Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Schedule 11 — Insurance companies
299

      (3)
There are the following modifications of sections 83YA and 83YB of FA 1989
in the case of any period of account of a company (“the straddling period of
account”)—
(a)
beginning before 29th September 2005, and
(b)
ending on or after that date.
5
      (4)
The modifications are that sections 83YA and 83YB of FA 1989 have effect in
relation to the straddling period of account (as “the current period of
account”) as follows.

First modification

Determine the company’s basic line 51 amount for the previous period of
10
account by reference to the last period of account (if any) of the company
ending before 1st January 2004.

Second modification

Increase the amount of any transfer-in amount of the company for the
previous period of account by the aggregate amounts of any transfer-in
15
amounts of the company for any period of account beginning on or after 1st
January 2004 and ending before the previous period of account.

Third modification

Increase the amount of any unrecognised capital amount of the company for
the straddling period of account by the aggregate amounts of unrecognised
20
capital amounts of the company for any period of account beginning on or
after 1st January 2004 and ending before the straddling period of account.

Fourth modification

Reduce (but not below nil) the company’s basic line 51 amount for the
straddling period of account by the appropriate amount of any resilience
25
capital for the straddling period of account.

For this purpose “the appropriate amount of any resilience capital for the
straddling period of account” means the amount by which—
(a)
the amount shown in line 32 of Form 2 of the company’s periodical
return in respect of the whole of its long-term business for the
30
straddling period of account, exceeds
(b)
the amount of any unrecognised capital amount of the company for
that period as determined in accordance with the third modification.
      (5)
In any case where any of the above modifications apply—
(a)
no amount is to be brought into account for the straddling period of
35
account by virtue of subsection (4) of section 83YA of FA 1989, and
(b)
no amount is to be brought into account for subsequent periods of
account by virtue of that subsection, except so far as an amount has
been brought into account for a previous period of account by virtue
of subsection (3) of that section (and has not previously been taken
40
into account under this paragraph).
      (6)
If, as a result of the fourth modification, the company’s basic line 51 amount
for the straddling period of account is reduced by an amount (“the
reduction”)—
(a)
sections 83YA and 83YB of FA 1989 have effect in relation to the
45
company’s next period of account after the straddling period of
account as if the appropriate line 51 amount of the company for the
straddling period of account were determined without making the
fourth modification, and
(b)
the following adjustments are made.
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Finance (No.2) Bill
Schedule 11 — Insurance companies
300

      (7)
An amount equal to two-thirds of the reduction is to be deemed to be
brought into account for the company’s first period of account beginning on
or after 1st January 2007 by virtue of subsection (3) of section 83YA of FA
1989.
      (8)
An amount equal to one-third of the reduction is to be deemed to be brought
5
into account for the company’s next period of account by virtue of
subsection (3) of section 83YA of FA 1989.
      (9)
But if the company ceases to carry on long-term business at any time—
(a)
before 1st January 2007, or
(b)
before the end of its first period of account beginning on or after 1st
10
January 2007,

the whole of the reduction is to be deemed to be brought into account for the
company’s period of account ending immediately before that time by virtue
of subsection (3) of section 83YA of FA 1989.
     (10)
Any amount brought into account by virtue of any of sub-paragraphs (7) to
15
(9) is in addition to—
(a)
any amount that, apart from those sub-paragraphs, is brought into
account by virtue of subsection (3) of section 83YA of FA 1989, or
(b)
any amount that is brought into account by virtue of subsection (4)
of that section.
20
     (11)
Any expression which is used in this paragraph and in section 83YA or 83YB
of FA 1989 has the same meaning in this paragraph as it has in that section.
Contingent loans
8     (1)
Section 83ZA of FA 1989 is amended as follows.
      (2)
In subsection (7) (meaning of appropriate amount for a period of account)—
25
(a)
in the opening words omit “the aggregate of”, and
(b)
omit paragraph (b) (deficiencies of assets over liabilities received on
relevant transferred business) and the “and” before that paragraph.
      (3)
Omit subsection (10) (meaning of “deficiencies of assets over liabilities
received on relevant transferred business”).
30
      (4)
In subsection (11) (meaning of “the relevant contingent loan”) for
“subsections (8) and (10)” substitute “subsection (8)”.
      (5)
Omit subsection (12) (definition in relation to subsection (10)(b)).
      (6)
In subsection (15) (references in subsections (8), (12) and (13) to an amount
being brought into account) omit “, (12)”.
35
      (7)
The amendments made by this paragraph have effect (and are deemed
always to have had effect) in relation to transfers taking place on or after 2nd
December 2004.

