Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
167

Internal linked funds and net value
9     (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—
5
(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
10
““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;”.
15
      (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
20
(d)
paragraph 3A(6) of Schedule 11 to FA 1996.
Fair value
10    (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
25
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).
30
      (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section 444AB(6) of ICTA (as originally enacted),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in section 444AC(11) of that Act (as originally enacted), the words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,
35
(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
11    (1)
Section 431 of ICTA (interpretative provisions relating to insurance
40
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.”

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
168

      (3)
In subsection (2), insert at the appropriate place—
““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
5
business and friendly societies, and
(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
10
includes life assurance business;”.
12    (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”.
      (3)
Omit subsection (7).
15
13
In section 83A(1) of FA 1989 (“brought into account”)—
(a)
omit “In sections 82A to 83B”, and
(b)
for “those sections” substitute “sections 82A to 83ZA”.
14    (1)
Omit the following provisions.
      (2)
In ICTA—
20
(a)
in section 12(7B), the words from the beginning to the end of the
definition of “contracts of long-term insurance”,
(b)
in section 76(15), “and other expressions have the same meaning as
in Chapter 1 of Part 12”,
(c)
in section 587B(9), ““life assurance business” and related expressions
25
have the same meaning as Chapter 1 of Part 12;”,
(d)
in section 755A(12), the definition of “long-term insurance fund”,
(e)
section 804F, and
(f)
in paragraph 14(1) of Schedule 28AA, the definition of “insurance
company”.
30
      (3)
In FA 1989—
(a)
in section 85(2A), the second sentence,
(b)
in section 89(6), the words from the beginning to “; and”, and
(c)
section 90A.
      (4)
In paragraph 16(7) of Schedule 7 to FA 1991, the words from “and, subject to
35
that,” to the end.
      (5)
In TCGA 1992—
(a)
section 214BA, and
(b)
paragraph 17(5) of Schedule 7AC.
      (6)
In FA 1996—
40
(a)
in section 87A(2), “, within the meaning of Chapter 1 of Part 12 of the
Taxes Act 1988,” and “(see section 431(2) of that Act)”,
(b)
section 88(7),
(c)
in paragraph 12(9) of Schedule 9, the definitions of “contracts of long-
term insurance” and “overseas life insurance company”,
45

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
169

(d)
in paragraph 20(3)(b) of that Schedule, “, within the meaning of
Chapter 1 of Part 12 of the Taxes Act 1988,” and “(see section 431(2)
of that Act)”, and
(e)
in Schedule 11, paragraph 6.
      (7)
In paragraph 13(3) of Schedule 18 to FA 1998, the words after “1988”.
5
      (8)
In CAA 2001—
(a)
section 257(3),
(b)
section 544(5), and
(c)
section 560(5)(a) and (c).
      (9)
In paragraph 31(1) of Schedule 22 to FA 2001, the definitions of “insurance
10
company” and “life assurance business”.
     (10)
In FA 2002—
(a)
in section 66(5), the words from the beginning to the end of the
definition of “long-term insurance fund”,
(b)
in paragraph 19(1) of Schedule 12, the definition of “life assurance
15
business”,
(c)
in paragraph 10(4) of Schedule 22, the words before the definition of
“transfer scheme”,
(d)
in Schedule 26—
(i)
in sub-paragraph (1) of paragraph 12, the references to the
20
expressions “Integrated Prudential Sourcebook” and “long-
term insurance fund”,
(ii)
sub-paragraphs (15) and (16) of that paragraph, and
(iii)
in paragraph 54(1), the definitions of “insurance company”,
“life assurance business”, “long-term insurance business”
25
and “contract of long-term insurance”, and
(e)
in Schedule 29, in paragraph 89(3), the definition of “contracts of
long-term insurance” and paragraph 138(1).
     (11)
In Schedule 23 to FA 2003—
(a)
in paragraph 30, the definitions of “insurance company” and “life
30
assurance business”, and
(b)
in paragraph 31, the entries relating to those definitions.
     (12)
Section 134(4)(c) of FA 2006.
Minor changes
15    (1)
In section 432ZA(5) of ICTA (linked assets), for “432F” substitute “432E”.
35
      (2)
In section 434A(2A) of that Act (computation of losses and limitation on
relief), for “paragraph 2” substitute “paragraph 2(1)”.
      (3)
In the heading of section 88 of FA 1989, for “fraction” substitute “share”.
      (4)
In paragraph 17 of Schedule 7 to FA 1991 (transitional provisions for
chargeable gains and unrelieved general annuity business)—
40
(a)
in sub-paragraph (4), for the words after “in an accounting period”
substitute “is so much of the chargeable gains arising to the company
in the accounting period as are referable to its basic life assurance
and general annuity business.”, and

