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Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

121

 

the opening and closing net values of any assets

directly referable to that category of business,

(b)   

if there has been a relevant reattribution, the mean of

the opening and closing amounts of the shareholders’

excess assets, and

5

(c)   

the mean of the appropriate parts (that is, the parts

relating to that category) of the opening and closing

amounts of the free assets amounts;

B is the aggregate of—

(a)   

the mean of the opening and closing liabilities of the

10

gross roll-up business (but taking that mean to be nil

if it would otherwise be below nil), reduced (but not

below nil) by the mean of the opening and closing net

values of any assets directly referable to that category

of business, and

15

(b)   

the mean of the appropriate parts (that is, the parts

relating to that category) of the opening and closing

amounts of the free assets amounts; and

C is the aggregate of—

(a)   

the mean of the opening and closing liabilities of the

20

PHI business (but taking that mean to be nil if it

would otherwise be below nil), reduced (but not

below nil) by the mean of the opening and closing net

values of any assets directly referable to that category

of business, and

25

(b)   

the mean of the appropriate parts (that is, the parts

relating to that category) of the opening and closing

amounts of the free assets amounts.

(6A)   

For the purposes of subsection (5) above “the relevant fraction”, in

relation to gross roll-up business, is—equation: over[char[B],plus[char[A],char[B],char[C]]]

30

   

where A, B and C have the same meaning as in subsection (6) above.

(6B)   

For the purposes of subsection (5) above “the relevant fraction”, in

relation to PHI business, is—equation: over[char[C],plus[char[A],char[B],char[C]]]

   

where A, B and C have the same meaning as in subsection (6) above.

(6C)   

But if the denominator found in accordance with subsection (6), (6A)

35

or (6B) above is nil, the relevant fraction for the purposes of

subsection (5) above in relation to the category of business in

question is such fraction as is just and reasonable.”

      (9)  

In subsection (7)—

(a)   

for “and (6A)” substitute “, (6A) and (6B)”,

40

(b)   

in paragraph (a), for “(4)” substitute “(4A)”,

(c)   

in paragraph (b), after “(3)” insert “or (4A)”, and

(d)   

in paragraph (c), omit “438B,”.

     (10)  

In subsection (8), for “subsections (6) and (6A)” substitute “subsection (6)”.

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

122

 

     (11)  

In subsection (8ZA), for “subsections (6) and (6A)” substitute “paragraph (c)

of the definition of A and paragraph (b) of the definitions of B and C in

subsection (6)”.

     (12)  

Omit subsection (9).

14    (1)  

Section 432AA (Schedule A business or overseas property business) is

5

amended as follows.

      (2)  

Omit subsection (3).

      (3)  

In subsection (4), for paragraphs (a) to (d) substitute—

“(a)   

basic life assurance and general annuity business;

(b)   

gross roll-up business; and

10

(c)   

PHI business.”

      (4)  

In subsection (5), omit “(3) or”.

15         

In section 432AB (losses from Schedule A business or overseas property

business), omit subsection (6).

16    (1)  

Section 432B (apportionment of receipts brought into account) is amended

15

as follows.

      (2)  

In subsection (1)—

(a)   

for “432F” substitute “432G”, and

(b)   

for “any category of life assurance business” substitute “gross roll-up

business”.

20

      (3)  

In subsection (2), for “432F” substitute “432G”.

      (4)  

In subsection (3)—

(a)   

for “Sections 432C and 432D apply” substitute “Section 432C

applies”, and

(b)   

insert at the end “(and section 432G applies in either case)”.

25

      (5)  

In subsection (4)—

(a)   

for “sections 432C and 432D” substitute “section 432C”,

(b)   

in paragraph (a), for “apply” substitute “applies”, and

(c)   

omit paragraph (b) and the word “and” before it.

      (6)  

In subsection (5)—

30

(a)   

for the words from “any category” to the end of paragraph (b)

substitute “gross roll-up business”, and

(b)   

omit “the relevant fraction of”.

      (7)  

In subsection (6), for the words from “432D” to “annuity business” substitute

“432C to gross roll-up business”.

35

      (8)  

In subsection (7), omit “the relevant fraction of” (in both places).

      (9)  

In subsection (8A), omit “the relevant fraction of”.

     (10)  

In subsection (8C), omit “the relevant fraction of”.

     (11)  

In subsection (9), omit the definitions of—

(a)   

“the relevant fraction”, and

40

(b)   

“the section 83 net amount”.

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

123

 

     (12)  

In subsection (10)—

(a)   

in paragraphs (a) and (b), for “paragraph (a)(ii)” substitute “the

definition of A, in paragraph (b)”, and

(b)   

for paragraph (c) substitute—

“(c)   

the substitution for the definitions of B and C of—

5

“B is the amount that would be given by A if A

applied in relation to gross roll-up business;

and

C is the amount that would be given by A if A

applied in relation to PHI business.”.”

10

17         

For section 432C substitute—

“432C   

  Section 432B apportionment: non-participating funds

(1)   

This section specifies the extent to which the net amount is referable

to life assurance business or to gross roll-up business.

