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Finance Bill
Schedule 33 — Insurance companies

    384

 

              (a)             in sub-paragraph (2), omit “net” (in both places), and

              (b)             in sub-paragraph (16), omit the definition of “net income and gains”.

          (4)      This paragraph has effect for accounting periods beginning on or after 1st

January 2003 except those ending before 9th April 2003.

  9       (1)      Section 432E of the Taxes Act 1988 (apportionment of receipts brought into

5

account: participating funds) is amended as follows.

          (2)      In subsection (1), for “subsection (2)” substitute “subsections (2) and (2A)”.

          (3)      In subsection (2), omit—

              (a)             paragraph (a), and

              (b)             in paragraph (b), the words “in any other case,”.

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          (4)      After subsection (2) insert—

              “(2A)                In a case where an amount is taken into account under subsection (2)

of section 83 of the Finance Act 1989 by virtue of subsection (2B) of

that section, the amount determined under subsection (2) above is

increased byequation: times[over[times[char[C],char[A],char[S]],times[char[A],char[S]]],char[x],char[R],

char[P]]

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                              where—

                                      CAS and AS have the same meanings as in subsection (2) above;

and

                                      RP is the amount taken into account under subsection (2) of

section 83 of the Finance Act 1989 by virtue of subsection (2B)

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of that section.”.

          (5)      This paragraph has effect for periods of account beginning on or after 1st

January 2003; but sub-paragraph (3) does not have effect in relation to any

periods of account ending before 9th April 2003.

  10      (1)      In section 804B(7) of the Taxes Act 1988 (double taxation relief: insurance

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companies carrying on more than one category of business)—

              (a)             in paragraph (a), for “that net amount which is referable by virtue of

section 432E to that category” substitute “the investment income

taken into account in that determination which would be referable to

that category by virtue of section 432E if the investment income were

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the only amount included in the net amount”, and

              (b)             in paragraph (b), for “net amount” substitute “investment income”.

          (2)      Section 804C of the Taxes Act 1988 (insurance companies: allocation of

expenses etc in computations under Case I of Schedule D) is amended as

follows.

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          (3)      In subsections (4) and (5), for “relevant amount” substitute “relevant

income”.

          (4)      For subsection (13) substitute—

              “(13)                For the purposes of the operation of this section in relation to any

income or gain in respect of which credit falls to be allowed under

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any arrangements, the amount of the income or gain that is referable

to a category of insurance business is the same fraction of the income

and gain as the fraction of the foreign tax that is attributable to that

category of business in accordance with section 804B.”.

 

 

Finance Bill
Schedule 33 — Insurance companies

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          (5)      This paragraph has effect for accounting periods beginning on or after 1st

January 2003 except those ending before 9th April 2003.

  11      (1)      In section 76(2B)(b) of the Taxes Act 1988 (expenses of management), for “the

franked investment income of, and foreign income dividends arising to, the

company” substitute “distributions received by the company from

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companies resident in the United Kingdom”.

          (2)      In section 434(3A) of the Taxes Act 1988 (franked investment income etc), for

“held in connection with a company’s life assurance business” substitute “of

a company’s long-term insurance fund”.

          (3)      In section 441(1) of the Taxes Act 1988 (overseas life assurance business),

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omit “and section 441A” (in both places).

          (4)      In section 89(2)(b) of the Finance Act 1989 (c. 26) (policy holders’ share of

profits), for “franked investment income arising in the period which is”

substitute “distributions received from companies resident in the United

Kingdom in the period which are”.

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          (5)      Apart from sub-paragraph (3), this paragraph has effect in relation to

distributions on or after 9th April 2003.

Rate of tax on policy holders’ share of life assurance profits

  12      (1)      The Finance Act 1989 is amended as follows.

          (2)      In section 88(1) (corporation tax rate on policy holders’ share of relevant

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profits of companies carrying on life assurance business to be basic rate of

income tax)—

              (a)             omit “and section 88A”, and

              (b)             for “basic” substitute “lower”.

          (3)      Omit section 88A (cases where tax rate already is lower rate).

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          (4)      In section 89(1) (meaning of “policy holders’ share of profits”)—

              (a)             for “sections 88 and 88A” substitute “section 88”, and

              (b)             omit “or, as the case may be, basic life assurance and general annuity

business”.

          (5)      The Taxes Act 1988 is amended as follows.

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          (6)      In section 438B(5) (income or gains arising from property investment LLP)—

              (a)             omit paragraph (b) and the word “and” before it, and

              (b)             for “section 88 of that Act” substitute “that section”.

          (7)      Section 755A (controlled foreign companies: chargeable profits and

creditable tax apportioned to company carrying on life assurance business)

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is amended as follows.

          (8)      In subsection (3), for “88A(1)” substitute “88(1)”.

          (9)      For subsection (11) substitute—

              “(11)                For the purposes of this section the policy holders’ part of any

BLAGAB apportioned profit is—

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                    (a)                   where subsection (11A) below applies, the whole of that

profit, and

                    (b)                   in any other case, the relevant fraction (within the meaning of

subsection (11B) below) of that profit.

