|
| |
|
(b) | if the debt is owed to the firm, the company partner stands in the |
| |
position of a debtor and accordingly has a debtor relationship. |
| |
(3) | Condition B is that the company partner controls the firm either alone or taken |
| |
together with one or more other company partners connected with the |
| |
company partner (see subsection (7)). |
| 5 |
(4) | Condition C is that the company partner or any other company partner is |
| |
treated under section 381(3) as if— |
| |
(a) | it had the debtor relationship which corresponds to the creditor |
| |
relationship mentioned in subsection (2)(a), or |
| |
(b) | it had the creditor relationship which corresponds to the debtor |
| 10 |
relationship mentioned in subsection (2)(b). |
| |
(5) | If this section applies, for the purposes of this Part for the relevant accounting |
| |
period there is taken to be a connection between— |
| |
(a) | the company partner, and |
| |
(b) | each company partner that is within subsection (4) (including the |
| 15 |
company partner itself if it is within that subsection), |
| |
| as a result of one of them having control of the other at a time in the period for |
| |
the purposes of section 466(2). |
| |
(6) | The provisions of this Part about connected companies relationships apply |
| |
| 20 |
(7) | For the purposes of subsection (3), one company partner is connected with |
| |
another at any time in an accounting period if at that or any other time in the |
| |
| |
(a) | one controls the other, or |
| |
(b) | both are under the control of the same person. |
| 25 |
(8) | Section 472 (meaning of “control”) applies for the purposes of this section. |
| |
384 | Treatment of exchange gains and losses |
| |
(1) | Whether credits and debits in respect of exchange gains and losses are to be |
| |
brought into account by a company partner under this Chapter as a result of |
| |
section 328(1), or that section is disapplied by section 328(3), depends on the |
| 30 |
| |
(2) | Section 328(3) applies only so far as exchange gains and losses are recognised |
| |
in the firm’s statement of total recognised gains and losses, statement of |
| |
recognised income and expense, statement of changes in equity or statement of |
| |
income and retained earnings. |
| 35 |
(3) | Accordingly, a company partner must bring credits and debits into account |
| |
under this Chapter in respect of exchange gains and losses which are not so |
| |
| |
(4) | For the meaning of references in this section to exchange gains and losses, see |
| |
| 40 |
385 | Company partners’ shares where firm owns deeply discounted securities |
| |
(1) | This section applies if the firm holds a deeply discounted security. |
| |
|
| |
|
| |
|
(2) | Each partner is treated for the purposes of this Chapter as beneficially entitled |
| |
to the share of the security specified in subsection (3). |
| |
(3) | That share is the share to which the partner would be entitled if— |
| |
(a) | all the partners were companies, and |
| |
(b) | the security were apportioned in the shares in which any profit or loss |
| 5 |
would be apportioned between them in accordance with the firm’s |
| |
profit-sharing arrangements. |
| |
(4) | In this section “deeply discounted security” has the same meaning as in |
| |
Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) |
| |
(see section 430 of that Act). |
| 10 |
| |
| |
| |
| |
(1) | This Chapter contains special rules about the treatment of the loan |
| 15 |
relationships of insurance companies. |
| |
| |
(a) | provides for special rules to apply in relation to an insurance |
| |
company’s non-trading deficits referable to BLAGAB instead of those |
| |
in Chapter 16 (see sections 387 to 391), |
| 20 |
(b) | excludes some loan relationships of corporate members of Lloyd’s |
| |
from this Part (see section 392), and |
| |
(c) | provides for the determination of questions concerning how far certain |
| |
matters are referable to any particular category of a company’s long- |
| |
term business (see sections 393 and 394). |
| 25 |
(3) | For further special rules affecting insurance companies, see— |
| |
(a) | section 298(3) (under which activities carried on by a company in the |
| |
course of mutual insurance business which is not life assurance |
| |
business or of BLAGAB are treated as not constituting a trade or part of |
| |
| 30 |
(b) | Chapter 4 (continuity of treatment on transfers within groups or on |
| |
reorganisations), and, in particular, sections 335(1) and (2), 336(4) and |
| |
| |
(c) | section 405 (certain non-UK residents with interest on 3½% War Loan |
| |
