Finance Bill

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Session 2007 - 08
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Finance Bill

Finance Bill (Volume II)
Schedule 17 — Insurance companies etc
270

and losses referred to in paragraph (b) of that subsection,” and insert
at the end “and”,
(b)
in paragraph (b), for “arising from the assets is, and gains or losses
accruing on the disposal of the assets are,” substitute “and losses
arising from the assets, and gains and losses accruing on the disposal
of the assets, are”, and
(c)
omit paragraph (c) and the “and” before it.
     (10)
In consequence of the preceding provisions, omit the provisions specified in
sub-paragraph (11).
     (11)
The provisions mentioned in sub-paragraph (10) are—
(a)
section 432AB(2) of ICTA,
(b)
section 502H of that Act,
(c)
paragraph 3 of Schedule 11 to FA 1996,
(d)
paragraph 19(4) of Schedule 12 to FA 1997,
(e)
paragraphs 36(1) and (3) and 138(2) and (3) of Schedule 29 to FA
2002,
(f)
paragraph 19(4) of Schedule 9 to F(No.2)A 2005, and
(g)
paragraphs 13(2) and 44 of Schedule 7, and paragraph 5 of Schedule
8, to FA 2007.
     (12)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 1 January 2008.
“BLAGAB profits” etc
18    (1)
In section 431 of ICTA (interpretative provisions relating to insurance
companies), after subsection (2YA) insert—
“(2YB)
“BLAGAB profits”, in relation to an accounting period of an
insurance company, means the company’s BLAGAB income and
gains for the period reduced (but not below nil) by the company’s
BLAGAB deductions for the period.
(2YC)
“BLAGAB income and gains”, in relation to an accounting period of
an insurance company, means the aggregate of—
(a)
income chargeable for the period under Schedule A or Case
III, V or VI of Schedule D so far as referable (in accordance
with section 432A) to the company’s basic life assurance and
general annuity business,
(b)
distributions received in the period from companies resident
in the United Kingdom so far as so referable, and
(c)
chargeable gains so far as so referable accruing to the
company in the period, but (subject to section 210A of the
1992 Act) after deducting—
(i)
any allowable losses so referable and so accruing, and
(ii)
so far as they have not been allowed as a deduction
from chargeable gains in any previous accounting
period, any allowable losses so referable previously
accruing to the company.
(2YD)
“BLAGAB deductions”, in relation to an accounting period of an
insurance company, means the aggregate of—

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(a)
amounts falling in respect of any non-trading deficits on the
company’s loan relationships to be brought into account in
the period in accordance with paragraph 4 of Schedule 11 to
the Finance Act 1996, and
(b)
the expenses deduction given by Step 8 in section 76(7) for the
period.”
      (2)
In section 755A(11C) of that Act (treatment of chargeable profits and
creditable tax apportioned to company carrying on life assurance business),
omit paragraph (b) and the “and” before it.
      (3)
In section 85A of FA 1989 (excess adjusted Case I profits), for subsections (6)
and (7) substitute—
“(6)
“The relevant income” means—
(a)
the company’s BLAGAB income and gains for the accounting
period (but excluding any amount within this section), and
(b)
profits of the company chargeable under Case VI of Schedule
D under section 436A of the Taxes Act 1988 (gross roll-up
business) for the accounting period.”
      (4)
In section 88 of that Act (meaning of “policy holders’ share of profits”), for
subsections (3) to (3B) substitute—
“(3)
For the purposes of subsection (1) above the relevant profits of a
company for an accounting period consist of the aggregate of—
(a)
the company’s BLAGAB profits for the period, and
(b)
profits of the company chargeable under Case VI of Schedule
D under section 436A of the Taxes Act 1988 (gross roll-up
business) for the period.”
      (5)
Omit—
(a)
section 89(1B) of FA 1989,
(b)
in section 210A(10)(a) of TCGA 1992, “(within the meaning of section
89(1B) of the Finance Act 1989)”,
(c)
paragraph 21(2) of Schedule 8 to FA 1995,
(d)
paragraph 2(1) of Schedule 11, and paragraph 56 of Schedule 14, to
FA 1996,
(e)
paragraph 6(1) of Schedule 33 to FA 2003,
(f)
in paragraph 9(2) of Schedule 7 to FA 2004, paragraphs (a) to (c) and
the words from”; and, in consequence of” to the end, and
(g)
paragraphs 58 and 67(2) of Schedule 7, and paragraphs 15(3) and
16(2) of Schedule 8, to FA 2007.
      (6)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 1 January 2008.
Abolition of “inherited estates” apportionment rules
19    (1)
Chapter 1 of Part 12 of ICTA (insurance companies) is amended as follows.
      (2)
In section 431(2ZB) and (2ZC) (interpretative provisions), insert “or” at the
end of paragraph (b) and omit paragraph (d) and the “or” before it.
      (3)
In section 432A (apportionment of income and gains), omit—