Finance Bill
Schedule 10 — Insurance companies: miscellaneous
170

(b)
omit sub-paragraph (5).
Obsolete etc provisions
16    (1)
Omit the following provisions (which are obsolete or of limited value).
      (2)
In the Table in section 98 of TMA 1970, the words “or 441A(3)” in both
columns.
5
      (3)
In ICTA—
(a)
in section 76(7), in Step 3, the entries relating to section 587B(8)(b)(i)
of ICTA and paragraph 23(2) of Schedule 13 to FA 2002,
(b)
section 440(2A) and (2B) (transfer of assets: loan relationships and
derivative contracts),
10
(c)
section 442(4) (special rule for insurance companies ceasing to be
resident in United Kingdom),
(d)
section 443 (life policies carrying rights not in money),
(e)
section 444 (life policies issued before 5th August 1965),
(f)
section 587B(8) (gifts to charities etc: modifications for insurance
15
companies), and
(g)
in section 807A (disposals and acquisitions of company loan
relationships with or without interest), subsections (4) and (5)(b)
and, in subsection (6)(a), “or an insurance credit”.
      (4)
In FA 1989—
20
(a)
section 84(2) to (6) (transitional provisions etc),
(b)
in section 85(3) (commencement of provisions for charge of certain
BLAGAB receipts), “(including the 1990 component period)”,
(c)
in section 86 (spreading of relief for acquisition expenses),
subsections (3) and (3A) and, in subsection (10), “(including the 1990
25
component period)”, and
(d)
section 87 (management expenses).
      (5)
In FA 1996—
(a)
paragraph 1(1) and (2) of Schedule 11 (loan relationships: I minus E
basis),
30
(b)
paragraph 4(6) of that Schedule (non-trading deficits: transitional
provision),
(c)
paragraph 5 of that Schedule (elections for accrual basis), and
(d)
paragraph 1(3) of Schedule 15 (apportionment of loan relationship
credits and debits: transitional provision).
35
      (6)
Paragraph 18 of Schedule 12 to FA 1997 (leasing arrangements: meaning of
“accounting purposes” for insurance companies).
      (7)
Paragraph 86 of Schedule 18 to FA 1998 (non-annual actuarial
investigations).
      (8)
Paragraph 4 of Schedule 6 to FA 1999 (reverse premiums etc).
40
      (9)
Section 87(3) and (4) of FA 2001 (tax credits etc).
     (10)
In Schedule 13 to FA 2002 (vaccine research), paragraphs 22, 23 and 25(3),
and, in paragraph 27, the definition of “life assurance business”.

Finance Bill
Schedule 11 — Technical provisions made by general insurers
171

Commencement
17    (1)
The amendment made by paragraph 1 has effect on and after 10th May 2007.
      (2)
The amendments made by paragraphs 2, 4(2) and (4), 5, 6 and 8 to 15 have
effect in relation to periods of account beginning on or after 1st January 2007.
      (3)
But the amendment made by paragraph 2(4) does not apply where the
5
transfer of business concerned took place before 10th May 2007.
      (4)
The amendment made by paragraph 3 has effect in relation to losses
accruing in a period of account beginning on or after 1st January 2007.
      (5)
The amendment made by paragraph 4(3) has effect in relation to periods of
account beginning on or after 1st January 2005.
10
Schedule 11
Section 41

Technical provisions made by general insurers
Restriction on amount of technical provisions made by general insurers
1     (1)
This paragraph applies if a general insurer makes any technical provisions
for a period of account.
15
      (2)
The amount of the technical provisions stated in the accounts for that period
is to be taken into account in the calculation for tax purposes of the profits of
the general insurer’s trade for that period unless an officer of Revenue and
Customs considers that that amount exceeds the appropriate amount.
      (3)
In that case—
20
(a)
the excess is not to be taken into account in that calculation, and
(b)
the profits of the general insurer’s trade for the next period of
account are to be adjusted accordingly for tax purposes.
      (4)
“The appropriate amount” means such amount as is determined in
accordance with regulations made by the Commissioners for Her Majesty’s
25
Revenue and Customs to be the appropriate amount to be taken into account
in that calculation.
      (5)
Any such determination must be made by reference to the time at which the
technical provisions are made.
Enforcement
30
2     (1)
This paragraph applies if an officer of Revenue and Customs gives a notice
of enquiry under paragraph 24(1) of Schedule 18 to FA 1998 to a general
insurer.
      (2)
The officer may by notice require the general insurer (at the general insurer’s
own expense) to provide the officer with a report as to whether (and, if so,
35
the extent to which) the amount of any technical provisions stated in the
accounts for any period covered by the company tax return into which the
enquiry is made exceeds the appropriate amount.