| 35 |
(d) | sections 468 and 471 (connection between creditor and debtor |
| |
companies to be ignored in some cases where creditor is insurance |
| |
company carrying on BLAGAB), |
| |
(e) | section 483(6) (treatment of deferred acquisition costs and provision for |
| |
unearned premiums or for unexpired risks as a money debt for the |
| 40 |
purposes of Chapter 2 of Part 6 in the case of companies carrying on |
| |
| |
|
| |
|
| |
|
(f) | section 486(4) (no exchange gains or losses to arise for the purposes of |
| |
that Chapter where relevant debts prevented from being deductible as |
| |
expenses of insurance companies at Step 1 of section 76(7) of ICTA). |
| |
(4) | In this Chapter “BLAGAB” means basic life assurance and general annuity |
| |
| 5 |
Treatment of deficit on basic life assurance and general annuity business |
| |
387 | Treatment of deficit on basic life assurance and general annuity business: |
| |
| |
(1) | Sections 388 to 391 apply instead of Chapter 16 (non-trading deficits) if a |
| |
company has a non-trading deficit from its loan relationships for BLAGAB for |
| 10 |
| |
(2) | In those sections “the deficit” and “the deficit period” mean that deficit and that |
| |
| |
388 | Basic rule: deficit set off against income and gains of deficit period |
| |
(1) | The basic rule is that the deficit must be set off against any income and gains of |
| 15 |
the deficit period which are referable to BLAGAB. |
| |
(2) | The income and gains are reduced accordingly. |
| |
(3) | Any such reduction is made before any expenses deduction under section 76 |
| |
of ICTA (expenses of insurance companies). |
| |
389 | Claim to carry back deficit |
| 20 |
(1) | If the deficit exceeds the income and gains for the deficit period referred to in |
| |
section 388(1), the company may make a claim for the whole or part of the |
| |
excess (“the claim amount”)— |
| |
(a) | to be carried back for up to 3 accounting periods ending within the |
| |
| 25 |
(b) | to be set off against the available profits of the company in those |
| |
periods in accordance with subsection (2). |
| |
(2) | The claim amount reduces the company’s available profits in the most recent |
| |
accounting period of the company, before any remainder reduces those in the |
| |
next most recent accounting period and then those in the next most recent |
| 30 |
| |
(3) | For the meaning of “available profits”, see section 390. |
| |
(4) | In this section and that section “permitted period” means the period of 12 |
| |
months immediately before the deficit period. |
| |
(5) | A claim under this section must be made— |
| 35 |
(a) | within the period of 2 years after the end of the deficit period, or |
| |
(b) | within such further period as an officer of Revenue and Customs |
| |
| |
|
| |
|
| |
|
390 | Meaning of “available profits” |
| |
(1) | For the purposes of section 389 the available profits of the company for an |
| |
accounting period are its BLAGAB non-trading loan relationships profits for |
| |
the period (see subsection (4)), less the unused part of the relevant deductions |
| |
for the period (see subsection (5)). |
| 5 |
(2) | If an accounting period ending within the permitted period begins before it, |
| |
only a part of the amount which would otherwise be the available profit for |
| |
that accounting period is available profit. |
| |
(3) | That part is so much as is proportionate to the part of the accounting period in |
| |
| 10 |
(4) | References in this section to a company’s BLAGAB non-trading loan |
| |
relationships profits for an accounting period are references to the amount (if |
| |
any) which is chargeable to tax for that period under section 299 (charge to tax |
| |
on non-trading profits) for the company’s BLAGAB. |
| |
(5) | The unused part of the relevant deductions for an accounting period is found |
| 15 |
| |
| |
| |
(a) | so much of the expenses deduction for the period given by Step 8 in |
| |
section 76(7) of ICTA (expenses of insurance companies) as is referable |
| 20 |
| |
(b) | so much of the sum of the deductions made in the case of the company |
| |
in respect of charges on income for that period as is so referable. |
| |
| |
| 25 |
(a) | the total amounts so referable which could be applied for the period in |
| |
making deductions as a result of section 76 of ICTA if the company’s |
| |
BLAGAB non-trading loan relationships profits for the period were |
| |
| |
(b) | the total amounts so referable which could be applied for the period in |
| 30 |
making deductions in respect of charges on income if those profits were |
| |
| |
| |