Finance (No.2) Bill
Schedule 12 — Settlements: amendment of TCGA 1992 etc
Part 1 — Settlors, trustees and settlements
301

Schedule 12
Section 88

Settlements: amendment of TCGA 1992 etc
Part 1
Settlors, trustees and settlements
Basic trust concepts
5
1     (1)
In section 68 of TCGA 1992 for the definition of “settled property” substitute
““settled property” means any property held in trust other than property to
which section 60 applies (and references, however expressed, to property
comprised in a settlement are references to settled property).”
      (2)
After section 68 of TCGA 1992 insert—
10
“68A
Meaning of “settlor”
(1)
In this Act, unless the context otherwise requires—
(a)
“settlor” in relation to a settlement means the person, or any
of the persons, who has made, or is treated for the purposes
of this Act as having made, the settlement, and
15
(b)
a person is a settlor of property which—
(i)
is settled property by reason of his having made the
settlement (or by reason of an event which causes him
to be treated under this Act as having made the
settlement), or
20
(ii)
derives from property to which sub-paragraph (i)
applies.
(2)
A person is treated for the purposes of this Act as having made a
settlement if—
(a)
he has made or entered into the settlement, directly or
25
indirectly, or
(b)
the settled property, or property from which the settled
property is derived, is or includes property of which he was
competent to dispose immediately before his death, and the
settlement arose on his death, whether by will, on his
30
intestacy, or otherwise.
(3)
A person is, in particular, treated for the purposes of this Act as
having made a settlement if—
(a)
he has provided property directly or indirectly for the
purposes of the settlement, or
35
(b)
he has undertaken to provide property directly or indirectly
for the purposes of the settlement.
(4)
Where one person (A) makes or enters into a settlement in
accordance with reciprocal arrangements with another person (B),
for the purposes of this Act—
40
(a)
B shall be treated as having made the settlement, and
(b)
A shall not be treated as having made the settlement by
reason only of the reciprocal arrangements.

Finance (No.2) Bill
Schedule 12 — Settlements: amendment of TCGA 1992 etc
Part 1 — Settlors, trustees and settlements
302

(5)
In subsection (2)(b) “property of which he was competent to dispose
immediately before his death” shall be construed in accordance with
section 62(10) (reading each reference to “assets” as a reference to
“property”).
(6)
A person who has been a settlor in relation to a settlement shall be
5
treated for the purposes of this Act as having ceased to be a settlor in
relation to the settlement if—
(a)
no property of which he is a settlor is comprised in the
settlement,
(b)
he has not undertaken to provide property directly or
10
indirectly for the purposes of the settlement in the future, and
(c)
he has not made reciprocal arrangements with another
person for that other person to enter into the settlement in the
future.
(7)
For the purpose of this section and sections 68B and 68C property is
15
derived from other property—
(a)
if it derives (directly or indirectly and wholly or partly) from
that property or any part of it, and
(b)
in particular, if it derives (directly or indirectly and wholly or
partly) from income from that property or any part of it.
20
(8)
In this section “arrangements” includes any scheme, agreement or
understanding, whether or not legally enforceable.
68B
Transfer between settlements: identification of settlor
(1)
This section applies in relation to a transfer of property from the
trustees of one settlement (“Settlement 1”) to the trustees of another
25
(“Settlement 2”) otherwise than—
(a)
for full consideration, or
(b)
by way of a bargain made at arm’s length.
(2)
In this section “transfer of property” means—
(a)
a disposal of property by the trustees of Settlement 1, and
30
(b)
the acquisition by the trustees of Settlement 2 of—
(i)
property disposed of by the trustees of Settlement 1,
or
(ii)
property created by the disposal;

