Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 9 — Insurance companies: transfers etc
154

444AEB
Case I advantage: transferor
(1)
A Case I advantage is obtained by the transferor if—
(a)
Case I profits of its life assurance business for a period of
account to which this section applies are less than they would
be but for the transfer scheme arrangements or any part of the
5
transfer scheme arrangements, or
(b)
Case I losses of its life assurance business for such a period of
account are greater than they would be but for the transfer
scheme arrangements or any part of the transfer scheme
arrangements.
10
(2)
If a Case I advantage is obtained by the transferor, the amount of the
Case I advantage is the aggregate of—
(a)
the amounts (if any) by which Case I profits for each period
of account to which this section applies are less than they
would be but for the transfer scheme arrangements or part,
15
and
(b)
the amounts (if any) by which Case I losses for each such
period of account are greater than they would be but for the
transfer scheme arrangements or part.
(3)
This section applies to a period of account if it is—
20
(a)
the period of account of the transferor covering the transfer
date,
(b)
any earlier period of account of the transferor, or
(c)
where any relevant associated operations are effected in any
later period of account, that period of account.
25
(4)
In this section and section 444AEC “Case I profits” and “Case I
losses” means profits and losses computed in accordance with the
provisions of Case I of Schedule D.
(5)
See section 444AA for the meaning of “the transfer date”, and section
444AEA for the meaning of “relevant associated operations”, in this
30
section.
444AEC
Case I advantage: transferee
(1)
A Case I advantage is obtained by the transferee if—
(a)
Case I profits of its life assurance business for a period of
account to which this section applies are less than they would
35
be but for the transfer scheme arrangements or any part of the
transfer scheme arrangements, or
(b)
Case I losses of its life assurance business for such a period of
account are greater than they would be but for the transfer
scheme arrangements or any part of the transfer scheme
40
arrangements.
(2)
If a Case I advantage is obtained by the transferee, the amount of the
Case I advantage is—
(a)
the amount by which Case I profits for each period of account
to which this section applies are less than they would be but
45
for the transfer scheme arrangements or part, or

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Schedule 9 — Insurance companies: transfers etc
155

(b)
the amount by which Case I losses for each such period of
account are greater than they would be but for the transfer
scheme arrangements or part.
(3)
This section applies to a period of account if it is—
(a)
the first period of account of the transferee ending after the
5
transfer date or after the effecting of the first of any relevant
associated operations (if that occurs before the transfer date),
(b)
the second period of account of the transferee ending after
the transfer date or after the effecting of the last of any
relevant associated operations (if that occurs after the transfer
10
date), or
(c)
any intervening period of account.
(4)
See section 444AA for the meaning of “the transfer date”, section
444AEA for the meaning of “relevant associated operations” and
section 444AEB for the meaning of “Case I profits” and “Case I
15
losses”, in this section.
444AED
Clearance: no avoidance or group advantage
(1)
Section 444AEA does not apply in relation to the transferor or the
transferee if, on an application under this section, the Commissioners
for Her Majesty’s Revenue and Customs (“the HMRC
20
Commissioners”) have given a notice under subsection (2) below.
(2)
A notice under this subsection is a notice stating that the HMRC
Commissioners are satisfied—
(a)
that the obtaining of a Case I advantage by the applicant is
not the sole or main purpose of the whole or any part of the
25
transfer scheme arrangements, or
(b)
that the transferor and the transferee are members of the
same group of companies and that there is no advantage to
the group arising from any Case I advantage obtained by the
transferor or by the transferee.
30
(3)
For the purposes of this section there is no advantage to a group
arising from any Case I advantage obtained by the transferor or by
the transferee if—
(a)
as a result of transfer scheme arrangements, there is an
increase in the liability to corporation tax of one or more
35
companies which are members of the group of companies,
and
(b)
the amount (or aggregate amount) of that increase is not less
than the reduction in the liability to corporation tax of the
transferor or the transferee (or both) arising from the
40
obtaining of the Case I advantage.
(4)
An application under this section must be in writing and contain
particulars of the transfer scheme arrangements.
(5)
The HMRC Commissioners may by notice require the applicant to
provide further particulars in order to enable them to determine the
45
application.

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Schedule 9 — Insurance companies: transfers etc
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(6)
A requirement may be imposed under subsection (5) above within 30
days of the receipt of the application or of any further particulars
required under that subsection.
(7)
If a notice under subsection (5) above is not complied with within 30
days or such longer period as the HMRC Commissioners may allow,
5
they need not proceed further on the application.
(8)
The HMRC Commissioners must give notice of their decision on an
application under this section to the applicant within 30 days of
receiving the application or, if they give a notice under subsection (5)
above, within 30 days of that notice being complied with.
10
(9)
If the HMRC Commissioners—
(a)
give notice to the applicant under subsection (8) above that
they are not satisfied as mentioned in subsection (2) above, or
(b)
do not comply with subsection (8) above,

