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Mr Howard Flight
112
Page 381, line 38 [Schedule 33], at end insert—
'5A(1)In the Finance Act 1989 (c. 26), after section 83AB insert—
"83AC Mutual surplus: application of section 83(2)
(1) This section applies in relation to any company where an amount brought into account as other income for a period of account represents relevant mutual surplus.
(2) Subject to subsection (3) below, where an amount mentioned in subsection (1) above is brought into account as other income for a period of account that amount is to be regarded as other income of the company for the purposes of section 83(2)(d) only to the extent that it comprises—
| (a) | the company's investment income from the assets of its long-term insurance fund, or |
| (b) | any increase in value (whether realised or not) of those assets. |
(3) Where an amount has been brought into account in accordance with subsection (1) above, in ascertaining whether or to what extent the company has incurred a loss in that period of account, subsection (2) shall not apply to the amount of relevant mutual surplus so brought into account.
(4) In this section:
"mutual surplus" means the excess of the fair value of the assets of a mutual life assurance company immediately before the relevant demutualisation over its liabilities at that date determined in accordance with section 5 of the Prudential Sourcebook (Insurers).
"relevant demutualisation" means a transfer to the company of the whole or any part of the business carried on by a mutual life assurance company.
"relevant mutual surplus" means so much of the mutual surplus as is transferred to the company on a relevant demutualisation.
"mutual life assurance company" means a company without share capital carrying on life assurance business.".'.
Mr Chancellor of the Exchequer
123
Page 381, line 48 [Schedule 33], at end insert—
'(3B) In subsection (3A)(a) above (and section 89(1B) below) "chargeable gains referable to the company's basic life assurance and general annuity business", in relation to an accounting period, means the chargeable gains so far as referable to that business accruing to the company in the accounting period after deducting—
| (a) | any allowable losses so referable accruing to the company in the accounting period, and |
| (b) | so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.".'. |
Mr Chancellor of the Exchequer
124
Page 384, line 4 [Schedule 33], at end insert—
| '8A | (1) | In section 432D of the Taxes Act 1988 (section 432B apportionment: value of non-participating funds), after "value of assets" (in each place) insert "or as other income". |
| (2) | Sub-paragraph (1) has effect for periods of account beginning on or after 1st January 2003.'. |
Mr Chancellor of the Exchequer
125
Page 385, [Schedule 33], leave out lines 8 to 11 and insert '"The policy holders' share of the franked investment income from investments held in connection with a company's" substitute "So much of the policy holders' share of the franked investment income from investments of a company's long-term insurance fund as is referable to its".
| (3) | In section 441(1) and (2) of the Taxes Act 1988 (overseas life assurance business), omit "and section 441A".'. |
Mr Chancellor of the Exchequer
126
Page 389, line 7 [Schedule 33], leave out from 'where' to 'acquires' in line 9 and insert ', within a period of 10 days, an insurance company disposes of a number of section 440A securities and (whether subsequently or previously)'.
Mr Chancellor of the Exchequer
127
Page 389, line 34 [Schedule 33], leave out from 'securities' to 'or' in line 36 and insert 'which are section 212 assets within the meaning of section 214(1) (rights under authorised unit trusts and interests in offshore funds),'.
Mr Chancellor of the Exchequer
128
Page 390, line 24 [Schedule 33], at end insert—
| '14A | (1) | Section 213 of the Taxation of Chargeable Gains Act 1992 (c.12) (spreading of gains and losses under section 212) is amended as follows. |
(a) for "subsection (3A)" substitute "subsection (8H)",
(b) in paragraph (b) for "one of the next 6" substitute "either of the next 2" and for "subsection" substitute "section",
(c) in paragraph (c), for "any intervening accounting period" substitute "the intervening accounting period (if there is one)", and
(d) in paragraph (ca), for "none of the intervening accounting periods is" substitute "the intervening accounting period (if there is one) is not".
| (3) | Omit subsections (3A) and (3B). |
| (4) | For subsection (5) substitute— |
"(4A) The following provisions apply where an insurance business transfer scheme has effect to transfer business which consists of the effecting or carrying out of contracts of long-term insurance from one person ("the transferor") to another ("the transferee").
