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Finance Bill
Schedule 11 — Technical provisions made by general insurers

174

 

     (14)  

Regulations under section 182(1)(a) of FA 1993 or section 229(1)(a) of FA

1994 (assessment and collection of tax charged in case of Lloyd’s

underwriters) may, in particular, include provision applying paragraph 2

with modifications in the case of members of a Lloyd’s syndicate.

     (15)  

Regulations under paragraph 1 or this paragraph may—

5

(a)   

make different provision for different purposes, and

(b)   

make supplementary, incidental, consequential and transitional

provision.

Repeal of section 107 of FA 2000

4          

In FA 2000, omit section 107 (general insurance reserves).

10

Commencement

5     (1)  

Paragraphs 1 to 3 have effect in relation to periods of account ending on or

after the day on which this Act is passed.

      (2)  

The repeal of section 107 of FA 2000 made by paragraph 4 has effect as

follows.

15

      (3)  

The repeal of—

(a)   

subsections (1) to (3) of that section (technical provisions made by a

general insurer proving to be excessive or insufficient),

(b)   

subsections (5) to (8) and (10) of that section so far as relating to those

subsections, and

20

(c)   

subsections (9) and (12)(a) of that section (which relate to those

subsections),

           

has effect in relation to any amount that would otherwise have been treated

as a receipt or an expense of a trade in computing for tax purposes the profits

of the trade for any period of account ending on or after the day on which

25

this Act is passed.

      (4)  

The repeal of—

(a)   

subsection (4) of that section (election for any part of technical

provisions not to be taken into account in a period of account),

(b)   

subsections (5) to (8) and (10) of that section so far as relating to that

30

subsection, and

(c)   

subsection (12)(b) of that section (which relates to that subsection),

           

has effect so that no election may be made under that subsection in respect

of technical provisions made by a general insurer for any period of account

which begins on or after that day.

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      (5)  

There is a restriction in relation to any election made by a general insurer

under that subsection in respect of technical provisions made by the general

insurer for the final election period.

      (6)  

The restriction is that the amount of the part of those provisions which the

general insurer elects not to be taken into account in computing for tax

40

purposes the profits of the general insurer’s trade for that period must not

exceed 10% of the total amount of those provisions.

      (7)  

In sub-paragraph (5) “the final election period”, in relation to any general

insurer, means the general insurer’s first period of account ending on or

after the day on which this Act is passed.

45

 

 

Finance Bill
Schedule 12 — Friendly societies: transfers to insurance companies etc

175

 

Schedule 12

Section 43

 

Friendly societies: transfers to insurance companies etc

Exempt life or endowment business

1     (1)  

Section 460 of ICTA (exemption from tax in respect of life or endowment

business) is amended as follows.

5

      (2)  

In subsection (10A), after “the transfer” insert “, other than any to which

subsection (11) or (12) below applied immediately before the transfer had

effect,”.

      (3)  

In subsection (11), for “thereafter continue to be tax exempt life or

endowment business for the purposes of this Chapter.” substitute “continue

10

to be exempt from corporation tax (whether on income or chargeable gains)

on profits arising from it.”

      (4)  

For subsection (12) substitute—

“(12)   

Where at any time an insurance company acquires by way of transfer

of engagements from a friendly society any life or endowment

15

business consisting of business which—

(a)   

relates to contracts made before that time; and

(b)   

immediately before that time was tax exempt life or

endowment business,

   

that business shall continue to be exempt from corporation tax

20

(whether on income or chargeable gains) on profits arising from it.

(13)   

But if any contracts constituting or forming part of the business of a

company covered by subsection (11) or (12) above are varied during

an accounting period of the company so as to increase the premiums

payable under them, the business relating to those contracts is not

25

exempt from corporation tax for that or any subsequent accounting

period.

(14)   

For the purposes of the Corporation Tax Acts any part of a

company’s business which is exempt from corporation tax by virtue

of subsection (11) or (12) above shall be treated as a separate business

30

from any other business carried on by the company.”

