Finance Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 9 — Insurance companies etc
203

(c)
the total of the items brought into account in the separate
accounts—
(i)
excluding any such accounts which by virtue of
subsection (3A), (3B) or (3E)(a) above are not
recognised accounts for the purposes of those
5
sections, but
(ii)
including any such accounts which by virtue of
subsection (3E)(b) above are treated as having been
required and prepared,

is not equal to the total amount brought into account in the
10
main account,

there shall be treated as having been required and prepared a further
separate revenue account covering the balance.”.
      (5)
At the end of the section insert—
“(6)
In this section “with-profits fund” and “non-profit fund” have the
15
same meaning as in the Integrated Prudential Sourcebook.”.
      (6)
The amendments made by this paragraph have effect in relation to periods
of account beginning on or after 1st January 2005.
Changes in recognised accounts: attribution of amounts carried forward under s.432F of ICTA
13    (1)
After section 83A of FA 1989 insert—
20
“83B
Changes in recognised accounts: attribution of amounts carried
forward under s.432F of Taxes Act 1988
(1)
This section applies to a company where any revenue account that is
recognised for a period of account (the “new period of account”)
relates to funds or business which is different from the funds or
25
business to which a revenue account that was recognised for the
preceding period of account relates.
(2)
Any subsection (2) excess (within the meaning of section 432F(2) of
the Taxes Act 1988) which would have been available under section
432F(3) or (4) of that Act to reduce a subsection (3) figure (within the
30
meaning of section 432F(1) of that Act) of the company in the new
period of account shall be attributed between the revenue accounts
that are recognised for that period of account in such manner as is
appropriate.
(3)
In this section “recognised” means recognised, by virtue of section
35
83A, for the purposes of sections 82A to 83AB.”.
      (2)
The amendment made by this paragraph has effect in relation to new
periods of account (within the meaning given by section 83B(1) of FA 1989)
beginning on or after 1st January 2005.
Charge of certain receipts of basic life assurance business
40
14    (1)
Section 85 of FA 1989 is amended as follows.
      (2)
In subsection (2) (receipts excluded from charge under Case VI of Schedule
D in respect of receipts referable to company’s basic life assurance and

Finance Bill
Schedule 9 — Insurance companies etc
204

general annuity business) after paragraph (e) insert “; or
(f)
any payment received under the Financial Services
Compensation Scheme to enable the company to meet its
obligations to policyholders.”.
      (3)
In subsection (2C) (rules as to whether receipt is referable to company’s basic
5
life assurance and general annuity business for the purposes of subsection
(1)) after paragraph (a) insert—
“(aa)
in the case of a repayment or refund of expenses other than
acquisition expenses, the expenses—
(i)
were attributable to basic life assurance and general
10
annuity business for the purposes of Step 1 in
subsection (7) of the new section 76 (see subsection (8)
of that section), or
(ii)
fell to be deducted by virtue of subsection (1) of the
old section 76;
15

and for this purpose, “the new section 76” and “the old
section 76” have the same meaning as in section 44 of the
Finance Act 2004 (see subsection (8) of that section),”.
      (4)
The amendments made by this paragraph have effect in relation to
accounting periods ending on or after 16th March 2005.
20
Miscellaneous references to “class” of business
15    (1)
In section 432B of ICTA (apportionment of receipts brought into account) in
subsection (1), for “class” substitute “category”.
      (2)
In section 444A of ICTA (transfers of business) in subsection (3), for “class”
substitute “category”.
25
      (3)
In Schedule 12 to FA 1997 (leasing arrangements: finance leases and loans)
in paragraph 19 (companies carrying on life assurance business) in sub-
paragraph (2), for “class” substitute “category”.
      (4)
In Schedule 29 to FA 2002 (gains and losses of a company from intangible
fixed assets) in paragraph 138 (interpretation provisions relating to
30
insurance companies) in sub-paragraph (3), for “class” substitute “category”.
      (5)
The amendments made by this paragraph have effect in relation to periods
of account beginning on or after 1st January 2005.
Transfers of business: references to accounting period ending with day of transfer
16    (1)
Section 12 of ICTA (corporation tax: basis of, and periods for, assessment) is
35
amended as follows.
      (2)
In subsection (7A), after “(7ZA) above” insert “and subject to subsection (7C)
below”.
      (3)
After subsection (7B) insert—
“(7C)
Where subsection (1) of section 444AA applies in the case of an
40
insurance business transfer scheme—
(a)
an accounting period of the transferor shall end for purposes
of corporation tax—

Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 1 — Location of assets
205

(i)
with the end of the period covered by the periodical
return deemed by virtue of subsection (2) of that
section, or
(ii)
where the last period covered by an actual periodical
return of the transferor ends immediately before the
5
transfer, with the end of that period,

