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(a) references to the policy holders’ share of the UK company’s | |
share of the relevant profits are to be construed in accordance | |
with sections 88(3) and 89 of the Finance Act 1989, and | |
(b) references to the UK company’s BLAGAB profits are to be | |
construed in accordance with section 89(1B) of that Act.”. | 5 |
(10) In paragraph 5(6)(b) of Schedule 28AA (provision not at arm’s length), omit | |
“or 88A”. | |
(11) This paragraph has effect for the financial year 2003 and subsequent | |
financial years. | |
Chargeable gains | 10 |
13 (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210 | |
insert— | |
“210A Ring-fencing of losses | |
(1) Section 8(1) has effect in relation to insurance companies subject to | |
the provisions of this section. | 15 |
(2) Non-BLAGAB allowable losses accruing to an insurance company | |
are not allowable as a deduction from the policy holders’ share of the | |
BLAGAB chargeable gains accruing to the company. | |
(3) BLAGAB allowable losses accruing to an insurance company are | |
allowable as a deduction from non-BLAGAB chargeable gains | 20 |
accruing to the company as permitted by the following provisions of | |
this section (and not otherwise). | |
(4) They are allowable as a deduction from only so much of non- | |
BLAGAB chargeable gains accruing to the company in an accounting | |
period as exceeds the aggregate of— | 25 |
(a) non-BLAGAB allowable losses accruing to the company in | |
the accounting period, and | |
(b) non-BLAGAB allowable losses previously accruing to the | |
company which have not been allowed as a deduction from | |
chargeable gains accruing in any previous accounting period. | 30 |
(5) And they are allowable as a deduction from non-BLAGAB | |
chargeable gains accruing to the company in an accounting period | |
only to the extent that they do not exceed the permitted amount for | |
the accounting period. | |
(6) The permitted amount for the first accounting period of an insurance | 35 |
company in relation to which this section has effect is the aggregate | |
of— | |
(a) the amount by which shareholders’ share for that accounting | |
period of BLAGAB allowable losses accruing to the company | |
in the accounting period exceeds the shareholders’ share of | 40 |
BLAGAB chargeable gains so accruing, and | |
(b) the shareholder’s share for the immediately preceding | |
accounting period of BLAGAB allowable losses previously | |
accruing to the company which have not been allowed as a | |
deduction from chargeable gains accruing in that | 45 |
| |
| |
|
| |
| |
immediately preceding accounting period or any earlier | |
accounting period. | |
(7) The permitted amount for any subsequent accounting period of the | |
company is arrived at by— | |
(a) deducting from the permitted amount for the immediately | 5 |
preceding accounting period the amount of any BLAGAB | |
allowable losses allowed as a deduction from non-BLAGAB | |
chargeable gains accruing to the company in the immediately | |
preceding accounting period, and | |
(b) adjusting the result in accordance with subsection (8) or (9) | 10 |
below. | |
(8) If the BLAGAB chargeable gains accruing to the company in the | |
subsequent accounting period exceed the BLAGAB allowable losses | |
so accruing, the amount arrived at under subsection (7)(a) above is | |
reduced by a fraction of which— | 15 |
(a) the denominator is the BLAGAB allowable losses accruing to | |
the company in any previous accounting period which have | |
not been allowed as a deduction from chargeable gains | |
accruing to the company in any previous accounting period, | |
and | 20 |
(b) the numerator is so many of those allowable losses as are | |
allowed as a deduction from BLAGAB chargeable gains | |
accruing to the company in the accounting period. | |
(9) If the BLAGAB allowable losses accruing to the company in the | |
subsequent accounting period exceed the BLAGAB chargeable gains | 25 |
so accruing, the amount arrived at under subsection (7)(a) above is | |
increased by the shareholders’ share of the amount by which those | |
allowable losses exceed those chargeable gains. | |
(10) For the purposes of this section the policy holders’ share of | |
chargeable gains or allowable losses accruing to an insurance | 30 |
company in an accounting period— | |
(a) if the policy holders’ share of the relevant profits for the | |
accounting period exceeds the BLAGAB profits of the | |
company for the period (within the meaning of section 89(1B) | |
of the Finance Act 1989), is the whole amount of the | 35 |
chargeable gains or allowable losses, and | |
(b) otherwise, is the same proportion of that whole amount as | |
the policy holders’ share of the relevant profits of the | |
company for the accounting period bears to those relevant | |
