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Finance Bill
Schedule 13 — Company gains from investment life insurance contracts

221

 

(a)   

by virtue of paragraph 2 the relevant company is required to bring

into account for an accounting period a non-trading credit

representing a profit from a related transaction, and

(b)   

the investment life insurance contract is a BLAGAB contract, or a

contract which is subject to a relevant comparable EEA tax charge.

5

      (2)  

The non-trading credit (“NTC”) is to be treated as increased by the relevant

amount and the relevant amount is to be set off against corporation tax

assessable on the company for the accounting period.

      (3)  

The relevant amount is—equation: cross[over[times[char[A],char[R]],plus[num[100.0000000000000000,"100"],minus[times[

char[A],char[R]]]]],times[char[N],char[T],char[C]]]

           

where AR is the appropriate rate for the accounting period, that is—

10

(a)   

if a single rate of tax under section 88(1) of FA 1989 (lower

corporation tax rate on certain insurance company profits) is

applicable in relation to the accounting period, that rate, and

(b)   

if more than one such rate of tax is applicable in relation to the

accounting period, the average of those rates over the accounting

15

period.

      (4)  

In sub-paragraph (1) “BLAGAB contract” means a contract forming part of

basic life assurance and general annuity business of an insurance company

but not part of business which is exempt from corporation tax under section

460 of ICTA (friendly society business and former friendly society business).

20

      (5)  

For the purposes of sub-paragraph (1) the contract is subject to a relevant

comparable EEA tax charge if the contract forms part of the business of a

company (other than the relevant company) to which a relevant comparable

EEA tax charge has applied.

      (6)  

For the purposes of sub-paragraph (5) a relevant comparable EEA tax charge

25

has applied to a company if—

(a)   

a charge to tax has applied to the company under the laws of a

territory outside the United Kingdom that is within the European

Economic Area,

(b)   

the charge has applied to the company—

30

(i)   

as a body deriving its status as a company from those laws,

(ii)   

as a company with its place of management there, or

(iii)   

as a company falling under those laws to be regarded for any

other reason as resident or domiciled there,

(c)   

the charge applies at a rate of at least 20% in relation to the amounts

35

subject to tax in the company’s hands, other than amounts arising or

accruing in respect of investments of a description for which a

special relief or exemption is generally available, and

(d)   

the charge is made otherwise than by reference to the company’s

profits.

40

4     (1)  

Where the relevant company brings into account credits and debits in

respect of the investment life insurance contract on the basis of fair value

accounting, the relevant amount under paragraph 3 is determined as if for

“NTC” in the formula in sub-paragraph (3) of that paragraph there were

substituted “PC”.

45

 
 

Finance Bill
Schedule 13 — Company gains from investment life insurance contracts

222

 

      (2)  

For this purpose “PC” is the profit from the contract, that is any amount by

which—

(a)   

the amount payable as a result of the related transaction, exceeds

(b)   

the fair value of the contract when the contract was made or, if the

contract was made before the beginning of the first accounting

5

period of the company beginning on or after 1st April 2008, at the

beginning of that period.

      (3)  

If the related transaction is an assignment (or, in Scotland, assignation) or

surrender of only part of the rights conferred by the contract, sub-paragraph

(2) has effect as if paragraph (b) of that sub-paragraph referred to the

10

relevant fraction of the fair value of the contract when the contract was made

or, if the contract was made before the beginning of the first accounting

period of the company beginning on or after 1st April 2008, at the beginning

of that period.

      (4)  

For this purpose the relevant fraction is—equation: over[char[C],times[char[F],char[V],char[C]]]

15

           

where—

C is the amount payable as a result of the related transaction, and

FVC is the fair value of the contract immediately before the related

transaction.

Commencement

20

5          

This Schedule has effect for accounting periods beginning on or after 1 April

2008.

