Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 9 — Insurance companies: transfers etc
153

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—
(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
5
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
return of the transferor covering the transfer date.
(2)
See section 444AA for the meaning of “the transfer date” in this
10
section.
444ABC
Transfer scheme transferring part of business: transferor
(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
15
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
insurance fund which are transferred from the transferor to the
transferee by the insurance business transfer scheme are not,
20
immediately after their transfer—
(a)
if the transferee is an insurance company, assets of the
transferee’s long-term insurance fund, or
(b)
if the transferee is not an insurance company, assets of a with-
profits fund of the transferee,
25

(“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
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
30
of account covering the transfer date.
(4)
The relevant amount in relation to the relevant non-transferred
assets is—
where
FVA is the fair value of the assets on the transfer date, and
35
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
section.”
      (2)
In section 432E(2A) of ICTA (apportionments: participating funds)—
40
(a)
before “444AF(2)” insert “444AB, 444ABC,”, and
(b)
after paragraph (a) insert—
“(aa)
section 444AB or 444ABC of this Act;”.

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Schedule 9 — Insurance companies: transfers etc
154

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)
See section 444AA for the meaning of “the transfer date” in this
section.”
Transfer schemes: taxing the transferee
6     (1)
In ICTA, for section 444AC substitute—
15
“444AC
Transfer schemes transferring whole of business: reduction in
income of transferee
(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
20
(“the transferee”) and conditions A and B are met.
(2)
Condition A is that the transferor did not carry on life assurance
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
25
13 of Form 14 in the periodical return of the transferor covering the
relevant period of account.
(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
30
includes the transfer date is to be reduced by an amount equal to the
transferred surplus.
(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.
35
(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
40
(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

Finance Bill
Schedule 9 — Insurance companies: transfers etc
155

another person (“the transferee”) and the condition in subsection (2)
below is met.
(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.
5
(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
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.
10
(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
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.
15
(5)
See section 444AA for the meaning of “the transfer date” in this
section.”
      (2)
In section 83(2A) of FA 1989 (receipts not to be taken into account), omit
paragraph (b).
Repeal of section 444AD
20
7     (1)
In ICTA, omit section 444AD (transfers of business: modification of section
83(2B) of FA 1989).
      (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
25
transfer-in amount for the previous period of account is any amount by
which—
(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
30
immediately before the transfer, exceeds
(b)
the amount of any business transfer-in brought into account
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)
35
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
40
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

Finance Bill
Schedule 9 — Insurance companies: transfers etc
156

(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
obtaining of that Case I advantage.
(2)
In subsection (1) above “transfer scheme arrangements” means an
insurance business transfer scheme (“the relevant transfer scheme”)
5
together with any relevant associated operations.
(3)
If a Case I advantage is obtained by the transferor (see subsection (1)
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
10
transferor for the period of account of the transferor covering the
transfer date.
(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
15
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
the transfer date.
(5)
In this section and sections 444AEB and 444AEC “relevant associated
operations”, in relation to the relevant transfer scheme, means—
20
(a)
any other insurance business transfer scheme,
(b)
any contract of reinsurance,
(c)
any reconstruction or amalgamation involving the transferor,
a dependant of the transferor which is an insurance
undertaking or the transferee, or
25
(d)
any surplus-increasing transfer of assets,

which is effected in connection with the relevant transfer scheme.
(6)
In subsection (5) above—
“dependant” and “insurance undertaking” have the same
meaning as in the Insurance Prudential Sourcebook, and
30
“surplus-increasing transfer of assets” means a transfer of assets
of the transferor’s long-term insurance fund to the transferee
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
35
transferee.
(7)
See section 444AA for the meaning of “the transfer date” in this
section.
444AEB
Case I advantage: transferor
(1)
A Case I advantage is obtained by the transferor if—
40
(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
transfer scheme arrangements, or
(b)
Case I losses of its life assurance business for such a period of
45
account are greater than they would be but for the transfer
scheme arrangements or any part of the transfer scheme
arrangements.

Finance Bill
Schedule 9 — Insurance companies: transfers etc
157

(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,
5
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—
10
(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.
15
(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
20
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
25
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
30
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
35
for the transfer scheme arrangements or part, or
(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—
40
(a)
the first period of account of the transferee ending after the
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
45
relevant associated operations (if that occurs after the transfer
date), or
(c)
any intervening period of account.

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Schedule 9 — Insurance companies: transfers etc
158

(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
losses”, in this section.
444AED
Clearance: no avoidance or group advantage
5
(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
Commissioners”) have given a notice under subsection (2) below.
(2)
A notice under this subsection is a notice stating that the HMRC
10
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
transfer scheme arrangements, or
(b)
that the transferor and the transferee are members of the
15
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.
(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
20
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
companies which are members of the group of companies,
and
25
(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
obtaining of the Case I advantage.
(4)
An application under this section must be in writing and contain
30
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
application.
(6)
A requirement may be imposed under subsection (5) above within 30
35
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,
they need not proceed further on the application.
40
(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.
(9)
If the HMRC Commissioners—
45
(a)
give notice to the applicant under subsection (8) above that
they are not satisfied as mentioned in subsection (2) above, or

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Schedule 9 — Insurance companies: transfers etc
159

(b)
do not comply with subsection (8) above,

the applicant may require them to transmit the application to the
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
5
be accompanied by any notice given under subsection (5) above and
further particulars provided pursuant to any such notice.
(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.
10
(12)
If any particulars provided under this section do not fully and
accurately disclose all facts and considerations material for the
decision of the HMRC Commissioners or the Special
Commissioners, any resulting notice that they are satisfied as
mentioned in subsection (2) above is void.
15
(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
Part 10.”
      (2)
In section 432E(2A) of ICTA (as amended by paragraph 4(2)), after
“444ABC,” insert “444AEA,” and after paragraph (aa) insert—
20
“(ab)
section 444AEA of this Act;”.
Repeal of FA s.82C
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
25
follows.
      (2)
In the first sentence of subsection (2B), for the words from “but the transfer”
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
30
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
35
“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
40
excluded from subsection (2B) above.”