      (5)  

Insert at the end—

“(15)   

The Treasury may by regulations provide that, where any part of the

business of a company is exempt from corporation tax by virtue of

subsection (11) or (12) above, the Corporation Tax Acts have effect

35

subject to such modifications (or exceptions) as the Treasury

consider appropriate.

(16)   

Regulations under subsection (15) above—

(a)   

may make different provision for different cases,

(b)   

may include any incidental, supplementary, consequential or

40

transitional provisions which the Treasury consider

appropriate, and

(c)   

may include retrospective provision.”

 

 

Finance Bill
Schedule 12 — Friendly societies: transfers to insurance companies etc

176

 

2     (1)  

Section 464 of ICTA (maximum benefits payable to members) is amended as

follows.

      (2)  

For the first sentence of subsection (1) substitute—

“(1)   

Subject to subsections (2) and (3) below, a person is not entitled to

have at any time outstanding contracts with any one or more friendly

5

societies, registered branches or insurance companies which (taking

them all together) are for the assurance of—

(a)   

more than £750 by way of gross sum under business which is

afforded exemption from corporation tax by section 460, or

(b)   

more than £156 by way of annuity under such business.”

10

      (3)  

In subsection (3), for the words preceding the paragraphs substitute “With

respect to contracts for the assurance of gross sums under business which is

afforded exemption from corporation tax by section 460, a person is not

entitled to have outstanding at any time with any one or more friendly

societies, registered branches or insurance companies—”.

15

      (4)  

In subsection (4A), for “tax exempt life or endowment business” substitute

“business which is afforded exemption from corporation tax by section 460

if they are”.

      (5)  

In subsection (6), for “member has outstanding with one or more society or

branch” substitute “person has outstanding with one or more societies,

20

branches or companies”.

      (6)  

In subsection (7)—

(a)   

for “or registered branch” substitute “, registered branch or

insurance company”,

(b)   

for “member” (in both places) substitute “person”, and

25

(c)   

for “or registered branches (taking together all such societies or

branches throughout the United Kingdom)” substitute “, registered

branches or insurance companies (taken together)”.

3          

In section 466(2) of ICTA, in the definition of “tax exempt life or endowment

business”, for “(11)” substitute “(10A)”.

30

Other exempt business

4     (1)  

Section 461 of ICTA (exemption of registered friendly societies from tax in

respect of business which is not life or endowment business) is amended as

follows.

      (2)  

After subsection (4) insert—

35

“(4A)   

Where—

(a)   

at any time an insurance company acquires by way of

transfer of engagements from a registered friendly society

any business other than life or endowment business, and

(b)   

immediately before that time the society was exempt from

40

corporation tax on profits arising from that business,

   

the insurance company shall be exempt from corporation tax on its

profits arising from any part of that business which relates to

contracts made before that time.

 

 

Finance Bill
Schedule 12 — Friendly societies: transfers to insurance companies etc

177

 

(4B)   

But if during an accounting period of the insurance company there is

an increase in the scale of benefits which it undertakes to provide in

the course of carrying on any such part of that business, the company

shall not be exempt from corporation tax by virtue of subsection (4A)

above for that or any subsequent accounting period.”

5

      (3)  

In subsection (5), after “(4)” insert “or (4A)”.

      (4)  

Insert at the end—

“(12)   

The Treasury may by regulations provide that, where any part of the

business of a company is exempt from corporation tax by virtue of

subsection (4) or (4A) above, the Corporation Tax Acts have effect

10

subject to such modifications (or exceptions) as the Treasury

consider appropriate.

(13)   

Regulations under subsection (12) above—

(a)   

may make different provision for different cases,

(b)   

may include any incidental, supplementary, consequential or

15

transitional provisions which the Treasury consider

appropriate, and

(c)   

may include retrospective provision.”

