|
| |
|
(5) | The application, in relation to the life assurance business of an |
| |
insurance company, of any provision of Case I of Schedule D is not |
| |
| |
(a) | to prevent the application of the I minus E basis in relation to |
| |
that business of the company for any accounting period, or |
| 5 |
(b) | to affect the operation of the I minus E basis in relation to the |
| |
that business of the company for any accounting period |
| |
except as specifically provided by the Corporation Tax Acts. |
| |
431H | Company carrying on life assurance business and other insurance |
| |
| 10 |
(1) | This section applies in relation to an insurance company which |
| |
carries on life assurance business and insurance business of any |
| |
| |
(2) | For the purposes of the Corporation Tax Acts— |
| |
(a) | the life assurance business, and |
| 15 |
(b) | the other insurance business, |
| |
| are to be treated as separate businesses. |
| |
(3) | The profits of the other insurance business shall be charged to tax |
| |
under Case I of Schedule D as the profits of a separate trade. |
| |
(4) | But subsection (3) above does not apply where that business is |
| 20 |
| |
(5) | As to the profits of the life assurance business, see section 431G.” |
| |
5 | In section 432A(7)(c)(ii) (apportionment of income and gains), for |
| |
“85(2C)(c)” substitute “85(2C) or 85A”. |
| |
6 | In section 437(1A) (annuities), for “, otherwise than in accordance with the |
| 25 |
provisions applicable to Case I of Schedule D,” substitute “under the I minus |
| |
| |
7 | Omit section 439A (taxation of pure reinsurance business). |
| |
8 (1) | Section 440B (modifications where tax charged under Case I of Schedule D) |
| |
| 30 |
(2) | In subsection (1), insert at the end “in accordance with section 431G(3)”. |
| |
(3) | In subsection (3), for “Section 440(1) and (2) apply” substitute “Subsection (1) |
| |
| |
(4) | After subsection (4) insert— |
| |
“(4A) | Section 440(2) does not apply if either the transferor or the company |
| 35 |
by which the asset is acquired is a company whose profits are |
| |
charged to tax in accordance with Case I of Schedule D (or if they |
| |
| |
(4B) | Section 211 of the 1992 Act does not apply if the transferor is a |
| |
company whose profits are charged to tax in accordance with Case I |
| 40 |
| |
| |
|
| |
|
| |
|
9 | After that section insert— |
| |
“440C | Modifications for change of tax basis |
| |
(1) | Subsection (2) makes provision for a case where— |
| |
(a) | subsection (4) of section 431G applies in relation to the profits |
| |
of the life assurance business of an insurance company for |
| 5 |
any accounting period, but |
| |
(b) | the profits of that business for a succeeding accounting |
| |
period fall to be charged to tax in accordance with Case I of |
| |
Schedule D by virtue of subsection (3) of that section. |
| |
(2) | The loss referred to in section 431G(4)(b) (less any loss for the same |
| 10 |
accounting period set off under section 436A for any intervening |
| |
accounting period and any amount deducted for any such period in |
| |
respect of the loss by virtue of section 85A(3)(b) of the Finance Act |
| |
1989) may be set off under section 393 against profits of that |
| |
succeeding accounting period (without being reduced in accordance |
| 15 |
with section 434A(2)(a)). |
| |
(3) | In determining whether any loss has been set off under section 436A |
| |
for any intervening accounting period, or whether any amount has |
| |
been deducted for any such period in respect of the loss by virtue of |
| |
section 85A(3)(b) of the Finance Act 1989, losses of earlier accounting |
| 20 |
periods are to be assumed to be set off before those of later |
| |
| |
(4) | Subsection (5) makes provision for a case where— |
| |
(a) | a loss arises to an insurance company for an accounting |
| |
period for which the profits of its life assurance business fall |
| 25 |
to be charged to tax in accordance with Case I of Schedule D |
| |
by virtue of section 431G(3)(b), |
| |
(b) | the profits of that business for a subsequent accounting |
| |
period are charged to tax under the I minus E basis, and |
| |
(c) | had those profits (instead) been charged to tax in accordance |
| 30 |
with Case I of Schedule D, any of that loss would have been |
| |
available to be set off against them under section 393. |
| |
(5) | The loss is to be treated for the purposes of the operation of section |
| |
436A in relation to the subsequent accounting period as if it were a |
