Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
161

(a)
during a period of account consisting of the period of account
of the transferor ending immediately before the time when
the transfer has effect, and
(b)
(where that does not cause there to be three periods of
account during which it carried on such business) during the
5
one or (as the case may require) two periods of account of the
transferor preceding that period of account (so as to cause
there to be three).
(11)
Where, during a preceding period of account to which subsection (7)
above applies (including one to which it applies by virtue of
10
paragraph (10) above), an insurance business transfer scheme had
effect to transfer to the company long-term business of another
insurance company, the references in subsection (7) above to
bringing into account include (so far as appropriate) bringing into
account by the other company.
15
83ZB
Charge in relevant period of account
(1)
The relevant amount (see subsection (2) below) is to be treated for the
purposes of section 83(2) above as brought into account by the
company for the relevant period of account as an increase in the
value of assets.
20
(2)
The relevant amount is—
(a)
where the condition in paragraph (a) of subsection (4) of
section 83ZA above is met, the amount brought into account
as a transfer to non-technical account from the non-profit
fund for the relevant period of account, and
25
(b)
in a case where that condition is not met but the condition in
paragraph (b) of that subsection is met, the amount by which
that amount exceeds the relevant limit.
(3)
The relevant limit is the lesser of—
(a)
125% of the relevant mean (see subsection (7) of that section),
30
and
(b)
the aggregate of the amounts brought into account as
mentioned in subsection (3)(c) of that section in the relevant
period of account and any preceding periods of account less
the aggregate of amounts treated as brought into account by
35
subsection (1) in any preceding periods of account.
83ZC
Deduction in subsequent periods of account
(1)
The company is entitled to a deduction of the appropriate amount in
computing profits of the company’s life assurance business in
accordance with the provisions of Case I of Schedule D for any
40
period of account following the relevant period of account in which
any payment made by the company under the loan relationship is
brought into account as part of total expenditure in the revenue
account for the non-profit fund.
(2)
The appropriate amount is the lesser of—
45
(a)
the amounts paid under the loan relationship and brought
into account as part of total expenditure in the revenue
account for the non-profit fund, and
(b)
the amount determined under subsection (3) below.

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Schedule 10 — Insurance companies: miscellaneous
162

(3)
That amount is—

where—
RA is the relevant amount under section 83ZB above (see
subsection (2) of that section), and
NY is the number of years, that is the number of years (rounded
5
up where not a whole number to the next whole number) in
the period—
(a)
beginning with the relevant period of account, and
(b)
ending with the last date on which it is expected that
the company will make a payment under the loan
10
relationship which could be brought into account as
part of total expenditure in the revenue account for
the non-profit fund.
(4)
But if the aggregate of what would otherwise be the appropriate
amount and any amounts which constituted the appropriate amount
15
for earlier periods of account in relation to the relevant financing
arrangement would exceed the amount which is the relevant
amount, the appropriate amount is the amount of that excess.”
      (2)
Where, at the end of the period of account of an insurance company
immediately preceding the first period of account of the company for which
20
the amendment made by sub-paragraph (1) has effect (“the initial period of
account”), the company has unrepaid contingent loan liabilities, sections
83ZA to 83ZC of FA 1989 (as substituted by sub-paragraph (1)) have effect
in relation to the initial period of account as if—
(a)
the company entered into a relevant financing arrangement in that
25
period of account,
(b)
the amount of the unrepaid contingent loan liabilities were amounts
in respect of a money debt referable to the company’s life assurance
business which are brought into account in relation to a non-profit
fund as part of total income for that period of account, and
30
(c)
the reference in section 83ZA(4)(a) to the relevant financing
arrangement having been entered into were to the company not
having unrepaid contingent liabilities.
      (3)
For the purposes of sub-paragraph (2)—
(a)
subsection (3) of section 83ZA of FA 1989 (as originally enacted)
35
applies for determining whether the company has unrepaid
contingent liabilities, and
(b)
the amount of the unrepaid contingent loan liabilities is the amount
given by subsection (7) of that section (as it has effect before its
repeal) for the period of account preceding the initial period of
40
account.
2     (1)
In section 444AE of ICTA (modification of section 83ZA of FA 1989), for
subsection (2) substitute—
“(2)
If the insurance business transfer scheme has effect to transfer a
relevant financing arrangement (within the meaning of section 83ZA
45
of the Finance Act 1989), it is to be treated as having been entered into
by the transferee in the period of account of the transferee that
includes the transfer if amounts in respect of the money debt