profits. | 40 |
(11) The amount of the chargeable gains accruing to an insurance | |
company in any accounting period shall be taken for the purposes of | |
subsection (10) above to be what would be that amount but for— | |
(a) any deduction under section 202(9) (mineral leases: capital | |
losses), | 45 |
(b) any reduction section 213(3) (spreading of losses from | |
deemed disposal of holdings of unit trust etc), and | |
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(c) any amount carried back under paragraph 4(3) of Schedule | |
11 to the Finance Act 1996 (non-trading deficit on loan | |
relationships). | |
(12) For the purposes of this section the shareholders’ share of chargeable | |
gains or allowable losses in relation to an accounting period of an | 5 |
insurance company is the proportion of the whole which is not | |
represented by the policy holders’ share of them in relation to the | |
accounting period. | |
(13) In this section— | |
“BLAGAB allowable losses”, in relation to an insurance | 10 |
company, means allowable losses referable to the company’s | |
basic life assurance and general annuity business, | |
“BLAGAB chargeable gains”, in relation to an insurance | |
company, means chargeable gains referable to the company’s | |
basic life assurance and general annuity business, | 15 |
“non-BLAGAB allowable losses”, in relation to an insurance | |
company, means allowable losses of the company which are | |
not BLAGAB allowable losses, | |
“non-BLAGAB chargeable gains”, in relation to an insurance | |
company, means chargeable gains of the company which are | 20 |
not BLAGAB chargeable gains, and | |
“the relevant profits” and “the policy holders’ share of the | |
relevant profits” have the same meaning as they have for the | |
purposes of subsection (1) of section 88 of the Finance Act | |
1989 by virtue of subsection (3) of that section and section 89 | 25 |
of that Act.”. | |
(2) Sub-paragraph (1) has effect to limit the deductions which may be made | |
from chargeable gains accruing in— | |
(a) any accounting period of an insurance company beginning on or | |
after 23rd December 2002, and | 30 |
(b) any accounting period of an insurance company beginning before | |
that date but ending on or after it, | |
in respect of allowable losses accruing in any accounting period (whenever | |
beginning or ending). | |
(3) In relation to an accounting period within sub-paragraph (2)(b) the | 35 |
limitations imposed by virtue of sub-paragraph (1) apply only as respects | |
chargeable gains accruing on or after 23rd December 2002. | |
14 (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210A | |
(inserted by paragraph 13(1)) insert— | |
“210B Disposal and acquisition of section 440A securities | 40 |
(1) Subsections (2) to (4) below apply in a case where an insurance | |
company disposes of a number of section 440A securities and, within | |
the period of 10 days before or after the disposal, acquires a number | |
of section 440A securities if— | |
(a) the securities disposed of decrease the size of a chargeable | 45 |
section 440A holding, | |
(b) the securities acquired increase the size of the same | |
chargeable section 440A holding, and | |
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(c) (apart from this section) an allowable loss would accrue on | |
the disposal. | |
(2) The securities disposed of shall be identified with the securities | |
acquired. | |
(3) The securities disposed of shall be identified with securities acquired | 5 |
before the disposal rather than securities acquired after the disposal | |
and— | |
(a) in the case of securities acquired before the disposal, with | |
those acquired later rather than those acquired earlier, and | |
(b) in the case of securities acquired after the disposal, with those | 10 |
acquired earlier rather than those acquired later. | |
(4) Where securities acquired could be identified with securities | |
disposed of either at an earlier or at a later date, they shall be | |
identified with the former rather than the latter; and the | |
identification of securities acquired with securities disposed of on | 15 |
any occasion shall preclude their identification with securities | |
comprised in a later disposal. | |
(5) Subsections (2) to (4) above have effect subject to section 105(1). | |
(6) Subsections (2) to (4) above do not apply to— | |
(a) securities deemed to be disposed of and immediately re- | 20 |
acquired by section 212 (annual deemed disposal of holdings | |
of unit trusts etc), or | |
(b) securities deemed by section 440 of the Taxes Act to be | |
disposed of and immediately re-acquired by virtue of | |
paragraph 3 of Schedule 19AA to the Taxes Act (assets | 25 |
becoming or ceasing to be assets of overseas life assurance | |
fund). | |
(7) Subsections (2) to (4) above do not apply if— | |