Finance Bill
Schedule 11 — Technical provisions made by general insurers
172

      (3)
The report must cover such matters, and be in such form, as the officer may
reasonably require for the purposes of the enquiry.
      (4)
The report must be made by a person who is appointed by the general
insurer unless the officer requires the report to be made instead by another
person.
5
      (5)
As soon as the general insurer appoints a person to make the report, the
general insurer must give a notice to the officer specifying that person.
      (6)
A notice under sub-paragraph (2) must specify the time (which must not be
less than 30 days) within which the general insurer is to comply with it.
      (7)
The following provisions of Schedule 18 to FA 1998—
10
(a)
paragraph 28 (appeal against requirements imposed by notice under
paragraph 27), and
(b)
paragraph 29 (penalty for failure to comply with such a notice),

apply in relation to any notice under sub-paragraph (2) as they apply in
relation to a notice under paragraph 27 of that Schedule.
15
      (8)
But the references in paragraph 28 of that Schedule to the provision of
information are to be construed as references to the provision of a report
under this paragraph.
Supplementary
3     (1)
In paragraph 1 “general insurer” means—
20
(a)
a company within the charge to corporation tax which carries on
general business,
(b)
a controlled foreign company (within the meaning of Chapter 4 of
Part 17 of ICTA) which carries on general business, or
(c)
members of a Lloyd’s syndicate who carry on general business.
25
      (2)
In paragraph 2 “general insurer” means—
(a)
a company within the charge to corporation tax which carries on
general business, or
(b)
a company which for the purposes of Chapter 4 of Part 17 of ICTA
has an interest in a controlled foreign company (within the meaning
30
of that Chapter) which carries on general business.
      (3)
For the purposes of sub-paragraphs (1) and (2) “general business” means
business which consists of the effecting or carrying out of contracts that fall
within Part 1 of Schedule 1 to the Financial Services and Markets Act 2000
(Regulated Activities) Order 2001 (S.I. 2001/544).
35
      (4)
In the case of members of a Lloyd’s syndicate, references in paragraph 1 to
any accounts for a period are to the return of the syndicate’s profits or loss
for that period under regulation 4 of the Lloyd’s Underwriters (Tax)
Regulations 2005 (S.I. 2005/3338).
      (5)
In paragraph 1 “period of account”—
40
(a)
except in the case of members of a Lloyd’s syndicate, means a period
of account for which an account is made up, and
(b)
in the case of members of a Lloyd’s syndicate, means an
underwriting year in which profits or losses are declared for an
earlier underwriting year.
45

Finance Bill
Schedule 11 — Technical provisions made by general insurers
173

      (6)
In paragraphs 1 and 2 “technical provisions”, except in the case of members
of a Lloyd’s syndicate, means any of the following—
(a)
provisions for claims outstanding,
(b)
provisions for unearned premiums, and
(c)
provisions for unexpired risks.
5
      (7)
In paragraphs 1 and 2 “technical provisions”, in the case of members of a
Lloyd’s syndicate (“the syndicate”), means—
(a)
so much of the reinsurance to close amounts of the members, and
(b)
so much of the provisions made by an open Lloyd’s syndicate of
which any member of the syndicate is a member for claims
10
outstanding, unearned premiums and unexpired risks,

as may be determined by or under regulations made by the Commissioners
for Her Majesty’s Revenue and Customs.
      (8)
For this purpose—
(a)
the reference to reinsurance to close amounts of any member of a
15
Lloyd’s syndicate is to any consideration which, in accordance with
the rules or practice of Lloyd’s, is given (or any amount which, in
accordance with those rules or practice, is treated as consideration
given) by the member in respect of the liabilities arising from the
member’s underwriting business in an underwriting year for the
20
purpose of closing the accounts of the business for that year, and
(b)
a Lloyd’s syndicate is an “open” Lloyd’s syndicate at any time after
the end of its closing year if, at that time, the accounts of its business
for the underwriting year for which it was formed have not been
closed,
25

and in paragraph (b) “closing year” has the same meaning as in Chapter 3 of
Part 2 of FA 1993 or Chapter 5 of Part 4 of FA 1994.
      (9)
In this paragraph—
“Lloyd’s syndicate” means a syndicate of underwriting members of
Lloyd’s formed for an underwriting year, and
30
“underwriting year” means the calendar year.
     (10)
In this paragraph references to provisions for claims outstanding, unearned
premiums and unexpired risks have the same meaning as in Schedule 9A to
the Companies Act 1985 (c. 6).
     (11)
The Commissioners for Her Majesty’s Revenue and Customs may by
35
regulations—
(a)
provide in prescribed circumstances for paragraph 1 not to apply in
relation to any member of a Lloyd’s syndicate, or
(b)
provide in prescribed circumstances for a reduction in relation to any
member of a Lloyd’s syndicate of the amount which (as a result of
40
that paragraph) is not to be taken into account in the calculation
mentioned in sub-paragraph (2) of that paragraph.
     (12)
The Treasury may by regulations amend sub-paragraphs (1) to (3)
(definition of “general insurer”).
     (13)
In the event of any changes in the rules or practice of Lloyd’s, the
45
Commissioners for Her Majesty’s Revenue and Customs may by regulations
make such amendments of paragraph 1 and this paragraph as appear to the
Commissioners to be expedient having regard to those changes.