the applicant may require them to transmit the application to the
15
Special Commissioners.
(10)
A requirement under subsection (9) above must be imposed within
30 days of the giving of the notice or the failure to comply and must
be accompanied by any notice given under subsection (5) above and
further particulars provided pursuant to any such notice.
20
(11)
Any notice given by the Special Commissioners has effect for the
purposes of subsection (1) above as if it were given by the HMRC
Commissioners.
(12)
If any particulars provided under this section do not fully and
accurately disclose all facts and considerations material for the
25
decision of the HMRC Commissioners or the Special
Commissioners, any resulting notice that they are satisfied as
mentioned in subsection (2) above is void.
(13)
For the purposes of this section two companies are members of the
same group of companies if they are for the purposes of Chapter 4 of
30
Part 10.”
      (2)
In section 432E(2A) of ICTA (as amended by paragraph 4(2)), after
“444ABC,” insert “444AEA,” and after paragraph (aa) insert—
“(ab)
section 444AEA of this Act;”.
Repeal of FA s.82C
35
9
In FA 1989, omit section 82C (relevant financial reinsurance contracts).
Transfers: receipts to be taken into account
10    (1)
Section 83 of FA 1989 (receipts to be taken into account) is amended as
follows.
      (2)
In the first sentence of subsection (2B), for the words from “but the transfer”
40
to “the time of the transfer” substitute “the fair value of the assets at the time
of the transfer, reduced by any amount brought into account in respect of
them (for the period of account in which the transfer takes place or any

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Schedule 9 — Insurance companies: transfers etc
157

earlier period of account) as part of total expenditure or as a business
transfer-out,”.
      (3)
In that sentence (as amended by sub-paragraph (2))—
(a)
omit “or as a business transfer-out”, and
(b)
for the words after “value of the assets of that fund” substitute
5
“except to the extent that any of the exclusions in subsections (2C) to
(2E) below apply.”
      (4)
Omit the second sentence of subsection (2B).
      (5)
For subsection (2E) substitute—
“(2E)
Assets transferred by an insurance business transfer scheme are
10
excluded from subsection (2B) above.”
Transfers and demutualisations: losses where assets added to long-term insurance fund
11    (1)
FA 1989 is amended as follows.
      (2)
Omit—
(a)
in section 83, subsections (3) to (7) and, in subsection (8), the
15
definitions of “add”, “demutualisation” and “total reinsurance”
(which relate to losses where assets added to long-term insurance
fund),
(b)
section 83AA (amounts added to long-term insurance fund in excess
of loss), and
20
(c)
section 83AB (treatment of surplus where there is subsequent
transfer from company etc).
      (3)
In section 83B(3) (changes in recognised accounts: attribution of amounts
carried forward), for “83AB” substitute “83ZC”.
12
In section 436A(3) of ICTA (gross roll-up business), for “83AB” substitute
25
“83ZC”.
Transfer schemes: old annuity contracts
13    (1)
Paragraph 16 of Schedule 7 to FA 1991 (transitional relief for old general
annuity contracts) is amended as follows.
      (2)
In sub-paragraph (7), in the definition of “old annuity contract”, insert at the
30
end “(including one forming part of the business transferred to another
insurance company by an insurance business transfer scheme)”.
      (3)
After that sub-paragraph insert—
    “(8)
Where—
(a)
business is transferred to an insurance company by an
35
insurance business transfer scheme during an accounting
period of the company, and
(b)
the business transferred consists of or includes old annuity
contracts (“the transferred contracts”),

the reference in the definition of R1 in sub-paragraph (2) above to
40
the company’s opening liabilities for the accounting period is, in
relation to the transferred contracts, a reference to the company’s

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Schedule 9 — Insurance companies: transfers etc
158

liabilities in respect of the transferred contracts immediately after
the transfer.”
Transfer schemes: no gain/no loss
14    (1)
TCGA 1992 is amended as follows.
      (2)
In section 211 (application of section 139), for subsections (2) and (2A)
5
substitute—
“(2)
Where this section applies the transferor and the transferee are
treated for the purposes of corporation tax on chargeable gains as if
any assets included in the transfer which—
(a)
immediately before they are acquired by the transferee, were
10
assets of the transferor’s long-term insurance fund, and
(b)
immediately after they are so acquired are assets of the
transferee’s long-term insurance fund,

were acquired for a consideration of such amount as would secure
that neither a gain nor a loss would accrue to the transferor on the
15
disposal.
(3)
Subsection (2) above is subject to section 212.”
      (3)
In section 35(3)(d) (re-basing: exceptions), after “171,” insert “211,”.
Transfer schemes: old reinsurance business
15
In paragraph 57 of Schedule 8 to FA 1995 (application of provisions made by
20
that Schedule), after sub-paragraph (2) (which disapplies section 442A of
ICTA in relation to the reinsurance of policies and contracts made and
reinsured before 29th November 1994) insert—
    “(3)
Where business consisting of or including an arrangement for the
reinsurance of a policy or contract made before 29th November
25
1994 which was effected before that date has been transferred by
an insurance business transfer scheme sub-paragraph (2) has
effect in relation to the transferee.”
Power to amend transfer provisions
16    (1)
The Treasury may by order make provision in relation to insurance business
30
transfer schemes.
      (2)
The power conferred by sub-paragraph (1) includes power to amend or
repeal any provision of the Corporation Tax Acts relating to insurance
business transfer schemes and otherwise to amend the Corporation Tax
Acts.
35
      (3)
The power conferred by sub-paragraph (1) includes power to make—
(a)
different provision for different cases or otherwise for different
purposes, and
(b)
incidental, supplementary, consequential or transitional provisions
and savings.
40
      (4)
Provision made by an order under this paragraph—
(a)
may be made so as to have effect in relation to periods of account
current when it is made, but