5     (1)  

Section 461B of ICTA (exemption of incorporated friendly societies from tax

in respect of business which is not life or endowment business) is amended

20

as follows.

      (2)  

For subsection (6) substitute—

“(6)   

But if during an accounting period of the company there is an

increase in the scale of benefits which it undertakes to provide in the

course of carrying on any such part of its business, the company shall

25

not be exempt from corporation tax by virtue of subsection (5) above

for that or any subsequent accounting period.

(6A)   

Where—

(a)   

at any time an insurance company acquires by way of

transfer of engagements from a qualifying society any

30

business other than life or endowment business, and

(b)   

immediately before that time the society was exempt from

corporation tax on profits arising from that business,

   

the insurance company shall be exempt from corporation tax on its

profits arising from any part of that business which relates to

35

contracts made before that time.

(6B)   

But if during an accounting period of the insurance company there is

an increase in the scale of benefits which it undertakes to provide in

the course of carrying on any such part of that business, the company

shall not be exempt from corporation tax by virtue of subsection (6A)

40

above for that or any subsequent accounting period.”

      (3)  

In subsection (7), after “(5)” insert “or (6A)”.

      (4)  

Insert at the end—

“(8)   

The Treasury may by regulations provide that, where any part of the

business of a company is exempt from corporation tax by virtue of

45

subsection (5) or (6A) above, the Corporation Tax Acts have effect

 

 

Finance Bill
Schedule 13 — Sale and repurchase of securities

178

 

subject to such modifications (or exceptions) as the Treasury

consider appropriate.

(9)   

Regulations under subsection (8) above—

(a)   

may make different provision for different cases,

(b)   

may include any incidental, supplementary, consequential or

5

transitional provisions which the Treasury consider

appropriate, and

(c)   

may include retrospective provision.”

Commencement

6     (1)  

The amendment made by sub-paragraph (2) of paragraph 1, so far as

10

relating to section 460(11) of ICTA, and the amendments made by sub-

paragraph (3) of that paragraph and paragraph 3 are deemed always to have

had effect.

      (2)  

The amendments made by paragraph 2 have effect in relation to contracts

made after the passing of this Act.

15

      (3)  

The amendment made by sub-paragraph (2) of paragraph 1, so far as

relating to section 460(12) of ICTA, and the amendments made by sub-

paragraph (4) of that paragraph and paragraphs 4(2) and (3) and 5(2) and (3)

have effect in relation to transfers of engagements and conversions taking

place on or after the day on which this Act is passed.

20

Schedule 13

Section 46

 

Sale and repurchase of securities

Purpose of Schedule

1     (1)  

The purpose of this Schedule is to secure that in the case of an

arrangement—

25

(a)   

which involves the sale of securities and the subsequent purchase of

securities, and

(b)   

which equates, in substance, to a transaction for the lending of

money at interest from or to a company (with the securities which

were sold as collateral for the loan),

30

           

the charge to corporation tax in that case reflects the fact that the

arrangement equates, in substance, to such a transaction.

      (2)  

But this is not to be read as preventing the rules in this Schedule about

corporation tax in respect of chargeable gains from having no effect in

relation to debtor quasi-repos and creditor quasi-repos.

35

Meaning of debtor repo

2     (1)  

For the purposes of this Schedule a company (“the borrower”) has a debtor

repo if conditions A to E are met.

      (2)  

Condition A is that under an arrangement the borrower receives from

another person (“the lender”) any money or other asset (“the advance”).

40

 

 

Finance Bill
Schedule 13 — Sale and repurchase of securities

179

 

      (3)  

Condition B is that, in accordance with generally accepted accounting

practice, the accounts of the borrower for the period in which the advance is

received record a financial liability in respect of the advance.

      (4)  

Condition C is that under the arrangement the borrower sells any securities

at any time to the lender.

5

      (5)  

Condition D is that the arrangement makes provision conferring a right or

imposing an obligation on the borrower to buy those or similar securities at

any subsequent time.

