Finance Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
128

28
Omit section 438C (determination of policy holders’ share for purposes of
s.438B).
29
Omit section 439 (restricted government securities).
30
Omit section 439B (life reinsurance business: separate charge on profits).
31    (1)
Section 440 (transfers of assets etc) is amended as follows.
5
      (2)
In subsection (3), for “(a) to (e)” substitute “(a), (d) and (e)”.
      (3)
In subsection (4), for paragraphs (a) to (c) substitute—
“(a)
assets which are linked solely to gross roll-up business or are
foreign currency assets;”,

and, in paragraph (e), for “any” substitute “either”.
10
32
In section 440A(2) (securities)—
(a)
in paragraph (a), for sub-paragraphs (i) to (iii) substitute—
“(i)
basic life assurance and general annuity
business, or
(ii)
gross roll-up business,”,
15
(b)
omit paragraph (c), and
(c)
in paragraph (d)—
(i)
for “any of the preceding paragraphs” substitute “paragraph
(a)”, and
(ii)
for “any of the descriptions mentioned in those paragraphs”
20
substitute “the description mentioned in that paragraph”.
33
In section 440B(4) (modifications where tax charged under Case I of
Schedule D)—
(a)
for “(a) to (e)” substitute “(a), (d) and (e)”, and
(b)
for the notionally substituted paragraph (a) substitute—
25
“(a)
so many of the securities as are included in the
company’s long-term insurance fund shall be treated
for the purposes of corporation tax as a separate
holding which is an asset of that fund, and”.
34
Omit section 441 (overseas life assurance business).
30
35
In section 444A(3) (transfers of business)—
(a)
for “436(3)(c) or 439B(3)(c)” substitute “436A(4)”,
(b)
omit paragraph (b) and the word “or” before it, and
(c)
for “the same category of business as that in which it arose)”
substitute “gross roll-up business)”.
35
36    (1)
Section 444AC (transfers of business: excess of assets or liabilities) is
amended as follows.
      (2)
In subsection (2B)—
(a)
for “each category of its life assurance business” substitute “its gross
roll-up business”,
40
(b)
for “a category of the transferee’s life assurance business” substitute
“the transferee’s gross roll-up business”, and
(c)
for “that category” substitute “gross roll-up business”.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
129

      (3)
In subsection (2D), for “a category of its life assurance business” substitute
“its gross roll-up business”.
      (4)
In subsection (10), in the definition of “the transferor’s business”, for
paragraph (b) substitute—
“(b)
its gross roll-up business.”
5
37    (1)
Section 444AF (demutualisation surplus: life assurance business) is
amended as follows.
      (2)
In subsection (4)(b), for “sections 432C and 432D apply” substitute “section
432C applies”.
      (3)
In subsection (5)(b), for “the profits of any category of the company’s life
10
assurance business chargeable to tax under Case VI of Schedule D”
substitute “profits of the company chargeable under Case VI of Schedule D
under section 436A (gross roll-up business)”.
38    (1)
Section 444AK (mutual surplus: Case VI categories of life assurance
business) is amended as follows.
15
      (2)
In subsection (1), for paragraph (b) substitute—
“(b)
the company carries on gross roll-up business.”
      (3)
In subsection (3), for “any category of the company’s life assurance business
chargeable to tax under Case VI of Schedule D” substitute “the company’s
gross roll-up business”.
20
      (4)
In subsection (5)(b), for “sections 432C and 432D apply” substitute “section
432C applies”.
      (5)
The heading accordingly becomes “Mutual surplus: gross roll-up
business”.
39
Omit sections 458 and 458A (capital redemption business).
25
40
In section 460(2) (registered friendly societies: exemption from tax in respect
of life or endowment business)—
(a)
for “pension business” substitute “gross roll-up business”,
(b)
at the end of paragraph (ca), insert “and”, and
(c)
omit paragraph (cb).
30
41
In section 461 (registered friendly societies: other business), omit subsection
(3A).
42
In section 461B (incorporated friendly societies), omit subsection (2A).
43    (1)
Section 466 (interpretation of Chapter 2 of Part 12) is amended as follows.
      (2)
For subsection (1) substitute—
35
“(1)
In this Chapter “life or endowment business” means, subject to
subsections (1A) and (1B) below—
(a)
any life assurance business, and
(b)
any PHI business.”
      (3)
In subsection (2)—
40
(a)
omit the definition of “life assurance business”, and
(b)
insert the following definition at the appropriate place—