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(a)
in subsection (6), paragraph (b) of the definition of A (but not the
“and” following it),
(b)
in subsection (8), paragraph (b) and the “and” before it, and
(c)
subsections (8A) and (8B).
      (4)
In section 432B (apportionment of receipts brought into account), omit
subsections (4) to (12).
      (5)
The amendments made by this paragraph have effect in relation to periods
of account beginning on or after 1 January 2007.
Group relief: gross profits to exclude relevant profits
20    (1)
In section 434A of ICTA (computation of losses and limitation on relief),
insert at the end—
“(4)
For the purposes of section 403, where the surrendering company is
an insurance company which is charged to tax under the I minus E
basis in respect of its life assurance business for the surrender period,
the company’s gross profits of that period do not include its relevant
profits (within the meaning of section 88 of the Finance Act 1989) for
that period; and expressions used in this subsection and section 403
have the same meaning here as there.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods beginning on or after 1 January 2008.
Charges on income
21    (1)
In section 434A(3) of ICTA (limitation on relief), after paragraph (a) (before
the “or” at the end) insert—
“(aa)
(where the company’s life assurance business is not mutual
business) in respect of any amount which is a charge on
income for the purposes of corporation tax,”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to periods
of account beginning on or after 1 January 2008 and ending on or after 12
March 2008.
Remediation of contaminated land
22    (1)
Schedule 22 to FA 2001 (remediation of contaminated land) is amended as
follows.
      (2)
In paragraph 14 (entitlement to land remediation tax credit)—
(a)
in sub-paragraph (7), omit “or (13)”, “and charges on income” and
“and charges”,
(b)
in sub-paragraph (8), omit “or (13)”, and
(c)
in sub-paragraph (9)—
(i)
for “Step 6” substitute “Step 7”, and
(ii)
omit “or (13)”, in the first place.
      (3)
In paragraph 17 (restriction on losses carried forward), omit—
(a)
in sub-paragraph (3)(b), “or (13)”, “and charges on income” and “and
charges”, and
(b)
in sub-paragraph (4), “or (13)”.

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      (4)
In paragraph 21 (provision in respect of I minus E basis), for the words after
“where” substitute “an insurance company is charged to tax under the I
minus E basis in respect of its life assurance business for any accounting
period.”
      (5)
In paragraph 22(2) (entitlement to relief: I minus E basis), for “is entitled to
relief for that accounting period in respect of its qualifying expenditure”
substitute “may treat the amount of its qualifying expenditure as expenses
payable which fall to be brought into account for that accounting period at
Step 1 in section 76(7) of the Taxes Act 1988”.
      (6)
In paragraph 24 (entitlement to life assurance company tax credit), omit—
(a)
in sub-paragraph (3), “or (13)”, in the first place, and
(b)
in sub-paragraph (2)(b), “or (13)”, “and charges on income” and “and
charges”.
      (7)
In paragraph 27(1) (restriction on carrying forward expenses payable)—
(a)
in paragraph (a), omit “or (13)”, and
(b)
in paragraph (b), omit “for the next accounting period”.
      (8)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 1 January 2008.
Repeal of ICTA s.56(4)
23    (1)
In section 56 of ICTA (transactions in deposits and debts), omit subsection
(4) (which relates to section 76(2) computations and is spent).
      (2)
In consequence of sub-paragraph (1), in section 164 of FA 1996, omit
subsection (4) (which amends section 56(4) of ICTA).
Partnership returns
24
In section 12AE(2) of TMA 1970 (partnership returns: alternative methods
for bringing amounts into charge to tax), for “84(2) or (3)” substitute “84(1)”.
Overseas life assurance business
25    (1)
Section 431D of ICTA (meaning of “overseas life assurance business”) is
amended as follows.
      (2)
In subsections (2) and (4), for “Board” substitute “Commissioners”.
      (3)
In subsection (3), for “Board” substitute “Commissioners for Her Majesty’s
Revenue and Customs”.
26    (1)
In section 476(3) of ITTOIA 2005 (foreign policies), omit—
(a)
“as a result of section 431D(1)(a) of ICTA (business with a non-UK
resident policy holder)”, and
(b)
“as a result of section 431D(1) of ICTA”.
      (2)
In consequence of sub-paragraph (1), omit paragraph 78 of Schedule 7 to FA
2007.
      (3)
The amendments made by this paragraph have effect as if they were made
by Schedule 7 to FA 2007 (see section 38(2) of that Act).

