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Finance (No.2) Bill
Schedule 11 — Insurance companies

292

 

technical account which is shown in (or included in an

amount shown in) line 13 of Form 58 for that fund, and

(c)   

the transfer to the non-technical account can reasonably be

regarded as connected with the initial transfer,

   

the amount of the gross transfer to non-technical account for the

5

relevant period given by subsection (3) above in the case of the with-

profits fund is to be increased by the amount transferred to the non-

technical account.

(5)   

In this section “post-policy holder surplus” means an amount equal

to—equation: plus[times[char[S],char[A]],minus[times[char[T],char[A],char[P]]]]

10

   

where—

SA is—

(a)   

the amount shown in line 34 of Form 58 for the fund

(surplus arising since last valuation), or

(b)   

if that amount is a negative amount, nil;

15

TAP is the amount shown in line 46 of Form 58 for the fund

(total allocated to policy holders).

(6)   

The amount, in the case of a policy holder participation fund, is—

(a)   

where TAP is greater than SA, the amount of the difference;

(b)   

otherwise, nil;

20

   

and for this purpose “SA” and “TAP” have the same meaning as in

subsection (5) above.

(7)   

References in this section to Form 58 are references to that Form in

the periodical return of the company for the relevant period.

(8)   

In this section “policy holder participation fund” means a fund in the

25

case of which an amount equal to the amount shown in line 34 of

Form 58 for the fund is allocated to policy holders for the relevant

period.

444AK   

  Mutual surplus: Case VI categories of life assurance business

(1)   

This section applies if at any time in a period of account of an

30

insurance company (“the relevant period”)—

(a)   

the company carries on life assurance business as mutual

business, and

(b)   

the company carries on one or more categories of life

assurance business chargeable to tax under Case VI of

35

Schedule D.

(2)   

If there is a reduction in the amount of the company’s

unappropriated surplus over the relevant period, there shall be

deemed for the purposes of section 83(2) of the Finance Act 1989 to

be brought into account for the relevant period as an increase in the

40

value of the assets of the company’s long-term insurance fund—

(a)   

the amount of that reduction, or

(b)   

if less, the amount of the company’s relevant receipts

reduction for the relevant period (see section 444AJ).

(3)   

But subsection (2) above shall have effect only for the purposes of

45

computing in accordance with the provisions of this Act applicable

 

 

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Schedule 11 — Insurance companies

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to Case I of Schedule D the profits for the relevant period of any

category of the company’s life assurance business chargeable to tax

under Case VI of Schedule D.

(4)   

If the company prepares for the relevant period one or more such

separate revenue accounts as are mentioned in section 83A(2)(b) of

5

the Finance Act 1989—

(a)   

subsection (2) above shall apply separately in relation to each

separate revenue account which is recognised for the

purposes of section 83 of that Act; and

(b)   

for that purpose, any amount that falls to be determined in

10

order to determine—

(i)   

whether that subsection applies in relation to any

such separate revenue account, and

(ii)   

if so, the amount to be brought into account under

that subsection in relation to that account,

15

   

shall be determined using only amounts or items which

relate to the separate revenue account concerned.

(5)   

In applying subsection (2) above in relation to a revenue account or

separate revenue account which—

(a)   

is recognised for the purposes of section 83 of that Act, and

20

(b)   

is one in relation to which sections 432C and 432D apply,

   

that subsection shall have effect as if paragraph (b) and the word “or”

before it were omitted.

(6)   

For the purposes of this section, there is a reduction in the amount of

the company’s unappropriated surplus over the relevant period if—

25

(a)   

CUS is less than OUS, and

(b)   

CUS is less than UUS.

(7)   

The amount of that reduction is—

(a)   

the amount by which CUS is less than OUS, or

(b)   

if OUS is greater than UUS, the amount by which CUS is less

30

than UUS.

(8)   

In this section—

CUS is the amount of the company’s unappropriated surplus at

the end of the relevant period,

OUS is the amount of the company’s unappropriated surplus at

35

the end of the period of account immediately preceding the

relevant period,

UUS is the amount of the company’s unappropriated surplus at

the end of the period of account immediately preceding the

first period of account of the company to begin on or after 1st

40

January 2003 and to end on or after 9th April 2003.

