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2 (1) Section 83 of the Finance Act 1989 (receipts etc to be taken into account in | |
Case I computations) is amended as follows. | |
(2) For subsection (2) substitute— | |
“(2) There shall be taken into account as receipts of a period of account | |
amounts (so far as referable to that business) brought into account for | 5 |
the period of account as— | |
(a) investment income receivable before deduction of tax, | |
(b) an increase in the value of non-linked assets, | |
(c) an increase in the value of linked assets, or | |
(d) other income; | 10 |
and if amounts (so far as so referable) are brought into account for a | |
period of account as a decrease in the value of non-linked assets or a | |
decrease in the value of linked assets they shall be taken into account | |
as an expense of the period of account. | |
(2A) But subsection (2) above does not require to be taken into account as | 15 |
receipts of a period of account so much of the amounts brought into | |
account as mentioned in paragraphs (a) to (d) of that subsection for | |
the period of account as— | |
(a) is entirely notional because an amount corresponding to it | |
would fall to be brought into account as an expense (for that | 20 |
or any other period of account), | |
(b) is exempted by section 444AC(2) of the Taxes Act 1988 | |
(transfers of business), or | |
(c) consists of interest paid under section 826 of the Taxes Act | |
1988 (interest on tax overpaid) in respect of a repayment or | 25 |
payment relating to an accounting period of the company | |
ending before 1st July 1999; | |
but, subject to that, the whole of the amounts so brought into account | |
for a period of account shall be taken into account as receipts of the | |
period of account. | 30 |
(2B) If any assets of the company’s long-term insurance fund are | |
transferred by the company so that they cease to be assets of that | |
fund, but the transfer is not brought into account as part of total | |
expenditure for the period of account in which the transfer takes | |
place or any earlier period of account, the fair value of the assets at | 35 |
the time of the transfer shall be deemed to be brought into account | |
for the period of account in which the transfer takes place as an | |
increase in the value of the assets of that fund unless the assets are | |
excluded from this subsection by— | |
(a) subsection (2C) or (2D) below, or | 40 |
(b) section 444AD of the Taxes Act 1988 (transfers of business). | |
(2C) Assets transferred to discharge liabilities in respect of deposits | |
received from reinsurers or arising out of insurance operations, | |
debenture loans or amounts borrowed from credit institutions are | |
included in subsection (2B) above only if the deposits, loans or | 45 |
amounts borrowed— | |
(a) were brought into account for any period of account, but | |
(b) were not taken into account as receipts of the period of | |
account under subsection (2) above. | |
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(2D) Assets are excluded from subsection (2B) above if they are | |
transferred for at least their fair value and the consideration for their | |
transfer, when received, forms part of the company’s long-term | |
insurance fund. | |
(2E) If subsection (2B) above applies in relation to the transfer of all the | 5 |
assets of the company’s long term insurance fund in accordance | |
with— | |
(a) an insurance business transfer scheme, or | |
(b) a scheme which would be such a scheme but for section | |
105(1)(b) of the Financial Services and Markets Act 2000 (which | 10 |
requires the business transferred to be carried on in an EEA | |
State), | |
the reference in that subsection to an amount being deemed to be | |
brought into account for the period of account in which the transfer | |
takes place is to its being so deemed for the period of account ending | 15 |
immediately before the transfer takes place.”. | |
(3) In subsection (3)— | |
(a) for “that business in a case where an amount is” substitute “its life | |
assurance business in a case where assets are”, | |
(b) after “taken into account” insert “under subsection (2) above”, and | 20 |
(c) for “that fund within subsection (2)(b) above” substitute “the long- | |
term insurance fund”. | |
(4) In subsection (4), for paragraph (c) substitute— | |
“(c) represents so much of the proceeds of the disposal of an asset | |
of the long-term insurance fund as does not exceed its fair | 25 |
value or an asset acquired for at least its fair value which is | |
added to that fund.”. | |
(5) In subsection (5), omit paragraph (b) and the word “but” before it. | |
(6) In subsection (6)(c), omit “unless the reinsurer under the contract falls within | |
section 439A of the Taxes Act 1988 (pure reinsurance)”. | 30 |
(7) Subsection (8) is amended as follows. | |
(8) After the definition of “demutualisation” insert— | |
““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;”. | 35 |
(9) In the definition of “total reinsurance”, omit “before the making of the | |
