Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 9 — Insurance companies: transfers etc
149

444ABA
Relevant non-transferred assets
(1)
For the purposes of section 444AB the relevant amount in relation to
assets that are relevant non-transferred assets is—
where—
FVA is the fair value of the assets on the transfer date, and
5
RVA is the recognised value of the assets.
(2)
For the purposes of this section and section 444ABB—
(a)
the recognised value of any assets which, immediately before
the transfer date, are held by the transferor in a non-profit
fund which is not a Form 14 line 51 fund is the relevant Form
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13 value of those assets, and
(b)
the recognised value of any other assets is the appropriate
fraction of the relevant Form 13 value of those assets.
(3)
For the purposes of subsection (2) above a non-profit fund is a Form
14 line 51 fund if an amount in respect of the fund is shown (or
15
treated as shown) in line 51 of Form 14 in the periodical return of the
transferor covering the relevant period of account.
(4)
For the purposes of subsection (2) above the relevant Form 13 value
of any assets is the value which is shown (or treated as shown) in
respect of the assets in Form 13 in the periodical return of the
20
transferor covering the relevant period of account (ignoring lines 91
to 99 of that Form).
(5)
For the purposes of subsection (2)(b) above the appropriate fraction
is

where—
25
A is the amount shown (or treated as shown) in line 51 of Form
14 in the periodical return of the transferor covering the
relevant period of account in respect of the fund in which,
immediately before the transfer date, the assets are held by
the transferor, increased or reduced as mentioned in
30
subsection (6) below, and
B is the amount shown (or treated as shown) in line 89 of Form
13 in that periodical return in respect of that fund.
(6)
The increase or reduction referred to in the definition of A in
subsection (5) above is any increase or decrease deemed to be
35
brought into account by section 83YA(3) or (4) of the Finance Act
1989 in respect of the fund for the relevant period of account.
(7)
See section 444AA for the meaning of “the transfer date”, and section
444AB for the meaning of “the relevant period of account”, in this
section.
40
444ABB
Retained assets
(1)
For the purposes of section 444AB the relevant amount in relation to
assets that are retained assets is the lesser of FVA and UTA, where—

Finance Bill
Schedule 9 — Insurance companies: transfers etc
150

(a)
FVA is the fair value of the assets on the transfer date, and
(b)
UTA is the amount by which the fair value of the assets of the
long-term insurance fund of the transferor immediately
before the transfer date exceeds the amount shown (or
treated as shown) in line 32 of Form 40 in the periodical
5
return of the transferor covering the transfer date.
(2)
See section 444AA for the meaning of “the transfer date” in this
section.
444ABC
Transfer scheme transferring part of business: transferor
(1)
This section applies where an insurance business transfer scheme
10
has effect to transfer part (but not the whole or substantially the
whole) of the long-term business of a person (“the transferor”) to
another person (“the transferee”) and the condition in subsection (2)
below is met.
(2)
That condition is that any of the assets of the transferor’s long-term
15
insurance fund which are transferred from the transferor to the
transferee by the insurance business transfer scheme are not,
immediately after their transfer—
(a)
if the transferee is an insurance company, assets of the
transferee’s long-term insurance fund, or
20
(b)
if the transferee is not an insurance company, assets of a with-
profits fund of the transferee,

(“relevant non-transferred assets”).
(3)
The relevant amount in relation to the relevant non-transferred
assets (see subsection (4) below) is to be taken into account under
25
section 83(2) of the Finance Act 1989 as an increase in value of the
assets of the long-term insurance fund of the transferor for the period
of account covering the transfer date.
(4)
The relevant amount in relation to the relevant non-transferred
assets is—
30
where
FVA is the fair value of the assets on the transfer date, and
BTO is any amount brought into account in respect of the assets
as a business transfer-out.
(5)
See section 444AA for the meaning of “the transfer date” in this
35
section.”
      (2)
In section 432E(2A) of ICTA (apportionments: participating funds)—
(a)
before “444AF(2)” insert “444AB, 444ABC,”, and
(b)
after paragraph (a) insert—
“(aa)
section 444AB or 444ABC of this Act;”.
40

Finance Bill
Schedule 9 — Insurance companies: transfers etc
151

Transferor’s period of account including transfer
5
In ICTA, after section 444ABC (inserted by paragraph 4) insert—
“444ABD
Transferor’s period of account including transfer
(1)
Any profits representing the amount by which—
(a)
the value of the liabilities transferred by an insurance
5
business transfer scheme, exceeds
(b)
the value of the assets transferred by the insurance business
transfer scheme shown (or treated as shown) in line 32 of the
periodical return of the transferor for the period of account of
the transferor including the transfer date,
10

are to be taken into account as profits of that period of account.
(2)
Any loss representing the amount by which—
(a)
the value of the liabilities transferred by an insurance
business transfer scheme, falls short of
(b)
the value of the assets transferred by the insurance business
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transfer scheme shown (or treated as shown) in line 32 of the
periodical return of the transferor for the period of account of
the transferor including the transfer date,