(a) the securities disposed of are linked assets appropriated to a | |
BLAGAB internal linked fund, | 30 |
(b) the securities acquired are, on acquisition, appropriated to | |
that or another internal linked fund, and | |
(c) the disposal and acquisition are made with a view to | |
adjusting the value of the assets of that fund, or of those | |
funds, in order to match its or their liabilities. | 35 |
(8) In this section— | |
“BLAGAB internal linked fund” means an internal linked fund | |
all the assets appropriated to which are linked solely to basic | |
life assurance and general annuity business, | |
“chargeable section 440A holding” means a holding which is a | 40 |
separate holding by virtue of subsection (2)(a)(iii) or (d) of | |
section 440A of the Taxes Act (and subsections (3) and (4) of | |
that section), | |
“internal linked fund” has the same meaning as in section | |
432ZA of the Taxes Act, and | 45 |
“section 440A securities” means securities within the meaning | |
of section 440A of the Taxes Act.”. | |
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(2) Sub-paragraph (1) has effect in relation to disposals on or after 23rd | |
December 2002. | |
(3) But sub-paragraph (1) has effect in relation to disposals made by an | |
insurance company during the period— | |
(a) beginning with 23rd December 2002, and | 5 |
(b) ending with 31st December 2002, | |
only if the amount of the allowable losses referable to the company’s life | |
assurance business which would have accrued to the company on the | |
disposals (but for that sub-paragraph) would have been at least £10 million. | |
15 (1) Section 171A of the Taxation of Chargeable Gains Act 1992 (c. 12) (notional | 10 |
transfers within group) is amended as follows. | |
(2) After subsection (3) insert— | |
“(3A) Section 440(3) of the Taxes Act does not cause subsection (3) above to | |
prevent the making of an election in a case where B is an insurance | |
company; and in such a case the asset or part deemed to be | 15 |
transferred to B by A, and by B to C, is to be treated for the purposes | |
of subsections (2)(c) and (3) above as not being part of B’s long-term | |
insurance fund. | |
“Insurance company” and “long-term insurance fund” have the | |
same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section | 20 |
431(2) of that Act).”. | |
(3) In subsection (4), for “that subsection” substitute “subsection (2) above”. | |
(4) This paragraph has effect in relation to disposals on or after 23rd December | |
2002. | |
Transfers of business | 25 |
16 (1) In the Taxes Act 1988, after section 444A insert— | |
“444AA Transfers of business: deemed periodical return | |
(1) This section applies where— | |
(a) an insurance business transfer scheme has effect to transfer | |
the whole of the long-term business of one person (“the | 30 |
transferor”), and | |
(b) the last period covered by a periodical return of the transferor | |
ends otherwise than immediately before the transfer. | |
(2) There is to be deemed for the purposes of corporation tax to be a | |
periodical return of the transferor covering the period— | 35 |
(a) beginning immediately after the last period ending before the | |
transfer which is covered by an actual periodical return of the | |
transferor, and | |
(b) ending immediately before the transfer takes place, | |
containing such entries as would have been included in an actual | 40 |
periodical return of the transferor covering that period (and so | |
making that period a period of account of the transferor). | |
(3) In a case where the last period covered by a periodical return of the | |
transferor ends after the transfer, the periodical return covering that | |
period is to be ignored for the purposes of corporation tax. | 45 |
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(4) For the purposes of this section “insurance business transfer scheme” | |
includes a scheme which would be such a scheme but for section | |
105(1)(b) of the Financial Services and Markets Act 2000 (which | |
requires the business transferred to be carried on in an EEA State).”. | |
(2) Sub-paragraph (1) has effect in relation to insurance business transfer | 5 |
schemes (within the meaning of section 444AA of the Taxes Act 1988) taking | |
place on or after 1st January 2003 unless the accounting period of the | |
transferor which ends with the day of the transfer began before that date. | |
17 (1) In the Taxes Act 1988, after section 444AA (inserted by paragraph 16(1)) | |
insert— | 10 |
“444AB Transfers of business: charge on transferor retaining assets | |
(1) This section applies where, immediately after an insurance business | |
transfer scheme has effect to transfer long-term business from one | |
person (“the transferor”) to one or more others (“the transferee” or | |