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
130

““gross roll-up business” shall be construed in accordance with
section 431;”.
      (4)
Omit subsections (2ZA), (2A) and (2B).
44
In section 502H(2)(a)(ii) and (4)(b) (insurance company as lessor), for “long-
term business which is not life assurance” substitute “PHI”.
5
45
In section 539(3) (life policies, life annuities and capital redemption policies),
in the definition of “capital redemption policy”, for “as defined in section
458(3)” substitute “, within the meaning of Chapter 1 of Part 12”.
46    (1)
Section 553B (overseas life assurance business: capital redemption policies)
is amended as follows.
10
      (2)
In subsection (2), in the definition of “overseas policy”, for “431D(1)(a)”
substitute “431D(1)”.
      (3)
In subsection (3), for the words from “after” to the end substitute “on or after
23rd March 1999”.
47    (1)
Section 755A (treatment of chargeable profits and creditable tax apportioned
15
to company carrying on life assurance business) is amended as follows.
      (2)
In subsection (4), for the words after “referable to” substitute “gross roll-up
business carried on by the UK company”.
      (3)
In subsection (6)(c), for “a category of business specified in paragraphs (a) to
(c) of subsection (4) above” substitute “gross roll-up business”.
20
      (4)
In subsection (13), for paragraphs (a) to (d) substitute—
“(a)
basic life assurance and general annuity business, or
(ba)
gross roll-up business,”.
48
In section 804A(1) (life assurance companies with overseas branches etc:
restriction of credit), for “any category of life assurance business” substitute
25
“gross roll-up business”.
49    (1)
Section 804B (insurance companies carrying on more than one category of
business: restriction of credit) is amended as follows.
      (2)
In subsection (1)(a), after “category of” insert “long-term”.
      (3)
In subsection (2), omit “or section 438B”.
30
      (4)
For subsection (3) substitute—
“(3)
Where the relevant income arises from an asset which is linked solely
to a category of business, the whole of the foreign tax is attributable
to that category of business, unless the case is one where subsection
(7) below applies in relation to that category of business.”
35
      (5)
In subsection (4)—
(a)
for “long-term business which is not life assurance” substitute “PHI”,
and
(b)
omit “or 438B”.
      (6)
In subsection (5), for “long-term business which is not life assurance”
40
substitute “PHI”.
      (7)
In subsection (6), omit “or 432D” (in both places).

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
131

      (8)
For subsection (9) substitute—
“(9)
Where for the purposes of this section an amount of foreign tax is
attributable to gross roll-up business, credit in respect of the foreign
tax so attributable shall be allowed only against corporation tax in
respect of profits chargeable under section 436A.”
5
50
In section 804C(14) (insurance companies: allocation of expenses etc in
computations under Case I of Schedule D), for—
(a)
“a category of life assurance business”, and
(b)
“any category of life assurance business”,