(5) Subject to subsections (5A) to (7) below, any chargeable gain or allowable loss which (assuming that the transferor had continued to carry on the business transferred) would have accrued to the transferor by virtue of subsection (1) above after the transfer shall instead be deemed to accrue to the transferee."
| (5) | After subsection (8) insert— |
"(8A) Subsection (8B) below applies where—
| (a) | immediately before the transfer the transferee did not carry on business consisting of the effecting or carrying out of contracts of long-term insurance, |
| (b) | the transferor and the transferee are, at the time of the transfer, members of the same group, |
| (c) | the net amount for the accounting period of the transferor ending with the day of the transfer, or for the immediately preceding accounting period of the transferor, ("the relevant pre-transfer period of the transferor") represents an excess of gains over losses, |
| (d) | the net amount for the accounting period of the transferee in which the transfer takes place, or for the immediately following accounting period of the transferee, ("the relevant post-transfer period of the transferee") represents an excess of losses over gains (after taking account of any reductions made by virtue of this section), and |
| (e) | within 2 years after the end of the relevant post-transfer period of the transferee, the transferor and the transferee make a joint election in respect of the whole or part of the net amount for that period by notice to an officer of the Board. |
(8B) Subject to subsections (8C) to (8E) and (8H) below, the net amounts for both the relevant pre-transfer period of the transferor and the relevant post-transfer period of the transferee shall be reduced by the amount in respect of which the election is made.
(8C) Subsection (8B) above does not apply if—
| (a) | the relevant post-transfer period of the transferee is the accounting period immediately following that in which the transfer takes place, and |
| (b) | the relevant pre-transfer period of the transferor is the accounting period immediately preceding that ending with the day of the transfer. |
(8D) If—
| (a) | the relevant post-transfer period of the transferee is the accounting period immediately following that in which the transfer takes place, and |
| (b) | the relevant pre-transfer period of the transferor is the accounting period ending with the day of the transfer, |
subsection (8B) above applies only if the conditions in subsection (8F) below are satisfied in relation to the accounting period of the transferee in which the transfer takes place.
(8E) If—
| (a) | the relevant post-transfer period of the transferee is the accounting period in which the transfer takes place, and |
| (b) | the relevant pre-transfer period of the transferor is the accounting period immediately preceding that ending with the day of the transfer, |
subsection (8B) above applies only if the conditions in subsection (8F) below are satisfied in relation to the accounting period of the transferor ending with the day of the transfer.
(8F) The conditions referred to in subsections (8D) and (8E) above are that—
| (a) | there is (after taking account of any reductions made by virtue of this section) no net amount for the accounting period, and |
| (b) | the company whose accounting period it is did not join a group of companies in the accounting period. |
(8G) A copy of the notice containing an election under subsection (8A)(e) above must accompany the tax return for the relevant post-transfer period of the transferee; and 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.
(8H) Subsections (3) and (8A) and (8B) above have effect where the company, or the transferee, in question joins a group of companies in the accounting period for which the net amount represents an excess of losses over gains as if a claim or election could not be made in respect of that net amount except to the extent (if any) that the net amount is an amount which, assuming there to be gains accruing to the company or transferee immediately after the beginning of that period, would fall to be treated under paragraph 4 of Schedule 7AA as a qualifying loss in relation to those gains.
(8I) References in this section to a company joining a group of companies are to be construed in accordance with paragraph 1 of Schedule 7AA as if those references were contained in that Schedule; and in subsection (8A)(b) above "group" has the same meaning as in that Schedule."
| (6) | This paragraph has effect where the accounting period for which the net amount represents an excess of losses over gains is an accounting period beginning on or after 1st January 2003.'. |
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