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Schedule 10 — Insurance companies: miscellaneous
159

(b)
may not be made so as to have effect in relation to any insurance
business transfer scheme taking effect before the day appointed
under paragraph 17(2) of this Schedule.
      (5)
No order may be made under this paragraph unless a draft of the statutory
instrument containing it has been laid before the House of Commons before
5
1st April 2008 and has been approved by a resolution of that House.
Commencement
17    (1)
The amendments made by paragraphs 1 to 3 and 13 to 15 have effect in
relation to periods of account beginning on or after 1st January 2007.
      (2)
The amendments made by paragraphs 4, 6 to 9, 10(3) to (5), 11 and 12 have
10
effect in accordance with provision made by an order made by the Treasury.
      (3)
But the amendments made by paragraphs 11 and 12 also have effect in
relation to any transfer of business or demutualisation taking place before
21st March 2007 in a period of account beginning on or after 1st January
2007.
15
      (4)
The amendment made by paragraph 5 has effect in relation to transfers of
business with a transfer date after 21st March 2007.
      (5)
The amendment made by paragraph 10(2) has effect in relation to transfers
taking place on or after 6th December 2006.
Schedule 10
20
Section 40

Insurance companies: miscellaneous
Financing-arrangement-funded transfers to shareholders
1     (1)
In FA 1989, for section 83ZA (contingent loans) substitute—
“83ZA
  Financing-arrangement-funded transfers to shareholders
(1)
Sections 83ZB and 83ZC below apply where an insurance company
25
makes a financing-arrangement-funded transfer to shareholders in
relation to a non-profit fund.
(2)
An insurance company makes a financing-arrangement-funded
transfer to shareholders in relation to a non-profit fund if—
(a)
the company enters into a relevant financing arrangement in
30
relation to a non-profit fund in a period of account (see
subsection (3) below),
(b)
a positive amount is brought into account as a transfer to
non-technical account from the non-profit fund for that or
any subsequent period of account (a “relevant period of
35
account”), and
(c)
either of the conditions in subsection (4) below is met.
(3)
An insurance company enters into a relevant financing arrangement
in relation to a non-profit fund in a period of account if—

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Schedule 10 — Insurance companies: miscellaneous
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(a)
in the period of account the company first stands in the
position of creditor as respects a money debt,
(b)
the money debt is to any extent referable to the company’s
life assurance business, and
(c)
amounts in respect of the money debt are brought into
5
account in relation to the non-profit fund as part of total
income for the period of account.
(4)
The conditions referred to in subsection (2)(c) above are—
(a)
that there is an available surplus in relation to the non-profit
fund for the relevant period of account (see subsection (5)
10
below) but there would not be if the relevant financing
arrangement had not been entered into; and
(b)
that the positive amount brought into account as a transfer to
non-technical account from the non-profit fund for the
relevant period of account meets the 125% condition (see
15
subsection (6) below).
(5)
For the purposes of subsection (4)(a) above, there is an available
surplus in relation to the non-profit fund for the relevant period of
account if an amount is shown in line 39 of Form 58 in relation to the
non-profit fund in the periodical return for the period of account.
20
(6)
For the purposes of subsection (4)(b) above, the positive amount
brought into account as a transfer to non-technical account from the
non-profit fund for the relevant period of account meets the 125%
condition if it exceeds 125% of the relevant mean (see subsection (7)
below).
25
(7)
To arrive at the relevant mean—
(a)
take the amount of any positive amount so brought into
account for each of the appropriate number (see subsection
(8) below) of preceding periods of account (or nil for any of
those periods of account for which no positive amount is so
30
brought into account),
(b)
aggregate them, and
(c)
divide the aggregate by the appropriate number.
(8)
The appropriate number is three or (if less) the total number of
periods of account of the company during the whole or any part of
35
which the company carried on life assurance business before the
relevant period of account.
(9)
Subsection (10) below applies if—
(a)
(apart from that subsection) there are fewer than three
periods of account of the company during the whole or any
40
part of which the company carried on life assurance business
before the relevant period of account, and
(b)
before the relevant period of account, an insurance business
transfer scheme had effect to transfer to the company the
whole, or substantially the whole, of the long-term business
45
of another insurance company.
(10)
The company is to be treated for the purposes of subsections (7) and
(8) above as having carried on life assurance business—