Finance Bill

House of Commons

Session 2005 - 06
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Finance Bill

Finance Bill
Schedule 9 — Insurance companies etc
139

Meaning of “brought into account”
13    (1)
Section 83A of FA 1989 is amended as follows.
      (2)
In subsection (2) (accounts which are recognised for the purposes of sections
82A to 83AB)—
(a)
in paragraph (b) (separate revenue account prepared under Chapter
5
9 of the Prudential Sourcebook (Insurers) in respect of a part of the
company’s long-term business to be a recognised account) for “part
of that business” substitute “with-profits fund (see subsection (6))”;
(b)
omit the words from “Paragraph (b) above” to the end of the
subsection.
10
      (3)
After subsection (3) insert—
“(3A)
Where, in the case of any with-profits fund in respect of which there
is prepared such a separate account (“the sub-fund”),—
(a)
the sub-fund forms part of another with-profits fund (“the
wider fund”) in respect of which such a separate account is
15
also prepared,
(b)
in the case of a company whose life assurance business is
mutual business, the sub-fund and each other with-profits
fund which forms part of the wider fund are 100:0 funds, and
(c)
the wider fund—
20
(i)
does not form part of another with-profits fund in
respect of which such a separate account is also
prepared, or
(ii)
forms part of another with-profits fund in respect of
which such a separate account is also prepared and
25
that separate account is treated by this subsection as
not being a recognised account for the purposes of
those sections,

the account in respect of the wider fund shall not be a recognised
account for the purposes of those sections.
30
(3B)
Where, in the case of such a separate account prepared in respect of
a with-profits fund,—
(a)
the account is not prevented from being a recognised account
for the purposes of those sections by virtue of subsection (3A)
above, but
35
(b)
if paragraph (b) of that subsection were to be omitted, the
account would be prevented from being such a recognised
account by virtue of that subsection,

no such separate account prepared in respect of a with-profits fund
forming part of that fund shall be such a recognised account.
40
(3C)
In subsection (3A) above “100:0 fund” means a fund in the case of
which—
(a)
the policy holders of the fund are entitled to participate in all
the profits of the fund, and
(b)
no other persons are entitled to participate in any of the
45
profits of the fund.

Finance Bill
Schedule 9 — Insurance companies etc
140

(3D)
Subsection (3E) below applies where there is prepared such a
separate account (“the with-profits account”) in respect of a with-
profits fund—
(a)
of which no other with-profits fund forms part, but
(b)
of which a non-profit fund (see subsection (6)) forms part.
5
(3E)
Where this subsection applies—
(a)
the with-profits account shall not be a recognised account for
the purposes of those sections, but
(b)
there shall be treated as having been required and prepared
a further separate revenue account covering so much of the
10
items brought into account in the with-profits account as
remains after excluding the items brought into account in
that account in respect of the non-profit fund.”.
      (4)
For subsection (4) substitute—
“(4)
If—
15
(a)
a company prepares a revenue account in respect of the
whole of its long-term business (“the main account”),
(b)
it prepares one or more such separate accounts as are
mentioned in subsection (2)(b) above, and
(c)
the total of the items brought into account in the separate
20
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
sections, but
25
(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
main account,
30

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
same meaning as in the Integrated Prudential Sourcebook.”.
35
      (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
14    (1)
After section 83A of FA 1989 insert—
“83B
Changes in recognised accounts: attribution of amounts carried
40
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
business to which a revenue account that was recognised for the
45
preceding period of account relates.

