such date or dates as may be prescribed by the regulations.

40Deemed I - E receipts

92 Certain BLAGAB trading receipts to count as deemed I - E receipts

(1) This section applies if—

(a) an insurance company has receipts that are taken into account in
calculating its BLAGAB trade profit or loss (see section 136) for an
45accounting period,

(b) the receipts would not fall within the charge to corporation tax apart
from this section, and

(c) the receipts are not excluded receipts.

(2) The appropriate amount of the receipts is an I - E receipt of the company for the
5accounting period.

(3) The “appropriate amount” of the receipts is found by deducting expenses from
the receipts so far as is necessary for calculating the full amount of the profits.

(4) Chapter 1 of Part 20 of CTA 2009 (general rules for restricting deductions) is to
apply to that calculation.

(5) 10The following receipts are “excluded” receipts—

(a) premiums,

(b) sums received under re-insurance contracts (but see subsection (6) for
exceptions),

(c) sums which do not fall within the charge to corporation tax because of
15an exemption,

(d) payments received under the Financial Services Compensation
Scheme, and

(e) payments received from other insurance companies to enable the
company to meet its obligations to policyholders.

(6) 20A sum received under a re-insurance contract is not an excluded receipt if—

(a) it is a re-insurance commission (however described), or

(b) it is a sum calculated to any extent by reference to the ordinary
BLAGAB management expenses of the company referable to the
accounting period (within the meaning of section 77).

25Minimum profits charge

93 Minimum profits test

(1) This section applies if an insurance company has a BLAGAB trade profit for an
accounting period.

(2) A comparison must be made between—

(a) 30the I - E profit or excess BLAGAB expenses for the accounting period,
and

(b) the BLAGAB trade profit for the accounting period,

adjusted as need be in accordance with sections 94 and 124.

(3) In making the calculation required by subsection (2)(a), it is to be assumed that
35this Chapter has effect with the omission of subsection (5)(a) (but, apart from
that, all the other rules in this Chapter have effect for the purposes of that
calculation).

(4) If there are excess BLAGAB expenses for the accounting period, the amount of
the excess is treated for the purposes of this section as a negative figure equal
40to that amount.

(5) If, for the accounting period, the adjusted BLAGAB trade profit exceeds the
adjusted I - E profit or excess BLAGAB expenses—