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(2) If the transferor and the transferee jointly elect, section 83(2B) of the | |
Finance Act 1989 does not apply to the transferor by reason of the | |
transfer as respects so much of the value of the assets to which it | |
would otherwise so apply as does not exceed the amount specified | |
in subsection (4) below. | 5 |
(3) An election under subsection (2) above— | |
(a) is irrevocable, and | |
(b) is to be made by notice to an officer of the Board no later than | |
the end of the period of 28 days beginning with the day | |
following that on which the transfer takes place; | 10 |
and a copy of the notice containing the election must accompany the | |
tax return of the transferee for the first accounting period ending | |
after the transfer. | |
Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims | |
and elections for corporation tax purposes) do not apply to such an | 15 |
election. | |
(4) The amount referred to in subsection (2) above is the amount by | |
which— | |
(a) the fair value of the assets of the long-term insurance fund of | |
the transferee immediately after the transfer, is greater than | 20 |
(b) the element of the transferee’s line 15 figure representing the | |
transferor’s long-term insurance fund. | |
(5) In subsection (4) 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. | 25 |
444AE Transfers of business: modification of s.83ZA 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”). | |
(2) If a contingent loan made to the transferor (within the meaning of | 30 |
subsection (1) of section 83ZA of the Finance Act 1989) is transferred | |
to the transferee, that section has effect as if— | |
(a) the contingent loan had become repayable by the transferor | |
immediately before the transfer, and | |
(b) the contingent loan were made to the transferee immediately | 35 |
after the transfer.”. | |
(2) In section 431(2) of the Taxes Act 1988, after the definition of “basic life | |
assurance and general annuity business” insert— | |
““brought into account” has the meaning given by section 83A | |
of the Finance Act 1989;”. | 40 |
(3) This paragraph has effect in relation to insurance business transfer schemes | |
taking place on or after 1st January 2003. | |
(4) If 30th September 2003 is later than the end of the period specified in | |
subsection (3)(b) of section 444AD of the Taxes Act 1988 (inserted by sub- | |
paragraph (1)), an election under subsection (2) of that section may be made | 45 |
no later than that date. | |
19 (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 211 | |
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insert— | |
“211ZA Transfers of business: transfer of unused losses | |
(1) This section applies where— | |
(a) an insurance business transfer scheme has effect to transfer | |
business consisting of or including basic life assurance and | 5 |
general annuity business from one person (“the transferor”) | |
to another (“the transferee”) or more than one others (“the | |
transferees”), and | |
(b) the transferor has relevant unused losses. | |
(2) For the purposes of subsection (1)(b) above the transferor has | 10 |
relevant unused losses if— | |
(a) BLAGAB allowable losses accrue to the transferor in the | |
accounting period ending with the day of the transfer or have | |
so accrued in any earlier accounting period, and | |
(b) they are not deducted from chargeable gains accruing to the | 15 |
transferor in that accounting period and have not been | |
deducted from chargeable gains so accruing in any previous | |
accounting period. | |
(3) Subject as follows— | |
(a) for the purposes of ascertaining the transferor’s total profits | 20 |
for any accounting period after that in which the transfer | |
takes place, the relevant unused losses are deemed not to | |
have accrued to the transferor, but | |
(b) (instead) they are treated as accruing to the transferee (in | |
accordance with subsection (4) below). | 25 |
(4) The losses treated as accruing to the transferee under subsection | |
(3)(b) above shall be deemed to be BLAGAB allowable losses | |
accruing to the transferee in the accounting period of the transferee | |
in which the transfer takes place. | |
(5) But those losses are not allowable as a deduction from chargeable | 30 |
gains accruing before the transfer takes place. | |
(6) For the purposes of section 210A (ring-fencing of losses), the | |
shareholders’ share of those losses is to be taken to be the same | |
proportion as would be the shareholders’ share of them if they had | |
remained losses of the transferor. | 35 |
