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(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,”. | 10 |
(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 by![equation: times[over[times[char[C],char[A],char[S]],times[char[A],char[S]]],char[x],char[R],
char[P]]](missing.gif) | 15 |
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) | 20 |
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 | 25 |
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 | 30 |
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. | 35 |
(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 | 40 |
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.”. | |
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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 | 5 |
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), | 10 |
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”. | 15 |
(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 | 20 |
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). | 25 |
(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. | 30 |
(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) | 35 |
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— | 40 |
(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. | |
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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 | 5 |
(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— | 10 |
(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 | 15 |
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 | 20 |
“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 | 25 |
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 | 30 |
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 | 35 |
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 | 40 |
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. | |
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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 | 5 |
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 | 10 |
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 | 15 |
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 | 20 |
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) | 25 |
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— | 30 |
(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 | 35 |
(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 | 40 |
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 | 45 |
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) | |
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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 | 10 |
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 | 15 |
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 | 20 |
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, | 25 |
“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 | 35 |
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, | 45 |
in respect of allowable losses accruing in any accounting period (whenever | |
beginning or ending). | |
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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 | 15 |
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 | 20 |
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. | 25 |
(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 | 30 |
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 | 35 |
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 | 40 |
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 | 45 |
that or another internal linked fund, and | |
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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 | 20 |
(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 | 25 |
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 | 35 |
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 | 40 |
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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