444AL   

  Interpretation of sections 444AF to 444AK

(1)   

This section applies for the purposes of sections 444AF to 444AK.

(2)   

References to mutual business, in relation to any time, include

business which at that time is treated for the purposes of section 432E

45

as mutual business.

 

 

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(3)   

“Unappropriated surplus”, in relation to a period of account of an

insurance company, means an unappropriated surplus on valuation

as shown in the periodical return of the company for the period of

account.

(4)   

References to the unappropriated surplus of the transferor at the end

5

of the period of account of the transferor ending immediately before

the transfer are, where a period of account of the transferor does not

end at that time, references to the unappropriated surplus on

valuation that would have been shown in a periodical return of the

transferor for that period had such a return been drawn up.”.

10

      (2)  

The amendment made by this paragraph has effect in relation to periods of

account ending on or after 29th September 2005.

      (3)  

In determining for the purposes of section 444AF of ICTA the undistributed

demutualisation surplus of an insurance company for the first period of

account of the company to end on or after 29th September 2005 and before

15

22nd March 2006 (“the transitional period”), the value of UDSP in subsection

(7) of that section is to be taken to be—

(a)   

the amount given by sub-paragraph (4), or

(b)   

if less, the amount given by sub-paragraph (5).

      (4)  

The amount given by this sub-paragraph is the total amount of any

20

demutualisation transfer surpluses accruing to the company—

(a)   

on or after 1st January 1990, and

(b)   

before the beginning of the transitional period.

      (5)  

The amount given by this sub-paragraph is the lowest amount of

unappropriated surplus of the company at the end of any period of account

25

ending—

(a)   

on or after the date of the last occasion on which a demutualisation

transfer surplus accrued to it as mentioned in sub-paragraph (4), and

(b)   

before the beginning of the transitional period.

      (6)  

Sections 444AF(3), 444AG, 444AH and 444AL of ICTA apply for the

30

purposes of sub-paragraphs (3) to (5), but section 444AG has effect subject to

the following modifications—

(a)   

in subsection (5)(a), omit—

(i)   

the words “the aggregate of”,

(ii)   

sub-paragraph (ii), and

35

(iii)   

the word “and” before that sub-paragraph;

(b)   

in subsection (5)(b), for “that aggregate amount” substitute “that

unappropriated surplus”;

(c)   

omit subsection (10).

      (7)  

In determining the value of DTSI for the purposes of section 444AF(7) of

40

ICTA where the relevant period ends on or after 29th September 2005 and

before 22nd March 2006, section 444AG of ICTA has effect subject to the

modifications specified in sub-paragraph (6).

      (8)  

Where the relevant period ends on or after 29th September 2005 and before

22nd March 2006, section 444AI of ICTA has effect as if subsections (6) and

45

(7) of that section were omitted.

      (9)  

Sub-paragraphs (10) to (12) apply in relation to an insurance company if—

 

 

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(a)   

a period of account of the company did not end on or after 29th

September 2005 and before 22nd March 2006;

(b)   

any value of UDSP given by sub-paragraph (3) in relation to the

company is lower than it would have been if the words from “but” in

sub-paragraph (6) to the end of that sub-paragraph had been

5

omitted; or

(c)   

any value of DTSI in section 444AF(7) of ICTA for any period of

account of the company ending on or after 29th September 2005 and

before 22nd March 2006 is, by virtue of sub-paragraph (7), lower than

it would have been if that sub-paragraph had been omitted.

10

     (10)  

In determining for the purposes of section 444AF of ICTA the undistributed

demutualisation surplus of an insurance company for the first period of

account of the company to end on or after 22nd March 2006 (“the initial

period”), the value of UDSP in subsection (7) of that section is to be taken to

be—

15

(a)   

the amount given by sub-paragraph (11), or

(b)   

if less, the amount given by sub-paragraph (12).