6     (1)  

Where the relevant company was a party to an investment life insurance

contract immediately before the beginning of the first accounting period of

the company beginning on or after that date, the company is to be treated for

25

the purposes of Chapter 2 of Part 13 of ICTA (life policies etc) as having

surrendered all the rights under the contract immediately before that date

for an amount equal to the carrying value of the contract at that time as

recognised for accounting purposes.

      (2)  

Any gain arising under Chapter 2 of Part 13 of ICTA by reason of that

30

deemed surrender (“the Chapter 2 gain”)—

(a)   

is not income of the company for the accounting period in which it

arises, but

(b)   

is instead to be brought into account as a non-trading credit for the

accounting period in which there is a related transaction.

35

      (3)  

If, immediately after the related transaction, the company is still a party to

the investment life insurance contract, only the relevant fraction of the

Chapter 2 gain is brought into account as mentioned in sub-paragraph (2)(b).

      (4)  

“The relevant fraction” is—equation: over[char[P],times[char[S],char[A],char[R]]]

           

where—

40

P is the amount payable as a result of the related transaction, and

 
 

Finance Bill
Schedule 13 — Company gains from investment life insurance contracts

223

 

SAR is the amount that would have been payable on a surrender of all

of the rights under the contract immediately before the related

transaction.

7     (1)  

This paragraph applies where—

(a)   

the relevant company was a party to an investment life insurance

5

contract immediately before the beginning of the first accounting

period of the company beginning on or after 1 April 2008,

(b)   

at all time since the contract was made the rights conferred by the

contract have been in the beneficial ownership of the company,

(c)   

the company brings into account credits and debits in respect of the

10

contract on the basis of fair value accounting, and

(d)   

the relevant amount exceeds the fair value of the contract

immediately before the beginning of that accounting period.

      (2)  

In sub-paragraph (1)(d) “the relevant amount” means—

(a)   

where section 541 of ICTA applies on the deemed surrender under

15

paragraph 6(1), the amount specified in sub-paragraph (i) of

subsection (1)(b) of that section less the amount or value of any

relevant capital payments (as defined in subsection (5)(a) of that

section), or

(b)   

where section 543 of that Act applies on that deemed surrender, the

20

amount specified in sub-paragraph (i) of subsection (1)(a) of that

section less the amount or value of any relevant capital payments (as

defined in subsection (3) of that section).

      (3)  

No amount is to be brought into account as a credit by virtue of paragraph 2

in relation to the contract except to the extent that the aggregate of—

25

(a)   

the amount of the credit, and

(b)   

the total of any other credits which have previously arisen in relation

to the contract by virtue of that paragraph,

           

is greater than the excess mentioned in sub-paragraph (1)(d).

8     (1)  

This paragraph applies where—

30

(a)   

the relevant company was a party to an investment life insurance

contract immediately before the beginning of the first accounting

period of the company beginning on or after 1 April 2008,

(b)   

the company brings into account credits and debits in respect of the

contract otherwise than on the basis of fair value accounting, and

35

(c)   

the carrying value of the contract as recognised for accounting

purposes immediately before the beginning of that first accounting

period exceeds the fair value of the contract at that time.

      (2)  

No amount is to be brought into account as a debit by virtue of paragraph 2

in relation to the contract except to the extent that the aggregate of—

40

(a)   

the amount of the debit, and

(b)   

the total of any other debits which have previously arisen in relation

to the contract by virtue of that paragraph,

           

is greater than the excess mentioned in sub-paragraph (1)(c).

 
 

Finance Bill
Schedule 14 — Company gains from investment life insurance contracts: consequential amendments etc

224

 

Schedule 14

Section 33

 

Company gains from investment life insurance contracts: consequential

amendments etc

ICTA

1          

ICTA is amended as follows.

5

2          

Omit sections 539 to 551A.

3     (1)  

Section 552 (information: duty of insurers) is amended as follows.

      (2)  

In subsection (3), omit—

(a)   

the words from “(or” to “year)”, and

(b)   

“, and the corresponding financial year,”.