contract of reinsurance (or, in a case where there are two or more contracts | |
of reinsurance, the last of them)”. | |
(10) In the sidenote, for “brought” substitute “taken”. | |
(11) Sub-paragraph (6) has effect in relation to contracts of reinsurance made on | 40 |
or after 9th April 2003; and sub-paragraph (9) has effect in relation to | |
reinsurance effected by a single contract made on or after that date or by two | |
or more contracts each of which is made on or after that day. | |
(12) But, subject to that, this paragraph has effect for periods of account | |
beginning on or after 1st January 2003. | 45 |
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3 (1) In the Finance Act 1989 (c. 26), after section 83 insert— | |
“83ZA Contingent loans | |
(1) For the purposes of this section a contingent loan is made to an | |
insurance company if— | |
(a) a deposit is received by the company from a reinsurer or | 5 |
arises out of insurance operations of the company, | |
(b) a debenture loan is made to the company, or | |
(c) an amount is borrowed by the company from a credit | |
institution, | |
and the deposit, debenture loan or amount borrowed is taken into | 10 |
account as a receipt of the company under section 83(2) above. | |
(2) For the purposes of this section the time when a contingent loan is | |
made to an insurance company is the time when the assets | |
constituting the deposit, debenture loan or amount borrowed are | |
received by the company. | 15 |
(3) For the purposes of this section an insurance company has unrepaid | |
contingent loan liabilities at any time if— | |
(a) one or more contingent loans have been made to the | |
company at or before that time, and | |
(b) amounts will or may at some later time become repayable by | 20 |
the company in respect of the contingent loan or contingent | |
loans. | |
(4) Where, at the end of the period of account of an insurance company | |
(“the period of account in question”), the company has unrepaid | |
contingent loan liabilities— | 25 |
(a) subsection (5) below applies if the company did not have | |
unrepaid contingent loan liabilities at the end of the period of | |
account immediately preceding the period of account in | |
question, and | |
(b) subsection (6) below applies if it did. | 30 |
(5) Where this subsection applies, the appropriate amount for the period | |
of account in question is allowed as a deduction in calculating the | |
profits of the company for the period of account in question. | |
(6) Where this subsection applies— | |
(a) if the appropriate amount for the period of account in | 35 |
question exceeds the appropriate amount for the | |
immediately preceding period of account, the excess is | |
allowed as a deduction in calculating the profits for the | |
period of account in question, but | |
(b) if the appropriate amount for the immediately preceding | 40 |
period of account exceeds the appropriate amount for the | |
period of account in question, the excess is to be taken into | |
account as a receipt of the period of account in question. | |
(7) For the purposes of subsections (5) and (6) above the appropriate | |
amount for a period of account is the amount of the unrepaid | 45 |
contingent loan liabilities at the end of the period of account reduced | |
(but not below nil) by the aggregate of— | |
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(a) any relevant net transfers to shareholders, and | |
(b) any deficiencies of assets over liabilities received on relevant | |
transferred business. | |
(8) In subsection (7)(a) above “relevant net transfers to shareholders” | |
means the aggregate of the positive amounts brought into account as | 5 |
transfers to non-technical account for— | |
(a) the period of account, | |
(b) the period of account in which the relevant contingent loan | |
was made to the company, and | |
(c) any period of account falling between the periods of account | 10 |
mentioned in paragraphs (a) and (b) above, | |
as reduced in accordance with subsection (9) below. | |
(9) The reduction to be made from the positive amount brought into | |
account as a transfer to non-technical account for any of the periods | |
of account mentioned in subsection (8) above is so much of the | 15 |
positive amount as does not exceed 12% of the amount allocated to | |
policy holders as bonuses in relation to the period of account. | |
(10) In subsection (7)(b) above “deficiencies of assets over liabilities | |
received on relevant transferred business” means any amount by | |
which, on an insurance business transfer scheme having effect to | 20 |
transfer long-term business from a person (“the transferor”) to the | |
company which has taken place since the time when the relevant | |
contingent loan was made to the company— | |
(a) the amount of the liabilities to policy holders and annuitants | |
transferred to the company, exceeded | 25 |
(b) the element of the company’s line 15 figure representing the | |
transferor’s long-term insurance fund. | |
(11) In subsections (8) and (10) above “the relevant contingent loan” | |
