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558 | Interpretation of accounting expressions |
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(1) | In determining for the purposes of this Chapter whether an amount is recorded |
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as a financial asset or liability in respect of the advance, it is assumed that the |
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period of account in which the advance is received or made ended immediately |
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after the receipt or making of the advance. |
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(2) | In its application for the purposes of this Chapter, section 309(1) applies as if |
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the reference to a company were a reference to a person. |
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(a) | in the case of a creditor repo, has the same meaning as in section |
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(b) | in the case of a creditor quasi-repo, has the same meaning as in |
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(c) | in the case of a debtor repo, has the same meaning as in section |
| 15 |
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(d) | in the case of a debtor quasi-repo, has the same meaning as in |
| |
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“arrangement” includes any agreement or understanding (whether or not |
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it is legally enforceable), |
| 20 |
“creditor quasi-repo” has the meaning given by section 544, |
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“creditor repo” has the meaning given by section 543, |
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“debtor quasi-repo” has the meaning given by section 549, |
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“debtor repo” has the meaning given by section 548, |
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“discharge”, in relation to a liability, means the discharge of the liability in |
| 25 |
whole or in part (and “discharged” is to be read accordingly), |
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“overseas dividend”, in relation to overseas securities, means any interest, |
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dividend or other annual payment payable in respect of the securities, |
| |
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“overseas securities” means shares, stock or other securities issued by— |
| 30 |
(a) | a government or public or local authority of a territory outside |
| |
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(b) | any other body of persons not resident in the United Kingdom. |
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Investment life insurance contracts |
| 35 |
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560 | Introduction to Chapter |
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(1) | This Chapter makes provision about investment life insurance contracts to |
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which relevant companies are party. |
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| 40 |
|
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|
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|
(a) | sections 562 to 565 (which make provision about treating the contracts |
| |
as creditor relationships in relation to those companies for the purposes |
| |
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(b) | sections 566 to 569 (which make provision for cases where the relevant |
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company was a party to the contract before the beginning of the |
| 5 |
company’s first accounting period beginning on or after 1 April 2008). |
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(3) | In this Chapter “relevant company” means a company which is not a life |
| |
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(4) | In subsection (3) “life insurance company” means— |
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(a) | an insurance company (as defined in section 431(2) of ICTA) which |
| 10 |
carries on long-term business (as defined in that section), or |
| |
(b) | a friendly society which would be such an insurance company but for |
| |
the words “(other than a friendly society)” in the definition of |
| |
“insurance company” in that section. |
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(5) | For the meaning of “investment life insurance contract”, see section 561. |
| 15 |
561 | Meaning of “investment life insurance contract” |
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(1) | In this Chapter “investment life insurance contract” means— |
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(a) | a policy of life insurance which has, or is capable of acquiring, a |
| |
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(b) | a contract for a purchased life annuity, or |
| 20 |
(c) | a capital redemption policy, |
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| other than a relevant excluded contract. |
| |
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“capital redemption policy” means a contract made in the course of capital |
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redemption business (as defined in section 431(2ZF) of ICTA), |
| 25 |
“purchased life annuity” means an annuity— |
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(a) | granted for consideration in money or money’s worth in the |
| |
ordinary course of a business of granting annuities on human |
| |
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(b) | payable for a term ending at a time ascertainable only by |
| 30 |
reference to the end of a human life (whether or not the annuity |
| |
may in some circumstances end before or after the life), and |
| |
“relevant excluded contract” means— |
| |
(a) | an investment life insurance contract under a registered |
| |
| 35 |
(b) | an investment life insurance contract purchased with sums or |
| |
assets held for the purposes of a registered pension scheme, or |