(2)   

In this section “the net amount” means the aggregate of the amounts

15

brought into account—

(a)   

as investment income,

(b)   

as an increase in the value of assets, or

(c)   

as other income,

   

less the aggregate of the amounts brought into account as a decrease

20

in the value of assets.

(3)   

To the extent that the net amount is attributable to—

(a)   

assets linked to life assurance business, or

(b)   

foreign currency assets,

   

it is referable to life assurance business.

25

(4)   

There is also referable to life assurance business the appropriate

fraction of so much of the net amount as is not attributable to linked

assets or foreign currency assets.

(5)   

For the purposes of subsection (4) above “the appropriate fraction”

is—equation: over[char[A],plus[char[A],char[B]]]

30

   

where—

A is the mean of the opening and closing liabilities of the

relevant business so far as referable to life assurance business

(but taking that mean to be nil if it would otherwise be below

nil), reduced (but not below nil) by the aggregate of the mean

35

of the opening and closing net values of linked assets and

foreign currency assets; and

B is the mean of the opening and closing liabilities of the

relevant business so far as referable to PHI business, reduced

(but not below nil) by the mean of the opening and closing

40

net values of any assets linked to PHI business.

(6)   

But if the denominator found in accordance with subsection (5)

above is nil, the appropriate fraction for the purposes of subsection

(4) above is such fraction as is just and reasonable.

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

124

 

(7)   

To the extent that the net amount is attributable to—

(a)   

assets linked to gross roll-up business, or

(b)   

foreign currency assets,

   

it is referable to gross roll-up business.

(8)   

There is also referable to gross roll-up business the relevant fraction

5

of so much of the net amount as is not attributable to linked assets or

foreign currency assets.

(9)   

For the purposes of subsection (8) above “the relevant fraction” is—equation: over[char[C],plus[char[C],char[D]]]

   

where—

C is the mean of the opening and closing liabilities of the

10

relevant business so far as referable to gross roll-up business

(but taking that mean to be nil if it would otherwise be below

nil), reduced (but not below nil) by the aggregate of the mean

of the opening and closing net values of any assets linked to

gross roll-up business and foreign currency assets; and

15

D is the mean of the opening and closing liabilities of the

relevant business so far as referable to basic life assurance

and general annuity business or PHI business (but taking that

mean to be nil if it would otherwise be below nil), reduced

(but not below nil) by the mean of the opening and closing

20

net values of any assets linked to either of those categories of

business.

(10)   

But if the denominator found in accordance with subsection (9)

above is nil, the relevant fraction for the purposes of subsection (8)

above is such fraction as is just and reasonable.

25

(11)   

For the purposes of this section, so much of the net amount—

(a)   

as is brought into account as other income in an internal

linked fund of the company, and

(b)   

as is not attributable to assets of that fund,

   

is to be treated as linked to a category of business to the same extent

30

as income attributable to an asset of the fund would, by virtue of

section 432ZA, be referable to that category of business.”

18         

Omit section 432D (section 432B apportionment: value of non-participating

funds).

19    (1)  

Section 432E (section 432B apportionment: participating funds) is amended

35

as follows.

      (2)  

For subsection (1) substitute—

“(1)   

The part of the net amount which is referable to life assurance

business or to gross roll-up business is—

(a)   

the amount determined in accordance with subsections (2)

40

and (2A) below, or

(b)   

if greater, the amount determined in accordance with

subsection (3) below.

(1A)   

In this section “the net amount” means the aggregate of the amounts

brought into account—

45

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

125

 

(a)   

as investment income,

(b)   

as an increase in the value of assets, or

(c)   

as other income,

   

less the aggregate of the amounts brought into account as a decrease

in the value of assets.”

5

      (3)  

In subsection (2)—

(a)   

in the definition of CAS, for “the category of business concerned”

substitute “life assurance business or of gross roll-up business”, and

(b)   

in the definition of CS, for “business of the category concerned”

substitute “life assurance business or to gross roll-up business”.

10

      (4)  

In subsection (3)—

(a)   

in paragraph (a), after “that category of business” insert “and foreign

currency assets”, and

(b)   

in paragraph (b)—

(i)   

omit “mentioned in subsection (1) above”, and

15

(ii)   

insert at the end “and foreign currency assets”.

      (5)  

In subsection (4), for the words following “case,” substitute “is—equation: cross[over[char[A],char[B]],num[100.0000000000000000,"100"]]

           

where—

A is so much of the net amount as is brought into account in respect of

the relevant business less such part of it as is attributable to linked

20

assets and foreign currency assets; and

B is the mean of the opening and closing liabilities of the relevant

business reduced by the mean of the opening and closing values of

any assets of the relevant business which are linked assets and

foreign currency assets.”

25

      (6)  

In subsection (4A), after “linked assets” insert “or foreign currency assets”.

      (7)  

Omit subsections (5) and (6).