and a reference to transferred property is a reference to property
35
acquired by the trustees of Settlement 2 on the disposal.
(3)
For the purposes of this Act, except where the context otherwise
requires—
(a)
the settlor (or each settlor) of the property disposed of by the
trustees of Settlement 1 shall be treated from the time of the
40
disposal as having made Settlement 2, and
(b)
if there is more than one settlor of the property disposed of by
the trustees of Settlement 1, each settlor shall be treated in
relation to Settlement 2 as the settlor of a proportionate part
of the transferred property.
45
(4)
For the purposes of this Act, except where the context otherwise
requires, if and to the extent that the property disposed of by the

Finance (No.2) Bill
Schedule 12 — Settlements: amendment of TCGA 1992 etc
Part 1 — Settlors, trustees and settlements
303

trustees of Settlement 1 was provided for the purposes of Settlement
1, or is derived from property provided for the purposes of
Settlement 1, the transferred property shall be treated from the time
of the disposal as having been provided for the purposes of
Settlement 2.
5
(5)
If transferred property is treated by virtue of subsection (4) as having
been provided for the purposes of Settlement 2 —
(a)
the person who provided the property disposed of by the
trustees of Settlement 1, or property from which it was
derived, for the purposes of Settlement 1 shall be treated as
10
having provided the transferred property, and
(b)
if more than one person provided the property disposed of
by the trustees of Settlement 1, or property from which it was
derived, for the purposes of Settlement 1, each of them shall
be treated as having provided a proportionate part of the
15
transferred property.
(6)
But subsections (3) and (4) do not apply in relation to a transfer of
property—
(a)
which occurs by reason only of the assignment or assignation
by a beneficiary under Settlement 1 of an interest in that
20
settlement to the trustees of Settlement 2,
(b)
which occurs by reason only of the exercise of a general
power of appointment, or
(c)
to which section 68C(6) applies.
(7)
In determining whether this section applies in relation to a transfer
25
of property between settlements, section 18(2) shall be disregarded.
68C
Variation of will or intestacy, etc: identification of settlor
(1)
This section applies where—
(a)
a disposition of property following a person’s death is varied,
and
30
(b)
section 62(6) applies in respect of the variation.
(2)
Where property becomes settled property in consequence of the
variation (and would not, but for the variation, have become settled
property), a person mentioned in subsection (3) shall be treated for
the purposes of this Act, except where the context otherwise
35
requires—
(a)
as having made the settlement, and
(b)
as having provided the property for the purposes of the
settlement.
(3)
Those persons are—
40
(a)
a person who immediately before the variation was entitled
to the property, or to property from which it derives,
absolutely as legatee,
(b)
a person who would have become entitled to the property, or
to property from which it derives, absolutely as legatee but
45
for the variation,
(c)
a person who immediately before the variation would have
been entitled to the property, or to property from which it

Finance (No.2) Bill
Schedule 12 — Settlements: amendment of TCGA 1992 etc
Part 1 — Settlors, trustees and settlements
304

derives, absolutely as legatee but for being an infant or other
person under a disability, and
(d)
a person who would, but for the variation, have become
entitled to the property, or to property from which it derives,
absolutely as legatee if he had not been an infant or other
5
person under a disability.
(4)
In subsection (3) references to a person being entitled to property
absolutely as legatee shall be construed in accordance with section
64(3) (reading the references to “an asset” and “any asset” as
references to “property”).
10
(5)
Where—
(a)
property would have become comprised in a settlement—
(i)
which arose on the deceased person’s death (whether
in accordance with his will, on his intestacy or
otherwise), or
15
(ii)
which was already in existence on the deceased
person’s death (whether or not the deceased person
was a settlor in relation to that settlement), but
(b)
in consequence of the variation the property, or property
derived from it, becomes comprised in another settlement,
20