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
163

concerned are brought into account in relation to a non-profit fund
as part of total income for that period of account.”
      (2)
In section 83(2A) of FA 1989 (receipts to be taken into account as receipts of
a period of account where profits computed in accordance with Case I of
Schedule D), after paragraph (ab) (inserted by paragraph 5(3)) insert—
5
“(ac)
consists of amounts brought into account in respect of a
money debt where the requirements in paragraphs (a) and (b)
of section 83ZA(3) below are satisfied in relation to the
money debt;”.
      (3)
In FA 1996, omit paragraph 2(2A) of Schedule 11.
10
“Structural” assets
3     (1)
In FA 1989, after section 83 insert—
“83XA
Structural assets
(1)
Section 83(2) does not require to be taken into account as receipts or
expenses of a period of account income from, or an increase or a
15
decrease in the value of, structural assets by an insurance company
held in a non-profit fund.
(2)
In this section “structural assets” means—
(a)
shares, debts and loans the value of which is required to be
entered in lines 21 to 24 of Form 13 in the periodical return
20
(UK insurance dependants and other insurance dependants),
and
(b)
assets of such other descriptions as are specified by
regulations made by the Treasury.
(3)
Regulations under subsection (2) above may be made so as to have
25
effect in relation to periods of account current when they are made
(as well as accounting periods beginning later).
(4)
Where a structural asset held by an insurance company in a non-
profit fund ceases to be an asset of the company’s long-term
insurance fund, the relevant value difference is to be taken into
30
account under section 83(2)—
(a)
as a receipt (if it is a positive amount), or
(b)
as an expense (if it is a negative amount),

of the period of account in which it so ceases.
(5)
“The relevant value difference” is the difference between historic cost
35
and shown value; and in this section—
“historic cost”, in relation to an asset, means the consideration
given by the company for the acquisition of the asset or,
where the asset was acquired by the company on a transfer of
business, the consideration given by the last person who
40
acquired it otherwise than on such a transfer, and
“shown value”, in relation to an asset, means the value of the
asset as shown in Form 13 of the periodical return for the
period of account of the company immediately before the
first period of account in which the asset was a structural
45
asset held by the company in a non-profit fund.

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Schedule 10 — Insurance companies: miscellaneous
164

(6)
For the purposes of the Taxation of Chargeable Gains Act 1992 an
insurance company is to be treated as acquiring a structural asset for
a consideration equal to historic cost at the beginning of the first
period of account of the company in which the asset is a structural
asset held by the company in a non-profit fund.
5
(7)
Structural assets held by an insurance company in a non-profit fund
are to be treated as being within paragraph (f) of subsection (4) of
section 440 of the Taxes Act 1988; but no disposal or re-acquisition is
to be deemed to occur by virtue of an asset ceasing to be within any
other paragraph of that subsection and coming within that
10
paragraph on becoming such a structural asset.
(8)
Structural assets held by an insurance company in a non-profit fund
are to be treated as being “remaining” securities within section
440A(2)(e) of the Taxes Act 1988.
(9)
Section 432A of the Taxes Act 1988 does not have effect in relation to
15
income arising from, or gains and losses accruing on the disposal of,
structural assets held by an insurance company in a non-profit
fund.”
      (2)
In ICTA, omit section 444ACA (transfers of business).
      (3)
In section 432E(2A) of that Act, omit “444ACA(2),” and paragraph (b).
20
Losses on disposal of authorised investment fund assets to connected manager
4
In TCGA 1992, after section 210B insert—
“210C
  Losses on disposal of authorised investment fund assets to connected
manager
(1)
Section 18(3) does not apply in relation to a loss accruing on the
25
disposal by an insurance company of authorised investment fund
assets to the manager of the authorised investment fund.
(2)
In this section—
“authorised investment fund assets” means assets of the
company’s long-term insurance fund consisting of rights
30
under an authorised unit trust or shares in an open-ended
investment company,
“the manager of the authorised investment fund” means—
(a)
in the case of an authorised unit trust, the person who
is the manager of the unit trust scheme for the
35
purposes of Chapter 3 of Part 17 of the Financial
Services and Markets Act 2000, and
(b)
in the case of an open-ended investment company, a
director or other person having responsibility for the
management of its scheme property, and
40
“open-ended investment company” means a company
incorporated in the United Kingdom to which section 236 of
the Financial Services and Markets Act 2000 applies.”