substitute “gross roll-up business”.
10
51    (1)
Section 804D (interpretation of section 804C in relation to life assurance
business etc) is amended as follows.
      (2)
In subsection (1), for “a category of life assurance business” substitute “gross
roll-up business”.
      (3)
In subsection (3), for “432F” substitute “432G”.
15
52
In section 804E (interpretation of section 804C in relation to other insurance
business), for “any category of life assurance business” substitute “gross roll-
up business”.
53
In section 806L(5) (carry forward or carry back of unrelieved foreign tax), for
paragraph (b) substitute—
20
“(b)
included in the profits of gross roll-up business chargeable
under Case VI of Schedule D by virtue of section 436A.”
54
In section 808 (restriction on deduction of interest or dividends from trading
income), for “436” substitute “436A”.
55
Omit Schedule 19AA (overseas life assurance fund).
25
56
In paragraph 2(1A)(a) of Schedule 25 (cases where section 747(3) does not
apply), for “436, 439B or 441” substitute “436A”.
Finance Act 1989 (c. 26)
57
FA 1989 is amended as follows.
58
In section 88(3A) (corporation tax: policy holders’ fraction of profits), for
30
paragraph (b) substitute—
“(b)
profits of the company chargeable under Case VI of Schedule
D under section 436A of the Taxes Act 1988 (gross roll-up
business).”
59
In section 89(1A) (policy holders’ share of profits), for paragraph (a)
35
substitute—
“(a)
deducting from any profits of the company for the period
chargeable under Case VI of Schedule D under section 436A
of the Taxes Act 1988 so much of the Case I profits of the
company for the period in respect of its life assurance
40
business as does not exceed the amount of any profits of the
company for the period so chargeable, and”.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
132

Taxation of Chargeable Gains Act 1992 (c. 12)
60
TCGA 1992 is amended as follows.
61
In section 204(10) (policies of insurance and non-deferred annuities)—
(a)
for “as defined in section 458(3)” substitute “within the meaning of
Chapter 1 of Part 12”, and
5
(b)
omit “other”.
62
In section 210B—
(a)
omit paragraph (b) and the word “or” before it, and
(b)
in subsection (8) (disposal and acquisition of section 440A securities),
in the definition of “chargeable section 440A holding”, for “(2)(a)(iii)”
10
substitute “(2)(a)(i)”.
63
In section 212(2) (annual deemed disposal of holdings of certain assets), for
the words from “pension business” to the end substitute “gross roll-up
business”.
64
In section 213(1A) (spreading of gains and losses under section 212), omit the
15
words following “general annuity business”.
Finance Act 1996 (c. 8)
65
FA 1996 is amended as follows.
66
In paragraph 12(3) of Schedule 9 (loan relationships: special computational
provisions), for “440(4)(a) to (e)” substitute “440(4)(a), (d) and (e)”.
20
67    (1)
Schedule 11 (loan relationships: special provisions for insurers) is amended
as follows.
      (2)
In paragraph 2, for sub-paragraph (1) substitute—
    “(1)
Where an insurance company carries on basic life assurance and
general annuity business, a separate computation, using only the
25
non-trading credits and non-trading debits referable to that
business, shall be made for the purposes of this Chapter in relation
to that business.”
      (3)
In paragraph 3A(5)—
(a)
after “(6A)” insert “, (6B)”,
30
(b)
for “subsections (6)(a) and (6A)(a)” substitute “subsection (6)”, and
(c)
omit paragraph (c) and the word “and” before it.
      (4)
In paragraph 4—
(a)
in sub-paragraph (1), omit paragraph (b) and the word “or” before it,
(b)
in sub-paragraph (2)(a), for “the relevant category of business”
35
substitute “basic life assurance and general annuity business”,
(c)
in sub-paragraph (7), for “the relevant category of business”
substitute “its basic life assurance and general annuity business”,
(d)
in sub-paragraph (10), for “the relevant category of business” (in
both places) substitute “basic life assurance and general annuity
40
business”, and
(e)
omit sub-paragraph (16).