the deceased person shall be treated for the purposes of this Act,
except where the context otherwise requires, as having made the
other settlement.
(6)
Where—
(a)
immediately before the variation property is comprised in a
25
settlement and is property of which the deceased person is a
settlor, and
(b)
immediately after the variation the property, or property
derived from it, becomes comprised in another settlement,

the deceased person shall be treated for the purposes of this Act,
30
except where the context otherwise requires, as having made the
other settlement.
(7)
If a person is treated as having made a settlement under subsection
(5) or (6), for the purposes of this Act he shall be treated as having
made the settlement immediately before his death.
35
(8)
But subsection (7) does not apply in relation to a settlement which
arose on the person’s death.”
      (3)
The amendment of section 68 made by sub-paragraph (1) shall come into
force on 6th April 2006 (in relation to settlements whenever created).
      (4)
Sections 68A and 68B (as inserted by sub-paragraph (2)) shall come into
40
force on 6th April 2006 (in relation to settlements whenever created).
      (5)
Section 68C (as inserted by sub-paragraph (2)) shall have effect in respect of
variations occurring on or after 6th April 2006 (irrespective of the date on
which the deceased person died).
2     (1)
For section 69(1) and (2) of TCGA 1992 (residence of trustees, etc)
45

Finance (No.2) Bill
Schedule 12 — Settlements: amendment of TCGA 1992 etc
Part 1 — Settlors, trustees and settlements
305

substitute—
“(1)
For the purposes of this Act the trustees of a settlement shall, unless
the context otherwise requires, together be treated as if they were a
single person (distinct from the persons who are trustees of the
settlement from time to time).
5
(2)
The deemed person referred to in subsection (1) shall be treated for
the purposes of this Act as resident and ordinarily resident in the
United Kingdom at any time when a condition in subsection (2A) or
(2B) is satisfied.
(2A)
Condition 1 is that all the trustees are resident in the United
10
Kingdom.
(2B)
Condition 2 is that—
(a)
at least one trustee is resident in the United Kingdom,
(b)
at least one is not resident in the United Kingdom, and
(c)
a settlor in relation to the settlement was resident, ordinarily
15
resident or domiciled in the United Kingdom at a time which
is a relevant time in relation to him.
(2C)
In subsection (2B)(c) “relevant time” in relation to a settlor—
(a)
means, where the settlement arose on the settlor’s death
(whether by will, intestacy or otherwise), the time
20
immediately before his death, and
(b)
in any other case, means a time when the settlor made the
settlement (or was treated for the purposes of this Act as
making the settlement);

and, in the case of a transfer of property from Settlement 1 to
25
Settlement 2 in relation to which section 68B applies, “relevant time”
in relation to a settlor of the transferred property in respect of
Settlement 2 includes any time which, immediately before the time
of the disposal by the trustees of Settlement 1, was a relevant time in
relation to that settlor in respect of Settlement 1.
30
(2D)
A trustee who is not resident in the United Kingdom shall be treated
for the purposes of subsections (2A) and (2B) as if he were resident
in the United Kingdom at any time when he acts as trustee in the
course of a business which he carries on in the United Kingdom
through a branch, agency or permanent establishment there.
35
(2E)
If the deemed person referred to in subsection (1) is not treated for
the purposes of this Act as resident and ordinarily resident in the
United Kingdom, then for the purposes of this Act it shall be treated
as neither resident nor ordinarily resident in the United Kingdom.”
      (2)
This paragraph shall have effect—
40
(a)
for the purposes of determining the residence status of the trustees
of a settlement (whenever created), from 6th April 2007, and
(b)
for any other purpose (in relation to settlements whenever created),
from 6th April 2006.
Interests in settlements
45
3     (1)
In section 77 of TCGA 1992 (charge on settlor with interest in settlement)—