     (11)  

The amount given by this sub-paragraph is the total amount of any

demutualisation transfer surpluses accruing to the company—

(a)   

on or after 1st January 1990, and

20

(b)   

before the beginning of the initial period.

     (12)  

The amount given by this sub-paragraph is the lowest amount of

unappropriated surplus of the company at the end of any period of account

ending—

(a)   

on or after the date of the last occasion on which a demutualisation

25

transfer surplus accrued to it as mentioned in sub-paragraph (11),

and

(b)   

before the beginning of the initial period.

     (13)  

Sections 444AF(3), 444AG, 444AH and 444AL of ICTA apply for the

purposes of sub-paragraphs (10) to (12).

30

     (14)  

In relation to any period of account ending before 31st December 2005, the

references in section 444AJ(5) and (8) of ICTA to line 34 of Form 58 are to be

taken to be references to line 35 of Form 58.

Receipts to be taken into account

6     (1)  

Section 83 of FA 1989 is amended as follows.

35

      (2)  

In subsection (2B) (circumstances in which fair value of assets of long-term

insurance fund which are transferred are to be brought into account)—

(a)   

for “unless the assets” substitute “except to the extent that the assets

(or their value)”, and

(b)   

in paragraph (a) for “or (2D)” substitute “, (2D) or (2DA)”.

40

      (3)  

After subsection (2D) (exclusion if assets transferred for fair value and

consideration forms part of long-term insurance fund) insert—

  “(2DA)  

If—

(a)   

assets of the company’s long-term insurance fund are

transferred by the company to another person (“the

45

transferee”),

 

 

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(b)   

the transferee assumes, as a result of the transfer, a liability

representing a debenture loan which, immediately before

the transfer, was a liability of that fund, and

(c)   

the liability does not, as a result of the transfer, become a

liability of any long-term insurance fund of the transferee,

5

           

so much of the fair value of the assets as does not exceed the fair

value of the liability is excluded from subsection (2B) above.”.

      (4)  

In subsection (8) (definitions), in the definition of “fair value”, for “, in

relation to assets,” to “its amount;” substitute “—

(a)   

in relation to assets, means the amount which would

10

be obtained from an independent person purchasing

them or, if the assets are money, its amount;

(b)   

in relation to liabilities, means the amount which

would be paid to an independent person assuming

them;”.

15

      (5)  

The amendments made by this paragraph have effect in relation to transfers

taking place on or after 22nd March 2006.

Changes in value of assets brought into account: non-profit companies

7     (1)  

After section 83 of FA 1989 insert—

“83YA   

  Changes in value of assets brought into account: non-profit

20

companies

(1)   

This section applies if, in the case of any non-profit company,—

(a)   

the amount shown in line 51 of Form 14 of its periodical

return in respect of the whole of its long-term business for

any period of account (“the current period of account”),

25

exceeds

(b)   

the aggregate amount of the amounts shown in line 51 of

Form 14 of its periodical return in respect of its with-profits

funds (if any) for that period.

(2)   

A comparison shall be made between—

30

(a)   

the appropriate line 51 amount of the company for the

current period of account (“the current line 51 amount”), and

(b)   

the aggregate amount of the appropriate line 51 amount of

the company for the previous period of account (if any) and

the amount of any transfer-in amount of the company for that

35

period.

(3)   

If the current line 51 amount is greater than that aggregate amount,

an amount equal to the difference shall be deemed for the purposes

of section 83(2) to be brought into account for the current period of

account as an increase in the value of non-linked assets.

40

(4)   

If the current line 51 amount is less than that aggregate amount, an

amount equal to the difference shall be deemed for the purposes of

section 83(2) to be brought into account for the current period of

account as a decrease in the value of non-linked assets.

 

 

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(5)   

The amount brought into account by virtue of this section shall be

deemed for the purposes of section 83(2) to be brought into

account—

(a)   

in the revenue account mentioned in section 83A(2)(a), or

(b)   

if section 83A(4) is applicable, in the separate revenue

5

account treated as prepared by virtue of that provision.