Finance Bill
Schedule 9 — Insurance companies etc
141

(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
meaning of section 432F(1) of that Act) of the company in the new
period of account shall be attributed between the revenue accounts
5
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
83A, for the purposes of sections 82A to 83AB.”.
      (2)
The amendment made by this paragraph has effect in relation to new
10
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
15    (1)
Section 85 of FA 1989 is amended as follows.
      (2)
In subsection (2) (receipts excluded from charge under Case VI of Schedule
15
D in respect of receipts referable to company’s basic life assurance and
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 policy holders.”.
20
      (3)
In subsection (2C) (rules as to whether receipt is referable to company’s basic
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—
25
(i)
were attributable to basic life assurance and general
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
30
old section 76;

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
35
accounting periods ending on or after 16th March 2005.
Corporation tax: policy holders’ fraction of profits
16    (1)
Section 88 of FA 1989 is amended as follows.
      (2)
In subsection (3A) (meaning of “income and gains of the company’s life
assurance business” in subsection (3)) after paragraph (a) insert—
40
“(aa)
receipts of the company chargeable under Case VI of
Schedule D by virtue of section 85(1) above,
(ab)
income of the company treated as referable to basic life
assurance and general annuity business by section 441B(2) of
the Taxes Act 1988 (treatment of UK land),
45

Finance Bill
Schedule 9 — Insurance companies etc
142

(ac)
amounts treated as accruing to the company and charged to
tax under Case VI of Schedule D by virtue of section 442A of
that Act (taxation of investment return where risk reinsured),
and”.
      (3)
The amendment made by this paragraph has effect in relation to periods of
5
account beginning on or after 1st January 2005.
Overseas life insurance companies
17    (1)
Section 156 of FA 2003 is amended as follows.
      (2)
For subsection (4) (regulations amending certain provisions relating to
overseas life insurance companies may be made with effect from 1st January
10
2003) substitute—
“(4)
Regulations under this section may be made so as to have effect in
relation to accounting periods or periods of account (whenever
beginning) which end on or after the day on which the regulations
come into force.”.
15
Meaning of “pension business”
18    (1)
Schedule 35 to FA 2004 is amended as follows.
      (2)
Paragraph 20 (life assurance: meaning of “pension business”) is amended as
follows.
      (3)
In the section 431B of ICTA substituted by that paragraph, in subsection
20
(2)—
(a)
after “registered pension scheme” (where first occurring) insert “by
virtue of the withdrawal of registration of the pension scheme under
section 157 of the Finance Act 2004”;
(b)
after “in which the pension scheme” insert “so”.
25
      (4)
In that section, insert at the end—
“(3)
Where—
(a)
immediately before 6th April 2006 an annuity contract falls
within any of the descriptions of contracts specified in
subsection (2) of this section as it had effect immediately
30
before that date, but
(b)
on or after that date the contract does not fall to be regarded
for the purposes of this section as having been entered into
for the purposes of a registered pension scheme,

the contract is to be treated for the purposes of this section as having
35
been entered into for such purposes.”.
      (5)
Paragraph 22 (friendly societies: meaning of “pension business”) is amended
as follows.
      (6)
In sub-paragraph (3), in the subsection (2B) of section 466 of ICTA inserted
by that sub-paragraph—
40
(a)
after “registered pension scheme” (where first occurring) insert “by
virtue of the withdrawal of registration of the pension scheme under
section 157 of the Finance Act 2004”;
(b)
after “in which the pension scheme” insert “so”.

Finance Bill
Schedule 9 — Insurance companies etc
143

      (7)
The preceding provisions of this paragraph come into force on 6th April
2006.
Miscellaneous references to “class” of business
19    (1)
In section 432B of ICTA (apportionment of receipts brought into account) in
subsection (1), for “class” substitute “category”.
5
      (2)
In section 444A of ICTA (transfers of business) in subsection (3), for “class”
substitute “category”.
      (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”.
10
      (4)
In Schedule 29 to FA 2002 (gains and losses of a company from intangible
fixed assets) in paragraph 138 (interpretation provisions relating to
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.
15
Transfers of business: references to accounting period ending with day of transfer
20    (1)
Section 12 of ICTA (corporation tax: basis of, and periods for, assessment) is
amended as follows.
      (2)
In subsection (7A), after “(7ZA) above” insert “and subject to subsection (7C)
below”.
20
      (3)
After subsection (7B) insert—
“(7C)
Where subsection (1) of section 444AA applies in the case of an
insurance business transfer scheme—
(a)
an accounting period of the transferor shall end for purposes
of corporation tax—
25
(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
30
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
35
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.”.
40
      (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”.