means— | |
(a) if amounts will or may at some later time become repayable | 30 |
by the company in respect of only one contingent loan, that | |
contingent loan, and | |
(b) if amounts will or may at some later time become repayable | |
by the company in respect of more than one contingent loan, | |
whichever of those contingent loans was made to the | 35 |
company first. | |
(12) In subsection (10)(b) above “the element of the company’s line 15 | |
figure representing the transferor’s long-term insurance fund” | |
means so much of the amount brought into account by the company | |
as other income in the period of account in which the transfer took | 40 |
place as represents the assets transferred to the company. | |
(13) Where in a period of account of an insurance company— | |
(a) an amount becomes repayable under a contingent loan made | |
to the company, and | |
(b) the amount repayable is brought into account as other | 45 |
expenses for the period of account, | |
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so much of the amount repayable as does not exceed the amount | |
specified in subsection (14) below is allowed as a deduction in | |
calculating the profits of the company for the period of account. | |
(14) The amount referred to in subsection (13) above is the amount | |
arrived at by deducting from the amount taken into account as a | 5 |
receipt of the company under section 83(2) above in relation to the | |
contingent loan the aggregate of any amounts which— | |
(a) have become repayable in respect of the contingent loan in | |
any earlier period of account, and | |
(b) have been allowed as a deduction in calculating the profits of | 10 |
the company for any such period.”. | |
(2) In paragraph 2 of Schedule 11 to the Finance Act 1996 (c. 8) (loan | |
relationships: special provisions for insurers), after sub-paragraph (2) | |
insert— | |
“(2A) Where an insurance company stands in the position of a debtor as | 15 |
respects a debt under a contingent loan made to the company | |
(within the meaning of section 83ZA(1) of the Finance Act 1989), | |
the debt is to be regarded for the purposes of this Chapter as not | |
arising from a transaction for the lending of money.”. | |
(3) This paragraph has effect in relation to contingent loans made to an | 20 |
insurance company in a period of account beginning on or after 1st January | |
2003. | |
4 (1) In section 83AA of the Finance Act 1989 (c. 26) (amounts added to long-term | |
insurance fund of a company in excess of company’s loss), omit— | |
(a) subsections (3) to (5), | 25 |
(b) subsection (6)(a), | |
(c) subsection (7)(b) and the word “and” before it, and | |
(d) in subsection (10), the definitions of “the relevant accounting period” | |
and “the transferor company”. | |
(2) Sub-paragraph (1) has effect for periods of account beginning on or after 1st | 30 |
January 2003. | |
5 (1) In section 83AB(1)(c) of the Finance Act 1989 (treatment of surplus where | |
there is a subsequent transfer of business from company etc)— | |
(a) omit sub-paragraph (i), and | |
(b) in sub-paragraph (ii), for “that section” substitute “section 83AA | 35 |
above”. | |
(2) Sub-paragraph (1) has effect for periods of account beginning on or after 1st | |
January 2003. | |
6 (1) In section 88 of the Finance Act 1989 (corporation tax: policy holders’ share | |
of profits), after subsection (3) insert— | 40 |
“(3A) In subsection (3) above “income and gains of the company’s life | |
assurance business” means the aggregate of— | |
(a) income and chargeable gains referable to the company’s | |
basic life assurance and general annuity business, and | |
(b) profits of the company chargeable under Case VI of Schedule | 45 |
D under sections 436, 439B and 441 of the Taxes Act 1988 | |
(pension business, life reinsurance business and overseas life | |
assurance business).”. | |
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(2) Section 89 of that Act (meaning of policy holders’ share of profits) is | |
amended as follows. | |
(3) In subsection (1), for the words after “references to” substitute— | |
“(a) in a case where there are no Case I profits of the company for | |
the period in respect of its life assurance business, the amount | 5 |
of the relevant profits, and | |
(b) in any other case, the amount arrived at in accordance with | |
subsection (1A) below.”. | |
(4) After that subsection insert— | |
“(1A) An amount is arrived at in accordance with this subsection by— | 10 |
(a) deducting from any profits of the company for the period | |
chargeable under Case VI of Schedule D under sections 436, | |
439B and 441 of the Taxes Act 1988 (as reduced by any losses | |
under those sections and any charges on income referable to | |
any category of business other than basic life assurance and | 15 |
general annuity business) so much of the Case I profits of the | |
company for the period in respect of its life assurance | |
business as does not exceed the amount of any profits of the | |
company for the period so chargeable, and | |