10

      (3)  

In subsection (5)—

(a)   

in paragraph (b)—

(i)   

omit “section 546C(7)(a) of this Act and”, and

(ii)   

for “the year and the insurance year end” substitute “the

insurance year ends”, and

15

(b)   

in paragraph (c), omit—

(i)   

“this Chapter and”,

(ii)   

in sub-paragraph (i), “the amount or value of any relevant

capital payments and”,

(iii)   

in sub-paragraph (iii), the words from the beginning to “656

20

and”, and

(iv)   

in sub-paragraph (v), the words from the beginning to “year

and”.

      (4)  

In subsection (6)—

(a)   

in paragraph (b)—

25

(i)   

omit “section 546C(7)(a) of this Act (and”,

(ii)   

omit the closing bracket after “2005”, and

(iii)   

for “the year (and the insurance year)” substitute “the

insurance year”, and

(b)   

in paragraph (c), omit “section 546C(7)(a) of this Act (and” and the

30

closing bracket after “2005”.

      (5)  

In subsection (7)—

(a)   

in paragraph (a), omit “, or, where the policy holder is a company,

the financial year,”, and

(b)   

in paragraph (b), for the words from “section 546C(7)(a)” to

35

“insurance year)” substitute “section 514(1) of ITTOIA 2005, the

period of three months following the end of the insurance year”.

      (6)  

In subsection (8)(c), omit the words from “or” to “financial year”.

      (7)  

In subsection (9)—

(a)   

in the words before paragraph (a), omit “or financial year”,

40

(b)   

in paragraph (a), for the words from “section 546C(7)(b)” to the end

substitute “subsection (1) of section 514 of ITTOIA 2005, the year of

assessment which includes the end of the insurance year mentioned

in subsection (3) and (4) of that section;”, and

 
 

Finance Bill
Schedule 14 — Company gains from investment life insurance contracts: consequential amendments etc

225

 

(c)   

in paragraph (b) omit “or financial year”.

      (8)  

In subsection (10)—

(a)   

in the definition of “amount”, omit “section 553(3) of this Act and”,

(b)   

in the definition of “chargeable event”, omit “this Chapter and”,

(c)   

omit the definition of “financial year”,

5

(d)   

after that definition insert—

““insurance year” has the same meaning as in Chapter 9

of Part 4 of ITTOIA 2005 (see section 499 of that Act);”,

(e)   

in the definition of “the relevant year of assessment”, omit paragraph

(b) and the “or” before it, and

10

(f)   

omit the definitions of “section 546 excess” and “year”.

      (9)  

Omit subsection (11).

     (10)  

In subsection (13), omit “section 548A above or”.

4          

In section 552ZA(3) (information: supplementary provisions), omit “section

546C(7)(a) of this Act and”.

15

5          

In section 552A(12) (tax representatives)—

(a)   

omit “this Chapter and” in each place, and

(b)   

for “have” substitute “has” in each place.

6          

Omit sections 553 to 553C.

7          

In paragraph 20 of Schedule 15 (qualifying policies)—

20

(a)   

in sub-paragraph (1)(a), omit “and 540 and 541”, and

(b)   

in sub-paragraph (3)—

(i)   

in paragraph (a), omit “and 540 and 541”, and

(ii)   

omit paragraph (b) and the “and” before it.

ITTOIA 2005

25

8          

ITTOIA 2005 is amended as follows.

9          

In section 467(5) (persons liable: UK resident trustees), for paragraph (c)

substitute—

“(c)   

neither section 465 nor section 466 applies.”

10         

In section 469(2) (two or more persons interested in policy or contract), omit

30

“above and section 547(1) of ICTA (persons liable for tax etc.)”.

11         

Omit section 486 (exclusion of maturity of capital redemption policies in

certain circumstances).

12         

In section 501 (part surrenders: loans)—

(a)   

in subsection (1), insert “or” at the end of paragraph (a) and omit

35

paragraph (c) and the “or” before it”, and

(b)   

omit subsection (4).