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
144

      (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
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—
5
“(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
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
10
insurance business transfer schemes taking place on or after 16th March
2005.
      (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.
15
Schedule 10
Section 49

Stamp duty land tax: miscellaneous amendments
Part 1
Amendments coming into force in accordance with paragraph 16
Introduction
20
1
Part 4 of FA 2003 (stamp duty land tax) is amended in accordance with this
Part of this Schedule.
Transfer of rights: exclusion of transaction to which alternative finance provisions apply
2
In section 45 (contract and conveyance: effect of transfer of rights) at the end
of subsection (3) insert “except in a case where the secondary contract gives
25
rise to a transaction that is exempt from charge by virtue of subsection (3) of
section 73 (alternative property finance: land sold to financial institution and
re-sold to individual)”.
Group relief
3
In paragraph 1 of Schedule 7 (group relief), in sub-paragraph (7) for
30
“paragraph 3” substitute “paragraphs 3 and 4A”.
4
In paragraph 3 of Schedule 7 (withdrawal of group relief)—
(a)
for sub-paragraph (2) substitute—
    “(2)
The amount chargeable is the tax that would have been
chargeable in respect of the relevant transaction but for
35
group relief if the chargeable consideration for that
transaction had been an amount equal to—
(a)
the market value of the subject-matter of the
transaction, and

Finance Bill
Schedule 10 — Stamp duty land tax: miscellaneous amendments
Part 1 — Amendments coming into force in accordance with paragraph 16
145

(b)
if the acquisition was the grant of a lease at a rent,
that rent,

or, as the case may be, an appropriate proportion of the tax
that would have been so chargeable.”, and
(b)
at the end of sub-paragraph (5) insert “and paragraph 4A
5
(withdrawal of group relief in certain cases involving successive
transactions)”.
5
In paragraph 4 of Schedule 7 (cases in which group relief is not
withdrawn)—
(a)
in sub-paragraph (3), for paragraph (b) substitute—
10
“(b)
another company that—
(i)
is above the vendor in the group structure,
and
(ii)
as a result of the transaction ceases to be a
member of the same group as the
15
purchaser.”, and
(b)
in sub-paragraph (5), for “this purpose” substitute “the purposes of
sub-paragraphs (3) and (4)”.
6
After paragraph 4 of Schedule 7 insert—
“Withdrawal of group relief in certain cases involving successive transactions
20
4A    (1)
Where, in the case of a transaction (“the relevant transaction”) that
is exempt from charge by virtue of paragraph 1 (group relief)—
(a)
there is a change in the control of the purchaser,
(b)
that change occurs—
(i)
before the end of the period of three years
25
beginning with the effective date of the relevant
transaction, or
(ii)
in pursuance of, or in connection with,
arrangements made before the end of that period,
(c)
apart from this paragraph, group relief in relation to the
30
relevant transaction would not be withdrawn under
paragraph 3, and
(d)
any previous transaction falls within sub-paragraph (2),

paragraphs 3 and 4 have effect in relation to the relevant
transaction as if the vendor in relation to the earliest previous
35
transaction falling within sub-paragraph (2) were the vendor in
relation to the relevant transaction.
      (2)
A previous transaction falls within this sub-paragraph if—
(a)
the previous transaction is exempt from charge by virtue of
paragraph 1, 7 or 8,
40
(b)
the effective date of the previous transaction is less than
three years before the date of the event falling within sub-
paragraph (1)(a),
(c)
the chargeable interest acquired under the relevant
transaction by the purchaser in relation to that transaction
45
is the same as, comprises, forms part of, or is derived from,
the chargeable interest acquired under the previous