(7) If only part of the transferor’s basic life assurance and general | |
annuity business is transferred, subsection (3) above applies as if the | |
references to the relevant unused losses were to such part of the | |
relevant unused losses as is appropriate. | |
(8) If the transfer is to more than one others, subsection (3)(b) above | 40 |
applies as if the reference to the relevant unused losses being treated | |
as accruing to the transferee were to such part of the relevant unused | |
losses as is appropriate being treated as accruing to each of the | |
transferees. | |
(9) Any question arising as to the operation of subsection (7) or (8) above | 45 |
shall be determined by the Special Commissioners who shall | |
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determine the question in the same manner as they determine | |
appeals; but both the transferor and the transferee (or the one of the | |
transferees concerned) shall be entitled to appear and be heard or to | |
make representations in writing. | |
(10) In this section “BLAGAB allowable losses” means allowable losses | 5 |
referable to the transferor’s basic life assurance and general annuity | |
business.”. | |
(2) Sub-paragraph (1) has effect in relation to insurance business transfer | |
schemes taking place on or after 1st January 2003. | |
20 (1) In section 431 of the Taxes Act 1988 (interpretative provisions relating to | 10 |
insurance companies), after subsection (2) insert— | |
“(2ZA) Subsections (2ZB) and (2ZC) below apply where an insurance | |
business transfer scheme has effect to transfer long-term business | |
from one person (“the transferor”) to another (“the transferee”). | |
(2ZB) If the transfer takes place otherwise than on the last day of a period | 15 |
of account of the transferor, references to— | |
(a) opening liabilities of the transferor, | |
(b) opening values or net values of assets of the transferor, or | |
(c) the opening amount of the investment reserve of the | |
transferor, | 20 |
for the period of account, so far as relating to the business | |
transferred, are to the part of those liabilities or values, or that | |
reserve, which bears to the whole the proportion A/C. | |
(2ZC) If the transfer takes place otherwise than on the first day of a period | |
of account of the transferee, references to— | 25 |
(a) closing liabilities of the transferee, | |
(b) closing values or net values of assets of the transferee, or | |
(c) the closing amount of the investment reserve of the | |
transferee, | |
for the period of account, so far as relating to the business | 30 |
transferred, are to the part of those liabilities or values, or that | |
reserve, which bears to the whole the proportion B/C. | |
(2ZD) In subsections (2ZB) and (2ZC) above— | |
A is the number of days in the period beginning with the period | |
of account and ending with the day of the transfer, | 35 |
B is the number of days in the period beginning with the day of | |
the transfer and ending with the period of account, and | |
C is one-half of the number of days in the period of account.”. | |
(2) Sub-paragraph (1) has effect in relation to insurance business transfer | |
schemes taking place on or after 1st January 2003 unless the accounting | 40 |
period of the transferor which ends with the day of the transfer began before | |
that date. | |
21 (1) Section 442A of the Taxes Act 1988 (investment return treated as accruing in | |
respect of reinsured risk) is amended as follows. | |
(2) In subsection (1), for “over the period of” substitute “while the risk remains | 45 |
reinsured by the company under”. | |
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(3) After subsection (3) insert— | |
“(3A) Where a transfer of the reinsurance arrangement from one insurance | |
company (“the transferor”) to another (“the transferee”) is effected | |
by novation or an insurance business transfer scheme, for the | |
purpose of calculating the investment return to be treated as | 5 |
accruing to the transferee in respect of the policy or contract after the | |
transfer, the references to the company in subsection (3)(a), (b) and | |
(c) above include (as well as the transferee)— | |
(a) the transferor, and | |
(b) any insurance company from which the reinsurance | 10 |
arrangement was transferred on an earlier transfer effected | |
by novation or an insurance business transfer scheme.”. | |
(4) In subsection (4), omit “to the company”. | |
(5) This paragraph has effect in relation to transfers of reinsurance | |
arrangements taking place on or after 1st January 2003. | 15 |