| Subtract the amount found at Step 2 from the amount found at Step 1. |
| |
| The result is the unused part of the relevant deductions for the accounting |
| 35 |
| |
(6) | In the case of any claim under section 389, the reference in Step 1(a) in |
| |
subsection (5) to the expenses deduction for an accounting period given by |
| |
Step 8 in section 76(7) of ICTA and the reference in Step 2(a) in subsection (5) |
| |
to the deduction for expenses as a result of section 76 of ICTA for an accounting |
| 40 |
period are references to the deduction for expenses that would been made as a |
| |
result of that section for that period on the assumptions in subsections (7) and |
| |
| |
(7) | The first assumption is that no account is taken of— |
| |
| 45 |
|
| |
|
| |
|
(b) | any other claim under section 389 relating to a deficit for an accounting |
| |
period after the deficit period. |
| |
(8) | The second assumption is that all such adjustments are made as are required |
| |
as a result of any sum having been carried back under the Corporation Tax |
| |
Acts to the accounting period mentioned in subsection (5), otherwise than as a |
| 5 |
| |
(a) | the claim mentioned in subsection (6), or |
| |
(b) | any such other claim as is mentioned in subsection (7)(b). |
| |
391 | Carry forward of surplus deficit to next accounting period |
| |
(1) | This rule applies if any of the deficit is not— |
| 10 |
(a) | set off against the income and gains referred to in section 388(1), or |
| |
(b) | set off against the profits referred to in section 389(1) as the result of a |
| |
claim under that section. |
| |
(2) | That deficit must be carried forward to the accounting period immediately |
| |
after the deficit period (“the next period”). |
| 15 |
(3) | Any deficit so carried forward is treated for the purposes of the Corporation |
| |
Tax Acts (including sections 388 to 390) as expenses payable which— |
| |
(a) | are referable to the next period, and |
| |
(b) | are to be brought into account at Step 3 in section 76(7) of ICTA |
| |
(expenses of insurance companies). |
| 20 |
Exclusion of loan relationships of members of Lloyd’s |
| |
392 | Exclusion of loan relationships of members of Lloyd’s |
| |
(1) | This section applies to any loan relationship of a corporate member of Lloyd’s. |
| |
(2) | This Part does not apply as respects the relationship so far as rights or liabilities |
| |
under it or securities representing it are— |
| 25 |
(a) | assets forming part of the member’s premium trust fund, or |
| |
(b) | liabilities attached to that fund. |
| |
(3) | In this section “corporate member” and “premium trust fund” have the same |
| |
meaning as in Chapter 5 of Part 4 of FA 1994 (Lloyd’s underwriters: |
| |
corporations etc) (see section 230(1) of that Act). |
| 30 |
Determination of questions requiring apportionments |
| |
393 | General rules for some debtor relationships |
| |
(1) | This section applies if a debtor relationship of an insurance company is |
| |
represented by a liability which is a liability of its long-term insurance fund. |
| |
(2) | Any question arising for the purposes of the Corporation Tax Acts as to how |
| 35 |
far any credits or debits given for the purposes of this Part in respect of the |
| |
liability are referable to any particular category of the company’s long-term |
| |
business is determined as follows. |
| |
(3) | In the case of credits and debits within the rules in section 394, that section |
| |
| 40 |
|
| |
|
| |
|
(4) | In the case of other credits and debits, the relevant fraction of the credits or |
| |
debits is referable to a category of long-term business. |
| |
(5) | That fraction is determined by applying section 432A(6) to (6B) and (8) of ICTA |
| |
(apportionment of income and gains) as if— |
| |
(a) | the credits or debits were income not directly referable to any category |
| 5 |
| |
(b) | the references in section 432A(6) to assets directly referable to a |
| |
category of business were references to assets linked to that category. |
| |
394 | Special rules for some debtor relationships |
| |
(1) | This section sets out the rules referred to in section 393(3) as to how far certain |
| 10 |
credits or debits given for the purposes of this Part in respect of liabilities |
| |
representing a debtor relationship of an insurance company which are |
| |
liabilities of its long-term insurance fund are referable to any particular |
| |
category of its long-term business. |
| |
(2) | If the liabilities are liabilities of an internal linked fund of the company relating |
| 15 |
to one category of long-term business, the credits or debits are referable to that |