      (6)  

Condition E is that, in accordance with generally accepted accounting

practice, the subsequent buying of those or similar securities would

10

extinguish the financial liability in respect of the advance recorded in the

accounts of the borrower.

      (7)  

For the purposes of conditions A to E references to the borrower include a

partnership of which the borrower is a member.

Meaning of debtor quasi-repo

15

3     (1)  

For the purposes of this Schedule a company (“the borrower”) has a debtor

quasi-repo in any case if—

(a)   

the borrower does not have a debtor repo in that case, and

(b)   

conditions A to E are met in that case.

      (2)  

Condition A is that under an arrangement the borrower receives any money

20

or other asset (“the advance”).

      (3)  

Condition B is that, in accordance with generally accepted accounting

practice, the accounts of the borrower for the period in which the advance is

received record a financial liability in respect of the advance.

      (4)  

Condition C is that under that or any other arrangement the borrower or any

25

other person sells any securities at any time.

      (5)  

Condition D is that the arrangement or other arrangement—

(a)   

makes provision conferring a right or imposing an obligation on the

borrower to buy the securities or any other securities at any

subsequent time, or

30

(b)   

makes provision conferring such a right or imposing such an

obligation on any other person and makes other relevant provision.

      (6)  

For this purpose any arrangement makes “other relevant provision” if it

makes provision—

(a)   

for the receipt of any money or other asset from the borrower under

35

that arrangement for the purpose of enabling the other person to

make that subsequent purchase, or

(b)   

for the discharge of any liability to the borrower under that

arrangement for that purpose (whether by way of set off or

otherwise).

40

      (7)  

Condition E is that, in accordance with generally accepted accounting

practice—

(a)   

the subsequent buying of the securities or the other securities by the

borrower, or

 

 

Finance Bill
Schedule 13 — Sale and repurchase of securities

180

 

(b)   

the receipt of the asset from the borrower, or the discharge of the

liability to the borrower, under the arrangement or other

arrangement,

           

would extinguish the financial liability in respect of the advance recorded in

the accounts of the borrower.

5

      (8)  

For the purposes of conditions A to E references to the borrower include a

partnership of which the borrower is a member.

Ignoring effect on borrower of sale of securities: debtor repos, debtor quasi-repos and other

arrangements

4     (1)  

This paragraph applies if a company (“the borrower”)—

10

(a)   

has a debtor repo or a debtor quasi-repo, or

(b)   

has a liability which is discharged under a relevant arrangement.

      (2)  

A relevant arrangement is one in relation to which conditions C and D in

paragraph 3 are met and the main purpose, or one of the main purposes, of

which is the obtaining of a tax advantage.

15

      (3)  

For the purposes of the charge to corporation tax in respect of income of the

borrower arising while the arrangement is in force, the Corporation Tax Acts

have effect as if—

(a)   

the borrower held the securities that are initially sold for any period

for which the arrangement is in force, and

20

(b)   

the borrower did not receive in that period amounts representative

of income payable in respect of those securities.

      (4)  

But—

(a)   

no amount is to be charged to corporation tax as a result of sub-

paragraph (3)(a) unless it is, in accordance with generally accepted

25

accounting practice, recognised in determining the borrower’s profit

or loss for that or any other period or taken into account in

calculating the amounts which are so recognised, and

(b)   

there is the following exception to sub-paragraph (3) if the securities

that are initially sold are overseas securities.

30

      (5)  

In the case of any overseas dividend payable in respect of those securities,

the entitlement of the borrower to double taxation relief in respect of that

dividend is determined as if—

(a)   

sub-paragraph (3) were omitted,

(b)   

the borrower received a payment of an amount which is

35

representative of that dividend,

(c)   

the payment were made under a requirement of the arrangement,

and

(d)   

the payment were made on the date on which that dividend is

payable.

40

      (6)  

For the purposes of this paragraph “double taxation relief” means any relief

given under or as a result of Part 18 of ICTA.

 

 

 
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