“the transferees”), the transferor— | 15 |
(a) does not carry on long-term business, but | |
(b) holds assets which, immediately before the transfer, were | |
assets of its long-term insurance fund. | |
(2) The transferor shall be charged to tax under Case VI of Schedule D in | |
respect of the taxable amount as if it had been received by the | 20 |
transferor during the accounting period beginning immediately after | |
the day of the transfer. | |
(3) If the transferor was charged to tax on the profits of its life assurance | |
business under Case I of Schedule D for the accounting period | |
ending with the day of the transfer, the taxable amount is the whole | 25 |
of the previously untaxed amount. | |
(4) Otherwise, the taxable amount is the non-BLAGAB fraction of the | |
previously untaxed amount. | |
(5) The previously untaxed amount is the lesser of— | |
(a) the fair value of such of the assets held by the transferor | 30 |
immediately after the transfer as were assets of its long-term | |
insurance fund immediately before the transfer, and | |
(b) the amount by which the fair value of the assets of the | |
transferor’s long-term insurance fund immediately before | |
the transfer exceeds the amount of the relevant pre-transfer | 35 |
liabilities. | |
(6) In subsection (5) above “fair value”, in relation to assets, means the | |
amount which would be obtained from an independent person | |
purchasing them or, if the assets are money, its amount. | |
(7) Subject to subsection (8) below, the amount of the relevant pre- | 40 |
transfer liabilities is the aggregate of the amounts shown in column | |
1 of lines 14 and 49 of Form 14 in the periodical return of the | |
transferor covering the period of account ending immediately before | |
the transfer. | |
(8) If the amount of the liabilities transferred exceeds the value of the | 45 |
assets so transferred, as brought into account for the first period of | |
account of the transferee (or any of the transferees) ending after the | |
| |
| |
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| |
| |
transfer, the amount of the relevant pre-transfer liabilities is the | |
amount arrived at by deducting the excess from the aggregate of the | |
amounts shown as mentioned in subsection (7) above. | |
(9) For the purposes of subsection (4) above the non-BLAGAB fraction | |
of the previously untaxed amount is the fraction of which— | 5 |
(a) the numerator is the amount of the liabilities transferred, | |
apart from those which are liabilities of basic life assurance | |
and general annuity business, and | |
(b) the denominator is the amount of the liabilities transferred. | |
(10) References in this section to assets held by the transferor after the | 10 |
transfer do not include any held on trust for the transferee or any of | |
the transferees. | |
(11) For the purposes of this section “insurance business transfer scheme” | |
includes a scheme which would be such a scheme but for section | |
105(1)(b) of the Financial Services and Markets Act 2000 (which | 15 |
requires the business transferred to be carried on in an EEA State).”. | |
(2) Sub-paragraph (1) has effect in relation to insurance business transfer | |
schemes (within the meaning of section 444AB of the Taxes Act 1988) taking | |
place in a period of account of the transferor beginning on or after 1st | |
January 2003. | 20 |
18 (1) In the Taxes Act 1988, after section 444AB (inserted by paragraph 17(1)) | |
insert— | |
“444AC Transfers of business: modification of s.83(2) FA 1989 | |
(1) This section applies where an insurance business transfer scheme | |
has effect to transfer long-term business from one person (“the | 25 |
transferor”) to another (“the transferee”). | |
(2) If— | |
(a) the element of the transferee’s line 15 figure representing the | |
transferor’s long-term insurance fund, exceeds | |
(b) the amount of the liabilities to policy holders and annuitants | 30 |
transferred to the transferee, | |
the excess is not to be regarded as other income of the transferee for | |
the purposes of section 83(2)(d) of the Finance Act 1989. | |
(3) In this section and section 444AD “the element of the transferee’s line | |
15 figure representing the transferor’s long-term insurance fund” | 35 |
means so much of— | |
(a) the amount which is brought into account by the transferee as | |
other income in the period of account of the transferee in | |
which the transfer takes place, as represents | |
(b) the assets transferred to the transferee. | 40 |
444AD Transfers of business: modification of s.83(2B) FA 1989 | |
(1) This section applies where an insurance business transfer scheme | |
has effect to transfer long-term business from one person (“the | |
transferor”) to another (“the transferee”). | |
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