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
133

Capital Allowances Act 2001 (c. 2)
68
CAA 2001 is amended as follows.
69    (1)
Section 255 (apportionment of allowances and charges) is amended as
follows.
      (2)
For subsection (1) substitute—
5
“(1)
Except where subsection (3) applies, any allowance to which the
company is entitled, and any charge to which it is liable, for a
chargeable period in respect of a management asset must be
apportioned between basic life assurance and general annuity
business, gross roll-up business and PHI business in accordance with
10
subsections (1A) and (1B).
(1A)
The allowance or charge is to be apportioned to a category of
business using the formula—

where—
A is the amount of the allowance or charge,
15
B is the mean of the opening and closing liabilities of that
category of business, and
C is the mean of the opening and closing liabilities of all the
categories of business mentioned in subsection (1) which are
carried on by the company.
20
(1B)
If C is nil or below nil, the allowance or charge to be apportioned to
a category of business is such as is just and reasonable.”
      (3)
Omit subsection (2).
      (4)
In subsection (3)—
(a)
in paragraph (a), for “section 441 of ICTA in respect of its overseas
25
life assurance business” substitute “section 436A of ICTA (gross roll-
up business)”, and
(b)
in paragraph (b), for “provided outside the United Kingdom for use
for the management of that business” substitute “held for the
purposes of a permanent establishment outside the United Kingdom
30
at or through which the company carries on gross roll-up business”.
70    (1)
Section 256 (different giving effect rules for different categories of business)
is amended as follows.
      (2)
In subsection (3), for paragraphs (a) to (c) substitute “section 436A of ICTA
(gross roll-up business)”.
35
      (3)
In subsection (4)—
(a)
for “profit” substitute “profits”,
(b)
in paragraph (a), for “any particular category of business” substitute
“gross roll-up business” and for “that category of business”
substitute “its gross roll-up business”, and
40
(c)
in paragraph (b), for “any particular category of business” substitute
“gross roll-up business” and for “that category of business”
substitute “its gross roll-up business”.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
134

71    (1)
Section 545 (investment assets) is amended as follows.
      (2)
In subsection (3), in the second sentence, for “sections 432ZA to 432E, or
section 438B,” substitute “section 432A”.
      (3)
In subsection (5)—
(a)
for the words from “under—” to “no allowance” substitute “under
5
section 436A of ICTA (gross roll-up business), no allowance”, and
(b)
for “the category of life assurance business in question” substitute
“gross roll-up business”.
Finance Act 2001 (c. 9)
72
In paragraph 20 of Schedule 22 to FA 2001 (remediation of contaminated
10
land), for the words from the beginning to “Schedule D,” substitute “In
computing in accordance with the provisions of the Taxes Act 1988
applicable to Case I of Schedule D the profits for any accounting period
arising to an insurance company from its life assurance business, or from its
gross roll-up business,”.
15
Finance Act 2002 (c. 23)
73
FA 2002 is amended as follows.
74    (1)
Schedule 12 (tax relief for expenditure on research and development) is
amended as follows.
      (2)
In paragraph 13, for sub-paragraph (3) substitute—
20
    “(3)
Part 3 of this Schedule has effect in relation to any gross roll-up
business of the company as if the references to the trade carried on
by the company were references to that business (and sub-
paragraph (2) does not apply in relation to that business).”
      (3)
In paragraph 15(3)—
25
(a)
for “(profits of life assurance business chargeable to tax under Case
VI of Schedule D)” substitute “(gross roll-up business)” and for “a
part of the life assurance business” substitute “the gross roll-up
business”, and
(b)
for “that part” substitute “the gross roll-up business”.
30
75    (1)
Schedule 26 (derivative contracts) is amended as follows.
      (2)
In paragraph 12(2), for “section 458” substitute “Chapter 1 of Part 12”.
      (3)
In paragraph 29(1), for “440(4)(a) to (e)” substitute “440(4)(a), (d) and (e)”.
Income Tax (Trading and Other Income) Act 2005 (c. 5)
76
ITTOIA 2005 is amended as follows.
35
77
In section 473(2) (policies and contracts to which Chapter 9 applies), in the
definition of “capital redemption policy”, for “as defined in section 458(3)”
substitute “within the meaning of Chapter 1 of Part 12”.
78
In section 476(3) (special rules: foreign policies), in the definition of “foreign
capital redemption policy”, for “431D(1)(a)” substitute “431D(1)”.
40