(so that an accounting period will end immediately before the
transfer), and
(b)
an accounting period of the transferor shall end for purposes
of corporation tax with the end of the period covered by the
10
periodical return deemed by virtue of subsection (3) of that
section (so that the time of the transfer shall be an accounting
period of the transferor);

and for this purpose, expressions used in this subsection and in that
section have the same meaning in this subsection as in that section.”.
15
      (4)
In section 444AB of ICTA (transfers of business: charge on transferor
retaining assets) in subsection (3), for “ending with the day of the transfer”
substitute “ending immediately before the transfer”.
      (5)
In section 444ABA of ICTA (subsequent charge in certain cases within
section 444AB of ICTA) in subsection (3), for “ending with the day of the
20
transfer” substitute “ending immediately before the transfer”.
      (6)
In section 213 of TCGA 1992 (spreading of gains and losses under section 212
of TCGA 1992) at the end insert—
“(10)
If the transfer is one to which section 444AA(1) of the Taxes Act
applies, the references in this section to the accounting period of the
25
transferor ending with the day of the transfer are references to the
accounting period ending immediately before the transfer.”.
      (7)
The amendments made by sub-paragraphs (2) to (5) have effect in relation to
insurance business transfer schemes taking place on or after 16th March
2005.
30
      (8)
The amendment made by sub-paragraph (6) 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.
Schedule 10
Section 128

Chargeable gains: location of assets etc
35
Part 1
Location of assets
Exceptions from sections 713 and 714 of ICTA
1     (1)
Section 715 of ICTA is amended as follows.
      (2)
In subsection (8) (place where securities are situated to be determined under
40
section 275 of TCGA 1992) for “section 275” substitute “sections 275(1) and
(2)(b) and 275C”.

Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 1 — Location of assets
206

Foreign securities: delayed remittances
2     (1)
Section 723 of ICTA is amended as follows.
      (2)
In subsection (8) (place where securities are situated to be determined under
section 275 of TCGA 1992) for “section 275” substitute “sections 275(1) and
(2)(b) and 275C”.
5
Designated international organisations
3     (1)
Section 265 of TCGA 1992 is amended as follows.
      (2)
In subsection (3) (securities issued by designated international organisations
to be taken to be situated outside UK for the purposes of capital gains tax)
for “capital gains tax” substitute “this Act”.
10
Location of assets: general
4     (1)
Section 275 of TCGA 1992 is amended as follows.
      (2)
Re-number that section as subsection (1) of that section.
      (3)
In that subsection, in paragraph (d) (location of shares or securities issued by
municipal or governmental authority etc) for “securities” substitute
15
“debentures”.
      (4)
In that subsection, after that paragraph insert—
“(da)
subject to paragraph (d) above, shares in or debentures of a
company incorporated in any part of the United Kingdom are
situated in the United Kingdom,”.
20
      (5)
In that subsection, in paragraph (e) (location of registered shares or
securities)—
(a)
for “subject to paragraph (d)” substitute “subject to paragraphs (d)
and (da)”;
(b)
for “securities” substitute “debentures”.
25
      (6)
In that subsection, for paragraph (h) (location of patents, trade marks and
registered designs) substitute—
“(h)
patents, trade marks, registered designs and corresponding
rights are situated where they are registered, and if registered
in more than one register, where each register is situated, and
30
licences or other rights in respect of any such rights are
situated in the United Kingdom if they or any right derived
from them are exercisable in the United Kingdom,”.
      (7)
In that subsection, for paragraph (j) (location of copyright, design right and
franchises) substitute—
35
“(j)
copyright, design right, franchises and corresponding rights,
and licences or other rights in respect of any such rights, are
situated in the United Kingdom if they or any right derived
from them are exercisable in the United Kingdom,”.
      (8)
After that subsection insert—
40
“(2)
In subsection (1) above—

Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 1 — Location of assets
207

(a)
in paragraphs (d), (da) and (e), the references to shares or
debentures, in relation to a company that has no share
capital, include any interests in the company possessed by
members of the company, and
(b)
in paragraphs (d) and (e), the references to debentures, in
5
relation to a person other than a company, include securities.
(3)
In subsection (1) above, in each of paragraphs (h) and (j),
“corresponding rights” means any rights under the law of a country
or territory outside the United Kingdom that correspond or are
similar to those within that paragraph.
10
(4)
Subsection (1) above is subject to—
section 265(3) (securities issued by designated international
organisations to be taken to be situated outside UK),
section 266 (securities issued by Inter-American Development
Bank to be taken to be situated outside UK), and
15
section 275C (location of assets: interests of co-owners).”.
Location of certain intangible assets
5
After section 275 of TCGA 1992 insert—
“275A
  Location of certain intangible assets
(1)
This section applies for the purpose of determining whether the
20
situation of an intangible asset (“asset A”) is in the United Kingdom
if the situation of asset A is not otherwise determined (see section
275B(1)).
(2)
In this section “intangible asset” means—
(a)
intangible or incorporeal property and includes a thing in
25
action, or
(b)
anything that under the law of a country or territory outside
the United Kingdom corresponds or is similar to intangible
or incorporeal property or a thing in action.
(3)
If asset A is subject to UK law (see section 275B(2)) at the time it is
30
created, it shall be taken for the purposes of this Act to be situated in
the United Kingdom at all times.
(4)
Subsections (5) to (9) below have effect if asset A—
(a)
is a future or option (see section 275B(3)), and
(b)
is not subject to UK law at the time it is created.
35
(5)
If, as a result of the application of the rule in subsection (6) below in
relation to asset A or any other asset or assets, asset A falls to be
treated as being subject to UK law at the time it is created, it shall be
taken for the purposes of this Act to be situated in the United
Kingdom at all times.
40
(6)
That rule is that where, in the case of any intangible asset,—
(a)
the asset is a future or option,
(b)
the underlying subject matter (see section 275B(4)) of the
asset consists of or includes an asset which is an intangible
asset, and
45

Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 1 — Location of assets
208

(c)
either—
(i)
that intangible asset is subject to UK law at the time it
is created and, on the assumption that there were no
rights or interests in or over that asset, the situation of
that asset would not be otherwise determined, or
5
(ii)
that intangible asset is treated by this subsection as
being so subject at that time,

the intangible asset mentioned in paragraph (a) above is to be treated
for the purposes of subsection (5) above and this subsection as being
so subject at the time it is created.
10
(7)
If—
(a)
asset A is not taken to be situated in the United Kingdom by
virtue of subsection (5) above, and
(b)
as a result of the application of the rule in subsection (8)
below in relation to asset A or any other asset or assets,
15
asset A falls to be treated as being situated in the United
Kingdom at any time,

it shall be taken for the purposes of this Act to be situated in the
United Kingdom at that time.
(8)
That rule is that where, in the case of any intangible asset,—
20
(a)
the asset is a future or option, and
(b)
the underlying subject matter of the asset consists of or
includes an asset—
(i)
which is, by virtue of subsection (9) below or of any
provision of this Act apart from this section, situated
25
in the United Kingdom at any time, or
(ii)
which is treated by this subsection as being so
situated at any time,

the intangible asset mentioned in paragraph (a) above is to be treated
for the purposes of subsection (7) above and this subsection as being
30
so situated at that time.
(9)
Where—
(a)
the underlying subject matter of a future or option consists of
or includes shares or debentures issued by a company
incorporated in any part of the United Kingdom, but
35
(b)
at the time the future or option is created, those shares or
debentures have not been issued,

the underlying subject matter of the future or option, so far as
consisting of or including those shares or debentures, is to be taken,
for the purposes of subsection (8) above, to consist of or include an
40
asset which is situated in the United Kingdom at all times.
275B
Section 275A: supplementary provisions
(1)
For the purposes of section 275A, the situation of an asset is not
otherwise determined if, apart from that section, this Act does not
make any provision for determining—
45
(a)
the situation of the asset, or
(b)
whether the situation of the asset is in the United Kingdom.

Finance Bill
Schedule 10 — Chargeable gains: location of assets etc
Part 2 — Minor amendments: non-resident company with UK permanent establishment
209

(2)
For the purposes of section 275A, an intangible asset is subject to UK
law at a particular time if any right or interest which comprises or
forms part of the asset is, at that time,—
(a)
governed by, or otherwise subject to, or
(b)
enforceable under,
5

the law of any part of the United Kingdom.
(3)
Sub-paragraphs (6) to (10) of paragraph 12 of Schedule 26 to the
Finance Act 2002 (meaning of “future” and “option”) apply for the
purposes of section 275A as they apply for the purposes of Part 2 of
that Schedule.
10
(4)
For the purposes of section 275A—
(a)
the underlying subject matter of a future is the property
which, if the future were to run to delivery, would fall to be
delivered at the date and price agreed when the contract is
made, and
15
(b)
the underlying subject matter of an option is the property
which would fall to be delivered if the option were exercised.
(5)
Section 275A is subject to section 275C (location of assets: interests of
co-owners).
(6)
This section is to be construed as one with section 275A.”.
20
Location of assets: interests of co-owners
6
After section 275B of TCGA 1992 (as inserted by paragraph 5) insert—
“275C
  Location of assets: interests of co-owners
(1)
This section applies for determining for the purposes of this Act—
(a)
the situation of an interest (see subsection (4)) in an asset, or
25
(b)
whether the situation of an interest in an asset is in the United
Kingdom.
(2)
The situation of the interest in the asset shall be taken to be the same
as the situation of the asset, as determined in accordance with
subsection (3) below.
30
(3)
The situation of the asset for the purposes of subsection (2) above
shall be determined on the assumption that the asset is wholly-
owned by the person holding the interest in the asset.
(4)
In this section “interest”, in relation to an asset, means an interest as
a co-owner of the asset (whether the asset is owned jointly or in
35
common and whether or not the interests of the co-owners are
equal).”.
Part 2
Minor amendments: non-resident company with UK permanent establishment
Computation of losses
40
7     (1)
Section 16 of TCGA 1992 is amended as follows.