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Schedule 10 — Insurance companies: miscellaneous
165

Priority of section 83(2) of FA 1989 etc
5     (1)
Section 83 of FA 1989 (receipts to be taken into account) is amended as
follows.
      (2)
After subsection (2) insert—
“(2ZA)
Amounts brought into account as mentioned in subsection (2) above
5
are not to be taken into account in any other way; and this subsection
applies in spite of—
(a)
section 80(5) of the Finance Act 1996 (taxation of loan
relationships),
(b)
paragraph 1(2) of Schedule 26 to the Finance Act 2002
10
(taxation of profits from derivative contracts), and
(c)
paragraph 1(3) of Schedule 29 to that Act (gains and losses in
respect of intangible fixed assets).”
      (3)
In subsection (2A), after paragraph (aa) insert—
“(ab)
comprises a business transfer-in that is not brought into
15
account in a revenue account prepared for the purposes of
Chapter 9 of the Prudential Sourcebook (Insurers) in respect
of the whole of the company’s long-term business,”.
      (4)
Omit—
(a)
in section 502H of ICTA, in subsection (2), paragraph (b) and the
20
word “and” before it and subsections (8) to (10),
(b)
paragraph 2(2) and (3) to (5) of Schedule 11 to FA 1996,
(c)
paragraph 19(1) to (3) of Schedule 12 to FA 1997, and
(d)
paragraph 36(4) and (5) of Schedule 29 to FA 2002.
Tidying up of TCGA 1992
25
6     (1)
TCGA 1992 is amended as follows.
      (2)
In section 210B(6)(a) (disposal and acquisition of section 440A securities), for
the words after “are” substitute “assets within section 212(1).”.
      (3)
Omit—
(a)
section 212(2A) (disapplication of section 212(1) to assets treated as
30
representing rights under a creditor relationship),
(b)
section 214 (rights under authorised unit trusts etc: transitional
provisions), and
(c)
section 214A (further transitional provisions).
Tidying up of Chapter 2 of Part 4 of FA 1996
35
7     (1)
Chapter 2 of Part 4 of FA 1996 (loan relationships) is amended as follows.
      (2)
In section 103(3) (loan relationships: interpretation), omit “or” at the end of
paragraph (a) and after paragraph (b) insert “or
(c)
any basic life assurance and general annuity business,”.
      (3)
In sub-paragraph (1) of paragraph 1A of Schedule 9 (life assurance policies),
40
for the words after “relating to” substitute “liabilities of an insurance
company within paragraph (a) of the definition of “liabilities” in section