13         

In section 541B(7) (section 541A: further definitions), omit paragraph (b) and

the “or” before it.

14         

In Schedule 1 (consequential amendments), omit paragraphs 210 to 221 and

40

226 to 228.

 
 

Finance Bill
Schedule 15 — Changes in trading stock
Part 1 — Income tax

226

 

Other Acts

15         

Omit—

(a)   

in FA 1989, section 90 and Schedule 9,

(b)   

in F(No.2)A 1992, paragraph 15 of Schedule 9,

(c)   

in FA 1995, section 55(8),

5

(d)   

in FA 1996, section 168(4) to (6) and paragraph 1A of Schedule 9,

(e)   

in FA 1997, section 79,

(f)   

in FA 1998, sections 88 and 89 and paragraphs 1 to 4 of Schedule 14,

(g)   

in FA 1999, paragraphs 16 and 18(3) of Schedule 4,

(h)   

in FA 2000, in section 46(2A), “547(1)(b)”,

10

(i)   

in FA 2001, section 83(2) and Part 1 of Schedule 28,

(j)   

in FA 2002, section 87 and paragraph 21 of Schedule 25,

(k)   

in FA 2003, section 171 and Schedule 34,

(l)   

in FA 2004, paragraph 25 of Schedule 35,

(m)   

in ITTOIA 2005, paragraph 493 of Schedule 1 and paragraph 86(3) of

15

Schedule 2,

(n)   

in ITA 2007, paragraph 111 of Schedule 1, and

(o)   

in FA 2007, section 29(1), paragraphs 45 and 46 of Schedule 7 and

paragraph 6(3) of Schedule 10.

Commencement

20

16    (1)  

The amendments made by this Schedule—

(a)   

so far as relating to corporation tax, have effect for accounting

periods beginning on or after 1 April 2008, and

(b)   

so far as relating to income tax, have effect for the tax year 2008-09

and subsequent tax years.

25

      (2)  

The amendments made by paragraph 3 to 5 also have effect in relation to

deemed surrenders under paragraph 6(1) of Schedule 13.

Schedule 15

Section 34

 

Changes in trading stock

Part 1

30

Income tax

1          

ITTOIA 2005 is amended as follows.

 
 

Finance Bill
Schedule 15 — Changes in trading stock
Part 1 — Income tax

227

 

2          

After section 172 insert—

“Chapter 11A

Trade profits: changes in trading stock

Introduction

5

172A    

Meaning of “trading stock”

(1)   

In this Chapter “trading stock”, in relation to a trade, means anything

(whether land or other property)—

(a)   

which is sold in the ordinary course of trade, or

(b)   

which would be so sold if it were mature or its manufacture,

10

preparation or construction were complete.

(2)   

It does not include—

(a)   

materials used in the manufacture, preparation or

construction of any such thing,

(b)   

any services performed in the ordinary course of the trade, or

15

(c)   

any article produced, or any material used, in the

performance of any such services.

Transfers of trading stock between trade and trader

172B    

Trading stock appropriated by trader

(1)   

This section applies if trading stock of a person’s trade is

20

appropriated by the person for any other purpose.

(2)   

In calculating the profits of the trade—

(a)   

the amount which the stock appropriated would have

realised if sold in the open market at the time of the

appropriation is brought into account as a receipt, and

25

(b)   

the value of anything in fact received for it is left out of

account.

(3)   

The receipt is treated as arising on the date of the appropriation.

172C    

Trading stock supplied by trader

(1)   

This section applies if something that—

30

(a)   

belongs to a person carrying on a trade, but

(b)   

is not trading stock of the trade,

   

becomes trading stock of the trade.

(2)   

In calculating the profits of the trade—

(a)   

the cost of the stock is taken to be the amount which it would

35

have realised if sold in the open market at the time it became

trading stock of the trade, and

(b)   

the value of anything in fact given for it is left out of account.

(3)   

The cost is treated as being incurred on the date it became trading

stock of the trade.

40

 
 

 
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