20         

In section 432F(2) (section 432B apportionment: supplementary

provisions)—

(a)   

omit “For each category of business in relation to which section 432E

30

falls to be applied”, and

(b)   

omit “, after making any reduction required by section 432E(5),”.

21         

For section 432G substitute—

“432G   

  Section 432B apportionment: business transfers-in

(1)   

There is referable to the life assurance business of the transferee the

35

appropriate fraction of the amount brought into account as a

business transfer-in and of any amount taken into account as profits

under subsection (1) of section 444ABD or as losses under subsection

(2) of that section.

(2)   

For the purposes of subsection (1) above “the appropriate fraction”

40

is—equation: over[times[char[L],char[A],char[B],char[L]],times[char[T],char[L]]]

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

126

 

   

where—

LABL is the amount of the liabilities transferred that are

referable to the life assurance business (but is nil if it would

otherwise be below nil); and

TL is the whole of the liabilities transferred.

5

(3)   

But if the amount of the liabilities transferred is nil, the appropriate

fraction for the purposes of subsection (1) above is such fraction as is

just and reasonable.

(4)   

There is referable to the gross roll-up business of the transferee the

relevant fraction of the amount brought into account as a business

10

transfer-in and of any amount taken into account as profits under

subsection (1) of section 444ABD or as losses under subsection (2) of

that section.

(5)   

For the purposes of subsection (4) above “the relevant fraction” is—equation: over[times[char[G],char[R],char[B],char[L]],times[char[T],char[L]]]

   

where—

15

GRBL is the amount of the liabilities transferred that are

referable to the gross roll-up business (but is nil if it would

otherwise be below nil); and

TL has the same meaning as in subsection (2) above.

(6)   

But if the amount of the liabilities transferred is nil, the relevant

20

fraction for the purposes of subsection (4) above is such fraction as is

just and reasonable.”

22    (1)  

Section 434 (franked investment income etc) is amended as follows.

      (2)  

For subsections (1) and (1B) substitute—

“(1)   

Where an insurance company makes a payment representative of a

25

distribution made by a company resident in the United Kingdom in

respect of an asset of its long-term insurance fund, the payment is to

be taken into account in computing its profits in accordance with the

provisions applicable to Case I of Schedule D unless the amount

taken into account in accordance with section 83(2)(a) of the Finance

30

Act 1989 includes the amount of the payment.”

      (3)  

Omit subsection (6A)(b).

23    (1)  

Section 434A (computation of losses and limitation on relief) is amended as

follows.

      (2)  

In subsection (2)(a)—

35

(a)   

omit “the aggregate of”, and

(b)   

omit sub-paragraph (iii).

      (3)  

In subsection (2)(b), for the words following sub-paragraph (ii) substitute—

   

“any loss for that period under section 436A shall be reduced

(but not below nil) by the total of the amounts set off as

40

mentioned in sub-paragraphs (i) and (ii) above.”

24         

Omit section 436 (pension business: separate charge on profits).

 

 

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments

127

 

25         

Before section 437 insert—

“436A   

  Gross roll-up business: separate charge on profits

(1)   

Profits arising to an insurance company from gross roll-up

business—

(a)   

are to be treated as income within Schedule D, and

5

(b)   

are chargeable under Case VI of that Schedule.

(2)   

For that purpose—

(a)   

the gross roll-up business is to be treated separately, and

(b)   

the profits from it are to be computed in accordance with the

provisions of this Act applicable to Case I of Schedule D.

10

(3)   

In making that computation, sections 82 and 82B to 83AB of the

Finance Act 1989 apply with the necessary modifications.

(4)   

If in any accounting period an insurance company incurs a loss, to be

computed on the same basis as the profits, arising from its gross roll-

up business—

15

(a)   

the loss must be set off against the amount of any profits

chargeable under this section for any subsequent accounting

period, and

(b)   

accordingly, the amount of the company’s profits so charged

in any such accounting period is to be treated as reduced by

20

the amount of the loss or so much of that amount as cannot

be relieved under this section against profits of an earlier

accounting period.

(5)   

Section 396 does not apply to a loss incurred by an insurance

company on its gross roll-up business.

25

(6)   

No loss to which section 396 applies may be set off under subsection

(4) above against the amount of any profits chargeable under this

section.

(7)   

This section does not apply in relation to an insurance company for

an accounting period if the profits of its long-term business for the

30

accounting period are charged to tax under Case I of Schedule D.

436B    

  Gains referable to gross roll-up business not to be chargeable gains

(1)   

Gains referable to gross roll-up business are not chargeable gains.

(2)   

For the purposes of this section “gains referable to gross roll-up

business” means gains which—

35

(a)   

accrue to an insurance company on the disposal by it of assets

of its long-term insurance fund, and

(b)   

are referable (in accordance with section 432A) to gross roll-

up business.”

26    (1)  

Section 438 (pension business: exemption from tax) is amended as follows.

40

      (2)  

In subsection (1), for the words after “income” substitute “from assets solely

linked to pension business.”

      (3)  

Omit subsections (2) and (4).

27         

Omit section 438B (income or gains arising from property investment LLP).

 

 

 
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