| |
| |
(3) | If the liabilities are liabilities of an internal linked fund of the company relating |
| |
to two or more such categories, the credits or debits are referable to those |
| |
categories in the same proportions as the linked assets in the fund are |
| 20 |
apportioned to them under section 432ZA(4) of ICTA (linked assets). |
| |
| |
(a) | the liabilities arise from deposit back arrangements, and |
| |
(b) | the business reinsured by the arrangements under which the deposit |
| |
back arrangements are made (“the reinsurance arrangements”) is |
| 25 |
within one category of long term business, |
| |
| the credits or debits are referable to that category. |
| |
| |
(a) | the liabilities arise from deposit back arrangements, and |
| |
(b) | the business reinsured by the reinsurance arrangements is within two |
| 30 |
| |
| the credits or debits are referable to those categories in the same proportions as |
| |
the relevant proportions of the liabilities reinsured by the arrangements which |
| |
are liabilities relating to those categories. |
| |
(6) | For the purposes of subsection (5) “relevant proportion”, in relation to |
| 35 |
reinsured liabilities of any particular category of business, means the average |
| |
| |
(a) | the proportion of all the reinsured liabilities that are liabilities relating |
| |
to that category at the beginning of the period of account, and |
| |
(b) | the proportion of all the reinsured liabilities that are liabilities relating |
| 40 |
to that category at the end of that period. |
| |
(7) | Debits relating to interest payable in respect of the late payment of any benefits |
| |
are referable to the category of long-term business that comprises the effecting |
| |
and carrying out of the policies or contracts under which the benefits are |
| |
| 45 |
|
| |
|
| |
|
| |
Other special kinds of company |
| |
Investment trusts’ and venture capital trusts’ creditor relationships |
| |
395 | Investment trusts: profits or losses of a capital nature |
| |
(1) | Profits or losses of a capital nature arising to an investment trust from a |
| 5 |
creditor relationship may not be brought into account as credits or debits for |
| |
the purposes of this Part. |
| |
(2) | For the purposes of this section “profits or losses of a capital nature” means |
| |
| |
(a) | are accounted for through the capital column of the income statement |
| 10 |
in accordance with the Statement of Recommended Practice, or |
| |
(b) | would have been so accounted for if that Statement had been applied |
| |
| |
(3) | “The Statement of Recommended Practice”, in relation to an accounting period |
| |
for which it is required or permitted to be used, means— |
| 15 |
(a) | the Statement of Recommended Practice relating to Investment Trust |
| |
Companies, issued by the Association of Investment Trust Companies |
| |
in January 2003, as from time to time modified, amended or revised, or |
| |
(b) | any subsequent Statement of Recommended Practice relating to |
| |
investment trusts, as from time to time modified, amended or revised. |
| 20 |
(4) | The Treasury may by order amend the definition of “profits or losses of a |
| |
capital nature” in subsection (2), so far as it applies in relation to an investment |
| |
trust that prepares accounts in accordance with international accounting |
| |
| |
(5) | An order under subsection (4) may make— |
| 25 |
(a) | different provision for different cases, and |
| |
(b) | incidental, supplemental, consequential and transitional provision and |
| |
| |
396 | Venture capital trusts: profits or losses of a capital nature |
| |
(1) | Profits or losses of a capital nature arising to a venture capital trust from a |
| 30 |
creditor relationship may not be brought into account as credits or debits for |
| |
the purposes of this Part. |
| |
(2) | For the purposes of this section “profits or losses of a capital nature” means |
| |
| |
(a) | are accounted for through the capital column of the income statement |
| 35 |
in accordance with the Statement of Recommended Practice, or |
| |
(b) | would have been so accounted for if the venture capital trust had been |
| |
an investment trust and that Statement had been applied correctly. |
| |
(3) | In this section “the Statement of Recommended Practice” has the meaning |
| |
given in section 395(3) (investment trusts: profits or losses of a capital nature). |
| 40 |
(4) | The Treasury may by order amend the definition of “profits or losses of a |
| |
capital nature” in subsection (2), so far as it applies in relation to a venture |
| |
|
| |
|