| |
(c) | a policy of life insurance issued in respect of an insurance made |
| |
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(3) | A policy of life insurance issued in respect of an insurance made before 14 |
| 40 |
March 1989 is treated for the purposes of this Chapter as issued in respect of |
| |
one made on or after that date if it is varied on or after that date so as— |
| |
(a) | to increase the benefits secured, or |
| |
(b) | to extend the term of the insurance. |
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(4) | For the purposes of subsection (3) any exercise of rights conferred by a policy |
| 45 |
is to be regarded as a variation of it. |
| |
|
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|
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|
Investment life assurance contracts treated as creditor relationships |
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562 | Contract to be loan relationship |
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(1) | If a relevant company is a party to an investment life insurance contract, for the |
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purposes of Part 5 (loan relationships) the contract is, in relation to the |
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company, a creditor relationship of the company. |
| 5 |
(2) | Subsection (1) is subject to subsection (4). |
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(3) | Subsection (4) applies if— |
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(a) | the amount or value of a lump sum payable under an investment life |
| |
contract by reason of death or the onset of critical illness, exceeds |
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(b) | the surrender value of the contract immediately before the time when |
| 10 |
the lump sum becomes payable. |
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(4) | If this subsection applies, that excess is not to be brought into account as a |
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credit under Part 5 representing a profit from a related transaction arising as a |
| |
result of the lump sum becoming payable. |
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563 | Increased non-trading credits for BLAGAB and EEA taxed contracts |
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(1) | This section applies if— |
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(a) | as a result of section 562 the relevant company is required to bring into |
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account for an accounting period a non-trading credit representing a |
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profit from a related transaction, and |
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(b) | the investment life insurance contract is— |
| 20 |
(i) | a BLAGAB contract, or |
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(ii) | a contract which is subject to a relevant comparable EEA tax |
| |
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(2) | For the meaning of “BLAGAB contract” and of a contract being subject to a |
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relevant comparable EEA tax charge, see section 564. |
| 25 |
(3) | The non-trading credit is treated as increased by the relevant amount. |
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(4) | The relevant amount is set off against corporation tax assessable on the |
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company for the accounting period. |
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(5) | Except where section 565 (relevant amount where the relevant company uses |
| |
fair value accounting) applies, the relevant amount is—![equation: cross[string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"NTC"],over[(*f"Book Antiqua Parliamentary"fV"Regular"V*)times[
char[A],char[R]],plus[num[100.0000000000000000,"100"],minus[times[char[A],char[R]]]]]]](missing.gif) |
| 30 |
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NTC is the non-trading credit, and |
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AR is the appropriate rate for the accounting period. |
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(6) | The appropriate rate for an accounting period is— |
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(a) | if a single rate of tax under section 88(1) of FA 1989 (lower corporation |
| 35 |
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 |
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| 40 |
|
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|
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|
564 | Section 563: interpretation |
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(1) | In section 563 “BLAGAB contract” means a contract forming part of basic life |
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assurance and general annuity business of an insurance company but not part |
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of business which is exempt from corporation tax under section 460 of ICTA |
| |
(friendly society business and former friendly society business). |
| 5 |
(2) | For the purposes of section 563 a contract is subject to a relevant comparable |
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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 |
| |
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(3) | For the purposes of subsection (2) a relevant comparable EEA tax charge has |
| 10 |
applied to a company if each of conditions A to D is met. |
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(4) | Condition A is that a charge to tax has applied to the company under the laws |
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of a territory outside the United Kingdom that is within the European |
| |
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(5) | Condition B is that the charge has applied to the company— |
| 15 |
(a) | as a body deriving its status as a company from those laws, |
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(b) | as a company with its place of management there, or |
| |