 

 

Finance Bill
Schedule 33 — Insurance companies

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              (11A)                This subsection applies if—

                    (a)                   the UK company’s life assurance business is mutual business,

                    (b)                   the policy holders’ share of the UK company’s relevant

profits for the relevant accounting period is equal to all those

profits, or

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                    (c)                   the policy holders’ share of the UK company’s relevant

profits for the relevant accounting period is more than its

BLAGAB profits for that period.

              (11B)                The relevant fraction for the purposes of subsection (11)(b) above is

the fraction arrived at by dividing—

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                    (a)                   the policy holders’ share of the UK company’s relevant

profits for the relevant accounting period, by

                    (b)                   the UK company’s BLAGAB profits for that period.

              (11C)                In subsections (11A) and (11B) above—

                    (a)                   references to the policy holders’ share of the UK company’s

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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.”.

          (10)     In paragraph 5(6)(b) of Schedule 28AA (provision not at arm’s length), omit

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“or 88A”.

          (11)     This paragraph has effect for the financial year 2003 and subsequent

financial years.

Chargeable gains

  13      (1)      In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210

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insert—

       “210A  Ring-fencing of losses

              (1)             Section 8(1) has effect in relation to insurance companies subject to

the provisions of this section.

              (2)             Non-BLAGAB allowable losses accruing to an insurance company

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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

accruing to the company as permitted by the following provisions of

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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—

                    (a)                   non-BLAGAB allowable losses accruing to the company in

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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.

 

 

Finance Bill
Schedule 33 — Insurance companies

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              (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

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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

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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

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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

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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)

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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—

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                    (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

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                    (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

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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

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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)

 

 

Finance Bill
Schedule 33 — Insurance companies

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of the Finance Act 1989), is the whole amount of the

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

5

profits.

              (11)            In arriving at the policy holders’ share of chargeable gains accruing

to an insurance company under subsection (10) above there is to be

ignored—

                    (a)                   any deduction under section 202(9) (mineral leases: capital

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losses),

                    (b)                   any reduction section 213(3) (spreading of losses from

deemed disposal of holdings of unit trust etc), and

                    (c)                   any amount carried back under paragraph 4(3) of Schedule

11 to the Finance Act 1996 (non-trading deficit on loan

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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

insurance company is the proportion of the whole which is not

represented by the policy holders’ share of them in relation to the

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accounting period.

              (13)            In this section—

                                      “BLAGAB allowable losses”, in relation to an insurance

company, means allowable losses referable to the company’s

basic life assurance and general annuity business,

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                                      “BLAGAB chargeable gains”, in relation to an insurance

company, means chargeable gains referable to the company’s

basic life assurance and general annuity business,

                                      “non-BLAGAB allowable losses”, in relation to an insurance

company, means allowable losses of the company which are

30

not BLAGAB allowable losses,

                                      “non-BLAGAB chargeable gains”, in relation to an insurance

company, means chargeable gains of the company which are

not BLAGAB chargeable gains, and

                                      “the relevant profits” and “the policy holders’ share of the

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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

of that Act.”.

          (2)      Sub-paragraph (1) has effect to limit the deductions which may be made

40

from chargeable gains accruing in—

              (a)             any accounting period of an insurance company beginning on or

after 23rd December 2002, and

              (b)             any accounting period of an insurance company beginning before

that date but ending on or after it,

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                   in respect of allowable losses accruing in any accounting period (whenever

beginning or ending).

 

 

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Schedule 33 — Insurance companies

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          (3)      In relation to an accounting period within sub-paragraph (2)(b) the

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—

5

       “210B Disposal and acquisition of section 440A securities

              (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—

10

                    (a)                   the securities disposed of decrease the size of a chargeable

section 440A holding,

                    (b)                   the securities acquired increase the size of the same

chargeable section 440A holding, and

                    (c)                   (apart from this section) an allowable loss would accrue on

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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

before the disposal rather than securities acquired after the disposal

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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

acquired earlier rather than those acquired later.

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              (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

any occasion shall preclude their identification with securities

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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-

acquired by section 212 (annual deemed disposal of holdings

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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

becoming or ceasing to be assets of overseas life assurance

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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,

                    (b)                   the securities acquired are, on acquisition, appropriated to

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that or another internal linked fund, and

 

 

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Schedule 33 — Insurance companies

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                    (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.

              (8)             In this section—

                                      “BLAGAB internal linked fund” means an internal linked fund

5

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

separate holding by virtue of subsection (2)(a)(iii) or (d) of

section 440A of the Taxes Act (and subsections (3) and (4) of

10

that section),

                                      “internal linked fund” has the same meaning as in section

432ZA of the Taxes Act, and

                                      “section 440A securities” means securities within the meaning

of section 440A of the Taxes Act.”.

15

          (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

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              (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

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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

30

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

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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

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  16      (1)      In the Taxes Act 1988, after section 444A insert—         

       “444AA  Transfers of business: deemed periodical return

              (1)             This section applies where—

 

 

 
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