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
166

431(2) of the Taxes Act 1988.”; and the italic heading before that paragraph
accordingly becomes “Insurance company liabilities”.
      (4)
In Schedule 11, omit paragraph 1(1A) to (1C).
Correction of erroneous repeal
8
The repeals made by Schedule 3 to ITA 2007 in paragraph 11 of Schedule 6
5
to FA 1990 are deemed never to have had effect; but Schedule 3 to ITA 2007
is deemed to have included the repeal of the words before the paragraphs in
sub-paragraph (1) of that paragraph.
Non-profit companies, non-profit funds and with-profits funds
9     (1)
In section 431(2) of ICTA (interpretative provisions relating to insurance
10
companies) insert at the appropriate place—
““non-profit company”, in relation to a period of account,
means a company carrying on long-term business where, at
the end of the period—
(a)
none of the liabilities of that business, or
15
(b)
none but an insignificant proportion of those
liabilities,
are with-profits liabilities;”,
““non-profit fund” means a fund that is not a with-profits
fund;”, and
20
““with-profits fund” has the meaning given by the Prudential
Sourcebook (Insurers);”.
      (2)
Omit—
(a)
in section 432YA(5) of ICTA, the definitions of “non-profit company”
and “non-profit fund”,
25
(b)
section 82D(5) of FA 1989,
(c)
in section 83YA of that Act, subsection (8) and, in subsection (11), the
definition of “with-profits fund”, and
(d)
in section 83A of that Act, in subsections (2)(b) and (3D)(b) “(see
subsection (6))” and subsection (6).
30
Internal linked funds and net value
10    (1)
In section 431(2) of ICTA (interpretative provisions relating to insurance
companies) insert at the appropriate place—
““internal linked fund”, in relation to an insurance company,
means an account—
35
(a)
to which linked assets are appropriated by the
company, and
(b)
which may be divided into units the value of which is
determined by the company by reference to the value
of those assets;”, and
40
““net value”, in relation to any assets, means the excess of the
value of the assets over the value of money debts (within the
meaning of Chapter 2 of Part 4 of the Finance Act 1996)
attributable to an internal linked fund which are not owed in
respect of liabilities;”.
45

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Schedule 10 — Insurance companies: miscellaneous
167

      (2)
Omit—
(a)
in section 432ZA(6) of ICTA, the definition of “internal linked fund”,
(b)
section 432A(9A) of that Act,
(c)
the definition of “internal linked fund” in section 210B(8) of TCGA
1992, and
5
(d)
paragraph 3A(6) of Schedule 11 to FA 1996.
Fair value
11    (1)
In section 431(2) of ICTA (interpretative provisions relating to insurance
companies) insert at the appropriate place—
““fair value”, in relation to assets, means the amount which
10
would be obtained from an independent person purchasing
them or, if the assets are money, its amount;”.
      (2)
In section 440 of ICTA (transfer of assets etc)—
(a)
in subsections (1) and (2), for “market” substitute “fair”, and
(b)
omit subsection (5).
15
      (3)
Omit—
(a)
section 444AB(6) of ICTA (as originally enacted),
(b)
in section 444AC(11) of that Act (as originally enacted), the words
from the beginning to the end of the definition of “fair value”,
(c)
section 444AD(5) of that Act,
20
(d)
in section 83(8) of FA 1989, in the definition of “fair value”,
paragraph (a), and
(e)
section 83YB(5) of that Act.
Generalisation of definitions
12    (1)
Section 431 of ICTA (interpretative provisions relating to insurance
25
companies) is amended as follows.
      (2)
For subsection (1) substitute—
“(1)
This section has effect for the interpretation of the life assurance
provisions of the Corporation Tax Acts.”
      (3)
In subsection (2), insert at the appropriate place—
30
““the life assurance provisions of the Corporation Tax Acts”
means—
(a)
the provisions of this Chapter so far as relating to life
assurance business, companies carrying on such
business and friendly societies, and
35
(b)
any other provisions of the Corporation Tax Acts
making separate provision by reference to whether or
not the business of a company is or includes life
assurance business or any category of business that
includes life assurance business;”.
40
13    (1)
Section 431A (power to amend) is amended as follows.
      (2)
In subsection (1), for “insurance company taxation provision” substitute “of
the life assurance provisions of the Corporation Tax Acts”.