| |
loss arising from its gross roll-up business in the accounting period |
| 35 |
| |
(6) | Subsections (7) and (8) make provision for a case where— |
| |
(a) | the profits of the life assurance business of an insurance |
| |
company for an accounting period are charged to tax under |
| |
| 40 |
(b) | the profits of that business for its next accounting period fall |
| |
to be charged to tax in accordance with Case I of Schedule D |
| |
by virtue of section 431G(3), and |
| |
(c) | that prevents the giving of relief in accordance with section |
| |
86(8) of the Finance Act 1989 (acquisition expenses relieved in |
| 45 |
fractions under section 76). |
| |
(7) | Any relief which would have been so given in— |
| |
(a) | the next accounting period, or |
| |
|
| |
|
| |
|
(b) | any subsequent accounting period for which the profits of the |
| |
company’s life assurance business continue to be charged to |
| |
tax in accordance with Case I of Schedule D, |
| |
| may be given by set-off against any gains treated as accruing under |
| |
section 213(1) of the 1992 Act at the end of the accounting period. |
| 5 |
(8) | But if the profits of the company’s life assurance business for a |
| |
subsequent accounting period are charged to tax under the I minus E |
| |
basis, any relief not previously given under subsection (7) is to be |
| |
treated for the purposes of the operation of section 76 in relation to |
| |
the first subsequent accounting period for which profits are so |
| 10 |
charged as if it were an amount which is to be relieved under that |
| |
section by virtue of section 86(8) and (9) of the Finance Act 1989.” |
| |
10 | In section 755A(2) and (6)(a) (controlled foreign companies: apportionments |
| |
to companies carrying on life assurance business), for “not charged to tax |
| |
under Case I of Schedule D in respect of its profits from” substitute “charged |
| 15 |
to tax under the I minus E basis in respect of”. |
| |
| |
11 | FA 1989 is amended as follows. |
| |
12 | In section 83(6)(c) (receipts to be taken into account), for the words from “the |
| |
reinsurer” to the end substitute “section 431G(3)(a) of the Taxes Act 1988 |
| 20 |
(pure reinsurance) applies to the reinsurer under the contract for the |
| |
accounting period of the reinsurer during which the transfer of business |
| |
| |
13 | In subsection (1) of section 85 (charge of certain receipts of BLAGAB)— |
| |
(a) | for “the profits of an insurance company in respect of its life |
| 25 |
assurance business are not charged under Case I of Schedule D” |
| |
substitute “an insurance company is charged to tax under the I minus |
| |
E basis in respect of its life assurance business”, and |
| |
(b) | for “those profits” substitute “the profits of the life assurance |
| |
| 30 |
14 | After that section insert— |
| |
“85A | Excess adjusted Case I profits |
| |
(1) | Where for any accounting period an insurance company is charged |
| |
to tax under the I minus E basis in respect of its life assurance |
| |
business, the company shall be chargeable on any excess adjusted |
| 35 |
Case I profits under Case VI of that Schedule. |
| |
(2) | “Excess adjusted Case I profits” means any amount by which— |
| |
(a) | the adjusted Case I profits (see subsection (3)), exceeds |
| |
(b) | the relevant amount (see subsection (5)). |
| |
(3) | “The adjusted Case I profits” means the amount that would be the |
| 40 |
profits of the company’s life assurance business for the accounting |
| |
| |
(a) | computed in accordance with the provisions applicable to |
| |
Case I of Schedule D, and |
| |
(b) | adjusted in respect of losses (see subsection (4)). |
| 45 |
|
| |
|
| |
|
(4) | The adjustment in respect of losses is a deduction of the amount |
| |
which, disregarding section 434A(2)(a) of the Taxes Act 1988, would |
| |
fall to be set off under section 393 of that Act against the company’s |
| |
income for the accounting period if the company had always been |
| |
charged to tax under Case I of Schedule D. |
| 5 |
(5) | The relevant amount (which may be a negative amount) is found |
| |
| |
(a) | taking the relevant income (see subsection (6)), and |
| |
(b) | deducting from it the relevant aggregate (see subsection (8)). |
| |
(6) | “The relevant income” means— |
| 10 |
(a) | any income (including distributions received from |
| |
companies resident in the United Kingdom) referable (in |
| |
accordance with section 432A of the Taxes Act 1988) to the |
| |