(6)   

Any amount brought into account by virtue of this section is in

addition to any amount brought into account for the purposes of

section 83(2) for the current period of account as an increase or

decrease in the value of non-linked assets apart from this section.

10

(7)   

For the purposes of this section a company has a transfer-in amount

for any period of account (“the previous period of account”) if—

(a)   

a transfer takes place in the following period of account, and

(b)   

the company, as the transferee, is a party to an election under

section 444AD of the Taxes Act 1988 (transfers of business:

15

modification of section 83(2B)),

   

and the amount of the transfer-in amount for the previous period of

account is the amount specified in subsection (4) of that section.

(8)   

For the purposes of this section and section 83YB “non-profit

company”, in relation to a period of account, means a company

20

carrying on long-term business where, at the end of that period,—

(a)   

none of the liabilities of that business, or

(b)   

none but an insignificant proportion of those liabilities,

   

are with-profits liabilities.

(9)   

But if a company considers that, in relation to a period of account, it

25

is no longer such a company, it may elect to be treated for the

purposes of this section and section 83YB as if, in relation to that

period of account and every subsequent period of account, it were a

non-profit company.

(10)   

Any such election—

30

(a)   

is irrevocable, and

(b)   

must be made by notice to an officer of the Board on or before

the end of the period of 6 months beginning with the day on

which that period of account ends.

(11)   

For the purposes of this section and section 83YB—

35

“amount”, in relation to line 51 of Form 14 of the company’s

periodical return, includes a nil amount;

“with-profits fund” has the same meaning as in the Integrated

Prudential Sourcebook.

83YB    

Meaning of “appropriate line 51 amount” for purposes of s.83YA

40

(1)   

For the purposes of section 83YA, the appropriate line 51 amount of

a non-profit company for any period of account is determined as

follows.

   

Step 1

   

Find the company’s basic line 51 amount for the period of account.

45

   

Step 2

 

 

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Reduce that amount (but not below nil) by the amount of any

unrecognised capital amount of the company for the period of

account.

   

But this step applies only if the period of account for which the

appropriate line 51 amount of the company is being determined is

5

the current period of account for the purposes of section 83YA.

   

Step 3

   

Increase the resulting amount by the amount of any relevant loan

repayment made to the company in the period of account.

(2)   

For the purposes of step 1, the company’s basic line 51 amount for

10

any period of account is—

(a)   

in the case where no with-profits funds form part of its long-

term business for that period, the amount shown in line 51 of

Form 14 of its periodical return in respect of the whole of its

long-term business for that period, and

15

(b)   

in any other case, so much of that amount as exceeds the

aggregate amount of the amounts shown in line 51 of Form

14 of its periodical return in respect of its with-profits funds

for that period.

(3)   

For the purposes of step 2, the company has an unrecognised capital

20

amount for any period of account if—

(a)   

any assets (“the added assets”) become assets of its long-term

insurance fund but do not become assets of any of its with-

profits funds,

(b)   

the consideration for the acquisition of the added assets does

25

not comprise any assets which, immediately before the

acquisition, were assets of its long-term insurance fund,

(c)   

no amount is shown in respect of the added assets in any of

lines 17 to 41 of Form 14 of its periodical return in respect of

the whole of its long-term business for the period of account,

30

and

(d)   

no amount is brought into account for the period of account

in consequence of the acquisition of the added assets.

(4)   

For the purposes of step 2, the amount of the unrecognised capital

amount for the period of account is the amount equal to the fair value

35

of the added assets.

(5)   

For this purpose the “fair value of the added assets” means—

(a)   

the amount which would be obtained from an independent

person purchasing them, or

(b)   

if the assets are money, its amount.

40

(6)   

For the purposes of step 3, a relevant loan repayment is made to the

company in any period of account if—

(a)   

a repayment in respect of a loan is made to the company in

the period of account, and

(b)   

the loan is one in relation to which the company has, for the

45

purposes of step 2, an unrecognised capital amount for that

or any other period of account.”.

      (2)  

The amendment made by this paragraph has effect in relation to periods of

account ending on or after 29th September 2005.

 

 

 
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