22 (1) Section 444A of the Taxes Act 1988 (transfers of business: losses etc) is | |
amended as follows. | |
(2) In subsection (3), insert at the end “if the conditions in paragraphs (a) and (b) | |
of section 343(1) are satisfied in relation to the business transferred | |
(construing references to an event as to the transfer).”. | 20 |
(3) After that subsection insert— | |
“(3ZA) Where subsection (3) above has effect, sections 343(2), (4), (5) and (7) | |
to (12) and 344 apply in relation to the business in which the loss | |
arose construing— | |
(a) references to the predecessor and the successor as to | 25 |
(respectively) the transferor and the transferee, and | |
(b) references to section 343(3) as to subsection (3) of this section, | |
except that nothing in section 343(8) to (10) and (12) applies in | |
relation to the transferee.”. | |
(4) This paragraph has effect in relation to insurance business transfer schemes | 30 |
taking place on or after 1st January 2003 unless the accounting period of the | |
transferor which ends with the day of the transfer, or the accounting period | |
of the transferee during which the transfer takes place, began before that | |
date. | |
Meaning of “investment reserve” etc | 35 |
23 In section 431(2) (interpretative provisions relating to insurance companies), | |
after the definition of “insurance company” insert— | |
““investment reserve”, in relation to an insurance company, | |
means the excess of the value of the assets of the company’s | |
long-term business over the aggregate of— | 40 |
(a) the value of the liabilities of that business, and | |
(b) any money debts (within the meaning of Chapter 2 of | |
Part 4 of the Finance Act 1996) of the company not | |
within paragraph (a) above which are owed in respect | |
of that business;”. | 45 |
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24 In section 432A(9A) of the Taxes Act 1988 (apportionment of income and | |
gains: meaning of “net value”), for the words after “assets over” substitute | |
“the value of money debts (within the meaning of Chapter 2 of Part 4 of the | |
Finance Act 1996) attributable to an internal linked fund which are not owed | |
in respect of long-term liabilities.”. | 5 |
25 In paragraph 4(5) of Schedule 19AA to the Taxes Act 1988 (overseas life | |
assurance fund), in the definition of “investment reserve”, for paragraphs (a) | |
and (b) substitute— | |
“(a) the value of the liabilities of that business, and | |
(b) any money debts of the company not within paragraph (a) | 10 |
above which are owed in respect of that business;”. | |
26 Paragraphs 23 to 25 have effect in relation to periods of account beginning | |
on or after 1st January 2003. | |
Rationalisation of interpretation provisions | |
27 In section 84(2) and (3) of the Finance Act 1989 (c. 26) (interpretation of | 15 |
sections 85 to 89 and further provisions about insurance companies), for “the | |
sections referred to in subsection (1) above” substitute “sections 85 to 89 | |
below”. | |
28 In the Finance Act 1989, after section 90 insert— | |
“90A Interpretation | 20 |
Expressions used in any of sections 82 to 90 above (or Schedule 8A to | |
this Act) and in Chapter 1 of Part 12 of the Taxes Act 1988 have the | |
same meaning in those sections (or that Schedule) as in that | |
Chapter.”. | |
29 In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 214B | 25 |
insert— | |
“214BA Interpretation | |
Expressions used in this Chapter and in Chapter 1 of Part 12 of the | |
Taxes Act have the same meaning in this Chapter as in that | |
Chapter.”. | 30 |
Schedule 34 | |
Section 170 | |
Policies of life insurance etc: miscellaneous amendments | |
Part 1 | |
Group life policies | |
Exception of certain group life policies from Chapter 2 of Part 13 | 35 |
1 (1) Section 539 of the Taxes Act 1988 (introductory) is amended as follows. | |
(2) In subsection (2) (policies and contracts to which the Chapter does not | |
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apply) at the end of paragraph (d) add “; or | |
(e) to any group life policy having as its sole object the provision, | |
on the death or disability of any of the individuals insured | |
under the policy, of a sum substantially the same as any | |
amount then outstanding under a loan made by a credit | 5 |
union to that individual; or | |
(f) to any group life policy with respect to which the conditions | |
in section 539A are satisfied (“an excepted group life | |
policy”).”. | |
(3) In subsection (3) (defined expressions) insert each of the following | 10 |
definitions at the appropriate place— | |