is to be taken into account as a loss of that period of account.
(3)
See section 444AA for the meaning of “the transfer date” in this
20
section.”
Transfer schemes: taxing the transferee
6     (1)
In ICTA, for section 444AC substitute—
“444AC
Transfer schemes transferring whole of business: reduction in
income of transferee
25
(1)
This section applies where an insurance business transfer scheme
has effect to transfer the whole, or substantially the whole, of the
long-term business of a person (“the transferor”) to another person
(“the transferee”) and conditions A and B are met.
(2)
Condition A is that the transferor did not carry on life assurance
30
business that is mutual business during the relevant period of
account.
(3)
Condition B is that an amount is shown (or treated as shown) in line
13 of Form 14 in the periodical return of the transferor covering the
relevant period of account.
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(4)
The amount which (apart from this section) would be regarded as
other income of the transferee for the purposes of section 83(2)(e) of
the Finance Act 1989 for the period of account of the transferee which
includes the transfer date is to be reduced by an amount equal to the
transferred surplus.
40
(5)
In subsection (4) above “the transferred surplus” means the amount
shown (or treated as shown) in line 13 of Form 14 in the periodical
return of the transferor covering the relevant period of account.

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Schedule 9 — Insurance companies: transfers etc
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(6)
See section 444AA for the meaning of “the transfer date”, and section
444AB for the meaning of “the relevant period of account”, in this
section.
444ACZA
Transfer schemes transferring part of business: reduction in
income of transferee
5
(1)
This section applies where an insurance business transfer scheme
has effect to transfer part (but not the whole or substantially the
whole) of the long-term business of a person (“the transferor”) to
another person (“the transferee”) and the condition in subsection (2)
below is met.
10
(2)
The condition is that the transferor did not carry on life assurance
business that is mutual business during the period of account of the
transferor covering the transfer date.
(3)
The amount which (apart from this section) would be regarded as
other income of the transferee for the purposes of section 83(2)(e) of
15
the Finance Act 1989 for the period of account of the transferee which
includes the transfer date is to be reduced by an amount equal to the
transferred surplus.
(4)
In subsection (4) above “the transferred surplus” means such part of
the amount shown (or treated as shown) in line 13 of Form 14 in the
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periodical return of the transferor covering the last period of account
of the transferor ending before the transfer date as it is just and
reasonable to regard as being attributable to the transfer.
(5)
See section 444AA for the meaning of “the transfer date” in this
section.”
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      (2)
In section 83(2A) of FA 1989 (receipts not to be taken into account), omit
paragraph (b).
Repeal of section 444AD
7     (1)
In ICTA, omit section 444AD (transfers of business: modification of section
83(2B) of FA 1989).
30
      (2)
In section 83YA(7) of FA 1989 (changes in value of assets brought into
account: transfer-in amount), for the words after “if” substitute “a transfer
takes place in the following period of account; and the amount of the
transfer-in amount for the previous period of account is any amount by
which—
35
(a)
the fair value of such of the assets of the long-term insurance
fund of the company immediately after the transfer as were
assets of the transferor’s long-term insurance fund
immediately before the transfer, exceeds
(b)
the amount of any business transfer-in brought into account
40
in accordance with section 83(2)(e) in relation to the transfer.”
Transfer schemes: anti-avoidance
8     (1)
In ICTA, before section 444AF (and the italic cross-heading before it)

Finance Bill
Schedule 9 — Insurance companies: transfers etc
153

insert—
“444AEA
Transfer schemes: anti-avoidance rule
(1)
This section applies where—
(a)
as a result of the whole or any part of transfer scheme
arrangements involving the transfer of long-term business
5
from one person (“the transferor”) to another (“the
transferee”) a Case I advantage is obtained by the transferor
or the transferee (or by both), and
(b)
the sole or main purpose, or one of the main purposes, of the
whole or any part of the transfer scheme arrangements is the
10
obtaining of that Case I advantage.
(2)
In subsection (1) above “transfer scheme arrangements” means an
insurance business transfer scheme (“the relevant transfer scheme”)
together with any relevant associated operations.
(3)
If a Case I advantage is obtained by the transferor (see subsection (1)
15
of section 444AEB), the amount of the transferor’s Case I advantage
(see subsection (2) of that section) is to be taken into account as an
increase in value of the assets of the long-term insurance fund of the
transferor for the period of account of the transferor covering the
transfer date.
20
(4)
If a Case I advantage is obtained by the transferee (see subsection (1)
of section 444AEC), the amount of the transferee’s Case I advantage
(see subsection (2) of that section) is to be taken into account as an
increase in value of the assets of the long-term insurance fund of the
transferee for the first period of account of the transferee ending after
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the transfer date.
(5)
In this section and sections 444AEB and 444AEC “relevant associated
operations”, in relation to the relevant transfer scheme, means—
(a)
any other insurance business transfer scheme,
(b)
any contract of reinsurance,
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(c)
any reconstruction or amalgamation involving the transferor,
a dependant of the transferor which is an insurance
undertaking or the transferee, or
(d)
any surplus-increasing transfer of assets,

which is effected in connection with the relevant transfer scheme.
35
(6)
In subsection (5) above—
“dependant” and “insurance undertaking” have the same
meaning as in the Insurance Prudential Sourcebook, and
“surplus-increasing transfer of assets” means a transfer of assets
of the transferor’s long-term insurance fund to the transferee
40
which is not brought into account for any period of account
of the transferee but increases the amount of total surplus
shown in line 39 of Form 58 in any periodical return of the
transferee.
(7)
See section 444AA for the meaning of “the transfer date” in this
45
section.