company’s basic life assurance and general annuity business |
| |
for the accounting period, |
| 15 |
(b) | any chargeable gains referable (in accordance with section |
| |
432A of that Act) to the company’s basic life assurance and |
| |
general annuity business for the accounting period (see |
| |
| |
(c) | any profits of the company chargeable for the accounting |
| 20 |
period under Case VI of Schedule D under section 436A of |
| |
| |
(7) | “Chargeable gains referable (in accordance with section 432A of the |
| |
Taxes Act 1988) to the company’s basic life assurance and general |
| |
annuity business” has the same meaning as in subsection (3A)(a) of |
| 25 |
section 88 below (see subsection (3B) of that section). |
| |
(8) | “The relevant aggregate” means the sum of— |
| |
(a) | the expenses deduction (see Step 8 in section 76(7) of the |
| |
Taxes Act 1988) in the case of the company for the accounting |
| |
| 30 |
(b) | any non-trading deficit on the company’s loan relationships |
| |
which is produced for the accounting period in relation to the |
| |
company’s basic life assurance and general annuity business |
| |
by a separate computation under paragraph 2(1) of Schedule |
| |
11 to the Finance Act 1996, and |
| 35 |
(c) | any amount which in pursuance of a claim under paragraph |
| |
4(3) of that Schedule is carried back to the accounting period |
| |
and (in accordance with paragraph 4(5) of that Schedule) |
| |
applied in reducing profits of the company for the accounting |
| |
| 40 |
(9) | The Treasury may by regulations provide— |
| |
(a) | that, in circumstances prescribed by the regulations, the |
| |
charge imposed by this section for an accounting period may |
| |
be reduced or eliminated, and |
| |
(b) | that the amount by which the charge is reduced, or (where |
| 45 |
the charge is eliminated) the amount of the charge, is instead |
| |
imposed for a subsequent accounting period (or part of the |
| |
amount is instead imposed for more than one subsequent |
| |
| |
|
| |
|
| |
|
(10) | Regulations under subsection (9) may include provision having |
| |
effect in relation to times before they are made.” |
| |
15 (1) | Section 88 (policy holders’ fraction of profits) is amended as follows. |
| |
| |
(3) | In subsection (3)(a), for “basic” substitute “expenses”. |
| 5 |
16 (1) | Section 89 (policy holders’ share of profits) is amended as follows. |
| |
(2) | In subsection (1B)(b), for “basic” substitute “expenses”. |
| |
(3) | In subsection (7), for the words after “Schedule D” substitute “; but for the |
| |
purposes of subsections (1), (1A) and (2) they are to be adjusted in respect of |
| |
losses in accordance with section 85A(4).” |
| 10 |
| |
17 | In paragraph 16(1) of Schedule 7 to FA 1991 (transitional relief for old |
| |
general annuity contracts), for “, otherwise than in accordance with the |
| |
provisions applicable to Case I of Schedule D,” substitute “under the I minus |
| |
| 15 |
Taxation of Chargeable Gains Act 1992 (c. 12) |
| |
18 | In section 212 of TCGA 1992 (annual deemed disposal of holdings of unit |
| |
trusts etc), omit subsection (7A) (which applies section 440B(5) of ICTA). |
| |
Finance (No. 2) Act 1992 (c. 48) |
| |
19 | In F(No.2)A 1992, omit section 65 (life assurance business: I minus E basis). |
| 20 |
| |
20 | In paragraph 4 of Schedule 11 to FA 1996 (loan relationships: special |
| |
provisions for insurers: treatment of deficit), omit sub-paragraphs (12) to |
| |
| |
| 25 |
21 | In paragraph 84 of Schedule 18 to FA 1998 (company tax returns, |
| |
assessments and related matters), for sub-paragraphs (1) to (3) substitute— |
| |
“(1) | This paragraph applies where amounts may be brought into |
| |
| |
(a) | in computing profits chargeable to tax under Case I of |
| 30 |
| |
(b) | as amounts within Case III or V of that Schedule.”; |
| |
| and the italic heading before that paragraph accordingly becomes “Choice |
| |
between Case I and Case III or V of Schedule D”. |
| |
Capital Allowances Act 2001 (c. 2) |
| 35 |
22 | CAA 2001 is amended as follows. |
| |
|
| |
|
| |
|
23 | In section 256(1), for paragraph (b) substitute— |
| |
“(b) | is charged to tax under the I minus E basis in respect of its life |
| |
| |
24 | In section 257(2) (life assurance: supplementary), for paragraphs (a) and (b) |
| |
| 5 |
“(a) | section 85A(3) of the Finance Act 1989 (excess adjusted Case |
| |
| |
(b) | section 89 of that Act (policy holders’ share of profits).” |
| |
| |
25 | FA 2002 is amended as follows. |