““credit union” means a society registered as a credit union | |
under the Industrial and Provident Societies Act 1965 or the | |
Credit Unions (Northern Ireland) Order 1985;”; | |
““excepted group life policy” shall be construed in accordance | 15 |
with subsection (2)(f) above;”; | |
““group life policy” means a policy of life insurance whose | |
terms provide— | |
(a) for the payment of benefits on the death of more than | |
one individual; and | 20 |
(b) for those benefits to be paid on the death of each of | |
those individuals;”. | |
Excepted group life policies | |
2 After section 539 of the Taxes Act 1988 insert— | |
“539A The conditions for being an excepted group life policy | 25 |
(1) The conditions mentioned in section 539(2)(f) (excepted group life | |
policies) are those set out in the following provisions of this section. | |
(2) Condition 1 is that under the terms of the policy a sum or other | |
benefit of a capital nature is payable or arises on the death of each of | |
the individuals insured under the policy who dies without attaining | 30 |
an age which is specified in the policy and is not greater than 75 | |
years. | |
In determining whether this condition is satisfied, disregard any | |
terms of the policy which exclude from benefit the death of a person | |
in specified circumstances, if the exclusion applies in relation to | 35 |
death in those circumstances in the case of each of the individuals | |
insured under the policy. | |
(3) Condition 2 is that under the terms of the policy— | |
(a) the same method is to be used for calculating the sums or | |
other benefits of a capital nature payable or arising on each | 40 |
death, and | |
(b) if there is any limitation on those sums or other benefits, the | |
limitation is the same in the case of any death. | |
(4) Condition 3 is that the policy does not have, and is not capable of | |
having, on any day— | 45 |
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(a) a surrender value that exceeds the proportion of the | |
premiums paid which, on a time apportionment, is referable | |
to the unexpired paid-up period beginning with that day, or | |
(b) if there is no such period, any surrender value. | |
For the purposes of this subsection the unexpired paid-up period | 5 |
beginning with any day is the period (if any) which— | |
(i) begins with that day, and | |
(ii) ends with the earliest subsequent day on which— | |
(a) a payment of premium falls due under the policy, or | |
(b) the term of the policy ends. | 10 |
(5) Condition 4 is that no sums or other benefits may be paid or | |
conferred under the policy, except as mentioned in condition 1 or | |
condition 3. | |
(6) Condition 5 is that any sums payable or other benefits arising under | |
the policy must (whether directly or indirectly) be paid to or for, or | 15 |
conferred on, or applied at the direction of— | |
(a) an individual or charity beneficially entitled to them, or | |
(b) a trustee or other person acting in a fiduciary capacity who | |
will secure that the sums or other benefits are paid to or for, | |
or conferred on, or applied in favour of, an individual or | 20 |
charity beneficially. | |
In this subsection “charity” means any body of persons or trust | |
established for charitable purposes only. | |
(7) Condition 6 is that no person— | |
(a) who is an individual whose life is insured under the policy, | 25 |
or | |
(b) who is, within the meaning of section 839, connected with an | |
individual whose life is so insured, | |
may, by virtue of a group membership right relating to that | |
individual, receive (directly or indirectly) any death benefit in | 30 |
respect of another group member. | |
In this subsection— | |
(i) “group membership right”, in relation to an individual, | |
means any right (including the right of any person to be | |
considered by trustees in their exercise of a discretion) that is | 35 |
referable to that individual’s being one of the individuals | |
whose lives are insured by the policy; and | |
(ii) “death benefit in respect of another group member” means— | |
(a) any sums or other benefits payable or arising under | |
the policy on the death of any other of those | 40 |
individuals, or | |
(b) anything representing any such sums or benefits. | |
(8) Condition 7 is that a tax avoidance purpose is not the main purpose, | |
or one of the main purposes, for which a person is at any time— | |
(a) the holder, or one of the holders, of the policy, or | 45 |
(b) the person, or one of the persons, beneficially entitled under | |
the policy. | |
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