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(a) an insurance business transfer scheme has effect to transfer | |
the whole of the long-term business of one person (“the | |
transferor”), and | |
(b) the last period covered by a periodical return of the transferor | |
ends otherwise than immediately before the transfer. | 5 |
(2) There is to be deemed for the purposes of corporation tax to be a | |
periodical return of the transferor covering the period— | |
(a) beginning immediately after the last period ending before the | |
transfer which is covered by an actual periodical return of the | |
transferor, and | 10 |
(b) ending immediately before the transfer takes place, | |
containing such entries as would have been included in an actual | |
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 | 15 |
transferor ends after the transfer, the periodical return covering that | |
period is to be ignored for all purposes of corporation tax other than | |
determining for the purposes of section 83(2B) of the Finance Act | |
1989 whether a transfer is brought into account as part of total | |
expenditure. | 20 |
(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 | 25 |
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— | 30 |
“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— | 35 |
(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 | 40 |
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 | 45 |
of the previously untaxed amount. | |
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(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 | |
immediately after the transfer as were assets of its long-term | 5 |
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 | |
liabilities. | 10 |
(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- | |
transfer liabilities is the aggregate of the amounts shown in column | 15 |
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 | |
assets so transferred, as brought into account for the first period of | 20 |
account of the transferee (or any of the transferees) ending after the | |
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 | 25 |
of the previously untaxed amount is the fraction of which— | |
(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. | 30 |
(10) References in this section to assets held by the transferor after the | |
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 | 35 |
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 | |
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 | 40 |
January 2003. | |
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 | 45 |
has effect to transfer long-term business from one person (“the | |
transferor”) to another (“the transferee”). | |
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(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 | |
transferred to the transferee, | 5 |
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” | |
means so much of— | 10 |
(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. | |
444AD Transfers of business: modification of s.83(2B) FA 1989 | 15 |
(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 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 | 20 |
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. | |
(3) An election under subsection (2) above— | |
(a) is irrevocable, and | 25 |
(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; | |
and a copy of the notice containing the election must accompany the | |
tax return of the transferee for the first accounting period ending | 30 |
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 | |
election. | |
(4) The amount referred to in subsection (2) above is the amount by | 35 |
which— | |
(a) the fair value of the assets of the long-term insurance fund of | |
the transferee immediately after the transfer, is greater than | |
(b) the element of the transferee’s line 15 figure representing the | |
transferor’s long-term insurance fund. | 40 |
(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. | |
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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 | 5 |
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 | 10 |
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;”. | 15 |
(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 | 20 |
no later than that date. | |
19 (1) In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 211 | |
insert— | |
“211ZA Transfers of business: transfer of unused losses | |
(1) This section applies where— | 25 |
(a) an insurance business transfer scheme has effect to transfer | |
business consisting of or including basic life assurance and | |
general annuity business from one person (“the transferor”) | |
to another (“the transferee”) or more than one others (“the | |
transferees”), and | 30 |
(b) the transferor has relevant unused losses. | |
(2) For the purposes of subsection (1)(b) above the transferor has | |
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 | 35 |
so accrued in any earlier accounting period, and | |
(b) they are not deducted from chargeable gains accruing to the | |
transferor in that accounting period and have not been | |
deducted from chargeable gains so accruing in any previous | |
accounting period. | 40 |
(3) Subject as follows— | |
(a) for the purposes of ascertaining the transferor’s total profits | |
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 | 45 |
(b) (instead) they are treated as accruing to the transferee (in | |
accordance with subsection (4) below). | |
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(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 | 5 |
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. | 10 |
(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 | 15 |
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 | 20 |
shall be determined by the Special Commissioners who shall | |
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. | 25 |
(10) In this section “BLAGAB allowable losses” means allowable losses | |
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. | 30 |
20 (1) In section 431 of the Taxes Act 1988 (interpretative provisions relating to | |
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”). | 35 |
(2ZB) If the transfer takes place otherwise than on the last day of a period | |
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 | 40 |
transferor, | |
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 | 45 |
of account of the transferee, references to— | |
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(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 | 5 |
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, | 10 |
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 | 15 |
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 | 20 |
reinsured by the company under”. | |
(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 | 25 |
purpose of calculating the investment return to be treated as | |
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 | 30 |
(b) any insurance company from which the reinsurance | |
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 | 35 |
arrangements taking place on or after 1st January 2003. | |
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 | 40 |
(construing references to an event as to the transfer).”. | |
(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— | 45 |
(a) references to the predecessor and the successor as to | |
(respectively) the transferor and the transferee, and | |
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(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 | |
taking place on or after 1st January 2003 unless the accounting period of the | 5 |
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 | |
23 In section 431(2) (interpretative provisions relating to insurance companies), | 10 |
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— | |
(a) the value of the liabilities of that business, and | 15 |
(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;”. | |
24 In section 432A(9A) of the Taxes Act 1988 (apportionment of income and | 20 |
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.”. | |
25 In paragraph 4(5) of Schedule 19AA to the Taxes Act 1988 (overseas life | 25 |
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) | |
above which are owed in respect of that business;”. | 30 |
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 | |
sections 85 to 89 and further provisions about insurance companies), for “the | 35 |
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 | |
Expressions used in any of sections 82 to 90 above (or Schedule 8A to | 40 |
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 | |
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