| 10 |
26 | In paragraph 13(1) of Schedule 12 (tax relief on R&D: special provisions for |
| |
insurance companies), for “the profits arising to a company from its life |
| |
assurance business are not charged to corporation tax under Case I of |
| |
Schedule D” substitute “an insurance company is charged to tax under the I |
| |
minus E basis in respect of its life assurance business”. |
| 15 |
27 | In Schedule 29 (gains and losses of a company from intangible fixed assets), |
| |
omit paragraph 36(6) (meaning of I minus E basis). |
| |
| |
| |
Unused pre-commencement section 76(12) etc excesses |
| 20 |
28 | Step 7 in subsection (7) of section 76 of ICTA applies in relation to an |
| |
insurance company for the first accounting period beginning on or after 1st |
| |
January 2007 for which the profits of the life assurance business are charged |
| |
to tax under the I minus E basis as if the amounts carried forward to the |
| |
accounting period under subsection (12) of that section included— |
| 25 |
(a) | any excess such as is mentioned in that subsection relating to the |
| |
company for an accounting period beginning on or after 1st April |
| |
2004 but not later than 1st January 2007 which was not brought into |
| |
account for the next accounting period in accordance with Step 7 in |
| |
subsection (7) of that section, and |
| 30 |
(b) | any excess such as was mentioned in subsection (3) of section 75 of |
| |
ICTA relating to the company for an accounting period beginning |
| |
before 1st April 2004 which was not deducted for the succeeding |
| |
accounting period in accordance with that section (as applied by |
| |
| 35 |
Shifts in basis of taxation at first post-commencement accounting period |
| |
29 (1) | This paragraph applies where— |
| |
(a) | the profits of the life assurance business of an insurance company for |
| |
the first accounting period of the company beginning on or after 1st |
| |
January 2007 (“the first accounting period”) are charged to tax in |
| 40 |
accordance with Case I of Schedule D by virtue of subsection (3)(b) |
| |
of section 431G of ICTA, but |
| |
|
| |
|
| |
|
(b) | the profits of the life assurance business of the company for the |
| |
preceding accounting period were charged to tax under the I minus |
| |
| |
(2) | The amount of the losses available to be set off under section 393 of ICTA |
| |
against the profits of the first accounting period is the amount of any loss |
| 5 |
under section 436, 439B or 441 of ICTA carried forward to that period by |
| |
virtue of Part 2 of Schedule 7 to this Act. |
| |
| |
| |
Insurance companies: transfers etc |
| |
Definition of “insurance business transfer scheme” |
| 10 |
1 (1) | In section 431(2) of ICTA (interpretative provisions for purposes of |
| |
Corporation Tax Acts), for the definition of “insurance business transfer |
| |
| |
““insurance business transfer scheme” means— |
| |
(a) | a scheme falling within section 105 of the Financial |
| 15 |
Services and Markets Act 2000, including an excluded |
| |
scheme falling within Case 2, 3 or 4 of subsection (3) |
| |
| |
(b) | a scheme which would fall within that section but for |
| |
subsection (1)(b) of that section;”. |
| 20 |
(2) | In consequence of sub-paragraph (1), omit— |
| |
(a) | the definition of “insurance business transfer scheme” in section |
| |
| |
(b) | section 444AB(11) of that Act (as originally enacted), |
| |
(c) | in section 444AC(11) of that Act (as originally enacted), the definition |
| 25 |
of “insurance business transfer scheme”, |
| |
(d) | section 460(10B) of that Act, |
| |
(e) | the definition of “insurance business transfer scheme” in paragraph |
| |
12(9) of Schedule 9 to FA 1996, |
| |
(f) | section 560(5)(b) of CAA 2001, |
| 30 |
(g) | paragraph 28(5) of Schedule 26 to FA 2002, and |
| |
(h) | the definition of “insurance business transfer scheme” in paragraph |
| |
89(3) of Schedule 29 to that Act. |
| |
(3) | In section 66 of FA 2002 (election to continue postponement of mark to |
| |
| 35 |
(a) | in subsection (4)(a), for “a transfer” substitute “an insurance business |
| |
| |
(b) | in subsection (5), omit the definition of “transfer scheme”, and |
| |
(c) | omit subsections (6) and (7). |
| |
(4) | In paragraph 10 of Schedule 22 to that Act— |
| 40 |
(a) | in sub-paragraph (1)(a), for “a transfer” substitute “an insurance |
| |
| |
(b) | in sub-paragraph (4), omit the definition of “transfer scheme”, and |
| |
(c) | omit sub-paragraphs (5) and (6). |
| |
|
| |
|