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Trades in I minus E
27    (1)
In section 53 of ICTA (farming and market gardening and managing land on
commercial basis for profit), insert at the end—
“(5)
The preceding provisions of this section do not apply in relation to—
(a)
farming or market gardening by an insurance company on
land which is an asset of the company’s long-term insurance
fund, or
(b)
the occupation by an insurance company of land which is
such an asset for a purpose other than farming or market
gardening.”
      (2)
In section 55 of ICTA (mines, quarries etc), insert at the end—
“(3)
Subsection (1) does not apply in relation to any concern carried on by
an insurance company on land which is an asset of the company’s
long-term insurance fund.”
      (3)
In section 432AB(5) (losses from Schedule A business etc), for “section 392A
or 392B” substitute “sections 392A and 503, or section 392B,”.
      (4)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 1 January 2008.
Controlled foreign companies
28    (1)
In paragraph 4(1A) of Schedule 25 to ICTA (controlled foreign companies),
for “436, 439B or 441” substitute “436A”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods beginning on or after 1 January 2008.
Offshore income gains
29    (1)
In section 757 of ICTA (disposals to which Chapter 5 of Part 17 of that Act
applies), after subsection (1) insert—
“(1A)
But this Chapter does not apply to disposals of assets of an insurance
company’s long-term insurance fund.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
disposals made in accounting periods beginning on or after 1 January 2008.
Transfers of business
30    (1)
In section 444AB(6) of ICTA (transfer schemes transferring whole of
business), for the words after “means” substitute “the period of account of
the transferor ending, or treated by section 444AA(2) as ending,
immediately before the transfer date.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business taking place on or after 1 July 2008.
31    (1)
In section 444ABB(1A)(b)(ii) of ICTA (retained assets), for “liabilities”
substitute “mathematical reserves (as determined in accordance with section
1.2 of the Insurance Prudential Sourcebook)”.

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      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business taking place on or after 1 July 2008.
32    (1)
In section 444ABD(1) of ICTA (transferor’s period of account including
transfer), for “liabilities” substitute “mathematical reserves (as determined
in accordance with section 1.2 of the Insurance Prudential Sourcebook)”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business with a transfer date after 21 March 2007.
Periodical return
33
In section 431(2) of ICTA, in the definition of “periodical return”, insert at the
end “(and does not include the Forms mentioned in Rule 9.3(5))”.
Repeal of section 737D of ICTA
34    (1)
In ICTA, omit section 737D (power to provide that manufactured payments
are to be treated as income eligible for relief under section 438).
      (2)
In consequence of sub-paragraph (1), omit—
(a)
section 83(1) of FA 1995,
(b)
section 139(6) of FA 2006, and
(c)
paragraph 175 of Schedule 1 to ITA 2007.
R&D relief
35
In paragraph 12 of Schedule 12 to FA 2002 (insurance companies treated as
large companies), for the words following paragraph (b) substitute “the
company does not qualify as a small or medium-sized enterprise for the
purposes of Parts 1 to 3 of this Schedule or Schedule 20 to the Finance Act
2000.”
Section 89(7) of FA 1989
36    (1)
In section 89(7) of FA 1989 (policy holders’ share of profits), for “in respect
of losses in accordance with section 85A(4)” substitute “in accordance with
section 85A(4) in respect of losses incurred in an accounting period in which
31 December 2002 is included or any later accounting period.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods beginning on or after 1 January 2008 and ending on or
after 15 May 2008.
Commencement of Schedule 9 to FA 2007
37    (1)
Paragraph 17 of Schedule 9 to FA 2007 (transfers: commencement) is
amended as follows.
      (2)
In sub-paragraph (2), for “9, 10(3) to (5),” substitute “10(5),”.
      (3)
In sub-paragraph (3)—
(a)
after “effect” insert “(a)”, and
(b)
insert at the end “and
(b)
in relation to periods of account ending after 30 June
2008 where the transfer of business or

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demutualisation concerned took place on or after 21
March 2007 and before 1 July 2008.”
      (4)
After sub-paragraph (4) insert—
   “(4A)
The amendment made by paragraph 9 has effect in relation to
contracts entered into in a period of account beginning on or after
1 January 2008.”
      (5)
Insert at the end—
“(6)
The amendments made by paragraph 10(3) and (4) have effect in
relation to assets transferred on or after 1 January 2008.”
Commencement of Business Transfer Schemes Order
38    (1)
In article 1(5) of the Insurance Business Transfer Schemes (Amendment of
the Corporation Tax Acts) Order 2008 (S.I. 2008/381), for “other” substitute
“earlier”.
      (2)
In article 29(2), for ““assuming the transferor had continued to carry on the
business transferred after the transfer”” substitute ““assuming that the
transferor had continued to carry on the business transferred””.
      (3)
The amendments made by this paragraph are to be treated as always having
had effect.
Gross roll-up business
39    (1)
In section 436A(6) of ICTA (gross roll-up business: separate charge on
profits), omit “under subsection (4) above”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to periods
of account beginning on or after 1 January 2008 and ending on or after 12
March 2008.
Repeal of spent provision
40
In section 88(5) of FA 1989 (policy holders’ share of profits), omit the words
after “January 1990”.
Schedule 18
Section 42

Friendly societies
Introduction
1
Chapter 2 of Part 12 of ICTA (friendly societies etc) is amended as follows.
PHI business
2     (1)
In section 466(1) (“life or endowment business”), for paragraph (b)
substitute—
“(b)
any PHI business (as defined in section 431) if—
(i)
the contract is one made before 1 September 1996, or