(b) deducting any remaining Case I profits of the company for | 20 |
the period in respect of its life assurance business from any | |
BLAGAB profits of the company for the period. | |
(1B) For the purposes of this section, the BLAGAB profits of a company | |
for an accounting period are the income and chargeable gains | |
referable to the company’s basic life assurance and general annuity | 25 |
business reduced by the aggregate amount of— | |
(a) any non-trading deficit on the company’s loan relationships, | |
(b) expenses of management falling to be deducted under | |
section 76 of the Taxes Act 1988, and | |
(c) charges on income, | 30 |
so far as referable to the company’s basic life assurance and general | |
annuity business.”. | |
(5) In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”. | |
(6) In section 76(2B) of the Taxes Act 1988 (expenses of management: relevant | |
income)— | 35 |
(a) in paragraph (a), for “of the company’s life assurance business for | |
that accounting period; and” substitute “for that accounting period | |
which are referable to the company’s basic life assurance and general | |
annuity business;”, and | |
(b) after paragraph (b) insert “and | 40 |
“(c) profits of the company for that accounting period | |
which are chargeable under Case VI of Schedule D | |
under section 436, 439B or 441.”. | |
(7) In— | |
(a) section 434(6A)(b) of the Taxes Act 1988 (franked investment | 45 |
income), and | |
(b) the second sentence of section 434A(3) of that Act (computation of | |
losses and limitation on relief), | |
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for “88” substitute “89”. | |
(8) In section 434A(2)(a)(i) of the Taxes Act 1988 (computation of losses and | |
limitation on relief), for “for the period, otherwise than in accordance with | |
those provisions, the profits or losses of the company’s life assurance | |
business” substitute “, otherwise than in accordance with those provisions, | 5 |
the relevant profits (within the meaning of section 88(1) of the Finance Act | |
1989) of the company for the period”. | |
(9) In section 437(1A) of the Taxes Act 1988 (general annuity business), for | |
“profits for any accounting period of a company’s life assurance business” | |
substitute “relevant profits (within the meaning of section 88(1) of the | 10 |
Finance Act 1989) of an insurance company for any accounting period”. | |
(10) In paragraph 16(1) of Schedule 7 to the Finance Act 1991 (c. 31) (transitional | |
relief for old general annuity contracts), for “profits for any accounting | |
period of an insurance company’s life assurance business” substitute | |
“relevant profits (within the meaning of section 88(1) of the Finance Act | 15 |
1989) of an insurance company for any accounting period”. | |
(11) Section 89(1B) of the Finance Act 1989 (c. 26) (inserted by sub-paragraph (4)) | |
has effect for the purposes of section 210A of the Taxation of Chargeable | |
Gains Act 1992 (c. 12) (inserted by paragraph 13(1)) in relation to any | |
accounting period of a company if it is necessary under that section to | 20 |
determine the company’s BLAGAB profits for the period. | |
(12) But, subject to that, this paragraph has effect for accounting periods ending | |
on or after 9th April 2003. | |
7 (1) In section 89(7) of the Finance Act 1989 (which defines Case I profits for the | |
purposes of determining the policy holders’ share of relevant profits and the | 25 |
shareholders’ share of income), in the definition of “Case I profits”, insert at | |
the end “and adjusted in respect of losses in accordance with section 76(2C) | |
and (2D) of the Taxes Act 1988;”. | |
(2) Sub-paragraph (1) has effect for accounting periods beginning on or after 1st | |
January 2003. | 30 |
(3) But section 76(2C) of the Taxes Act 1988, as it applies by virtue of sub- | |
paragraph (1), has effect as if the reference in it to the amount which would | |
fall, in the case of a company, to be set off under section 393 of that Act were | |
to only so much of that amount as is attributable to losses incurred in the | |
accounting period of the company in which 31st December 2002 is included | 35 |
or any later accounting period. | |
8 (1) In section 76(1) of the Taxes Act 1988 (expenses of management), for the | |
words after paragraph (d) substitute— | |
“(e) expenses of management may be deducted for any | |
accounting period only from so much of the income and | 40 |
gains of that accounting period referable to basic life | |
assurance and general annuity business as remains after any | |
deduction falling to be made by virtue of paragraph 4(2) of | |
Schedule 11 to the Finance Act 1996 (non-trading deficits on | |
loan relationships).”. | 45 |
(2) In section 87(6)(b) of the Finance Act 1989 (management expenses), omit “, | |
disregarding section 76(1)(e) of that Act (as set out in subsection (2) above),”. | |
(3) In paragraph 4 of Schedule 11 to the Finance Act 1996 (c. 8) (non-trading | |
deficits on loan relationships)— | |
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