(c) | as a company falling under those laws to be regarded for any other |
| |
reason as resident or domiciled there. |
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(6) | Condition C is that the charge applies at a rate of at least 20% in relation to the |
| 20 |
amounts 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. |
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(7) | Condition D is that the charge is made otherwise than by reference to the |
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| 25 |
565 | Relevant amount where the relevant company uses fair value accounting |
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(1) | This section applies if the relevant company brings credits and debits in respect |
| |
of the investment life insurance contract into account on the basis of fair value |
| |
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(2) | If this section applies, the relevant amount for section 563 is—![equation: cross[times[char[P],string[(*s11.00sf"Book Antiqua Parliamentary"fV"Regular"V*)"C"]],
over[(*f"Book Antiqua Parliamentary"fV"Regular"V*)times[char[A],char[R]],plus[num[
100.0000000000000000,"100"],minus[times[char[A],char[R]]]]]]](missing.gif) |
| 30 |
| |
PC is the profit from the contract (see subsections (3) and (4)), and |
| |
AR is the appropriate rate for the accounting period (as defined in section |
| |
| |
(3) | For the purposes of this section, except where subsection (4) applies, the profit |
| 35 |
from the contract is any amount by which— |
| |
(a) | the amount payable as a result of the related transaction, exceeds |
| |
(b) | the fair value of the contract at the beginning time (see subsection (6)). |
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(4) | If the related transaction is an assignment or surrender of only part of the rights |
| |
conferred by the contract, the profit from the contract is any amount by |
| 40 |
| |
|
| |
|
| |
|
(a) | the amount payable as a result of the related transaction, exceeds |
| |
(b) | the relevant fraction of the fair value of the contract at the beginning |
| |
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(5) | In subsection (4) “the relevant fraction” means—![equation: over[char[C],times[char[F],char[V],char[C]]]](missing.gif) |
| |
| 5 |
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 |
| |
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(6) | In this section “the beginning time” means— |
| |
(a) | if the contract was made before the beginning of the first accounting |
| 10 |
period of the company beginning on or after 1st April 2008, at the |
| |
beginning of that period, and |
| |
(b) | otherwise when the contract was made. |
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Old accounting period contracts |
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| 15 |
(1) | This section and sections 567 to 569 apply if 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. |
| |
| |
“the deemed surrender” means the surrender of all the rights under that |
| 20 |
contract that the relevant company was deemed for the purposes of |
| |
Chapter 2 of Part 13 of ICTA (life policies etc) to have made |
| |
immediately before 1 April 2008 under paragraph 6(1) of Schedule 13 |
| |
to FA 2008 for an amount equal to the carrying value of the contract at |
| |
that time as recognised for accounting purposes, |
| 25 |
“the first accounting period” means the first accounting period of the |
| |
company beginning on or after that date, and |
| |
“the old contract” means the contract mentioned in subsection (1). |
| |
567 | Gains on deemed surrenders to be brought into account on related |
| |
| 30 |
(1) | Any gain which arose under Chapter 2 of Part 13 of ICTA (life policies etc) as |
| |
a result of the deemed surrender (“the deemed gain”) is to be brought into |
| |
account by the relevant company as a non-trading credit for the accounting |
| |
period in which there is a related transaction (so far as not previously brought |
| |
into account under this section). |
| 35 |
(2) | But if the relevant company is still a party to the old contract immediately after |
| |
the related transaction, only the relevant fraction of the deemed gain which |
| |
would otherwise be brought into account under subsection (1) is to be so |
| |
| |
|
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|
| |
|
(3) | The relevant fraction” is—![equation: over[char[P],times[char[S],char[A],char[R]]]](missing.gif) |
| |
| |
P is the amount payable as a result of the related transaction, and |
| |
SAR is the amount which would have been payable on a surrender of all |
| |
the rights under the old contract immediately before the related |
| 5 |
| |
568 | Restriction on credits on old contracts: fair value accounting cases |
| |
(1) | This section applies if— |
| |
(a) | at all times since the old contract was made the rights conferred by it |
| |
have been in the beneficial ownership of the relevant company, |
| 10 |
(b) | the company brings into account credits and debits in respect of the old |
| |
contract on the basis of fair value accounting, and |
| |
(c) | the old contract cost exceeds the fair value of the contract immediately |
| |
before the beginning of the first accounting period. |
| |
(2) | In subsection (1)(c) “the old contract cost” means— |
| 15 |
(a) | if section 541 of ICTA applied on the deemed surrender, the amount |
| |
specified in section 541(1)(b)(i) of that Act, less the amount or value of |
| |
any relevant capital payments (as defined in section 541(5)(a) of that |
| |
| |
(b) | if section 543 of that Act applied on the deemed surrender, the amount |
| 20 |
specified in section 543(1)(a)(i) of that Act, less the amount or value of |
| |
any relevant capital payments (as defined in section 543(3) of that Act). |
| |
(3) | No amount is to be brought into account as a credit in relation to the old |
| |
contract by the relevant company as a result of section 562 except so far as the |
| |
| 25 |
(a) | the amount of the credit, and |
| |
(b) | the amount of any other credits which have previously arisen in |
| |
relation to the old contract as a result of that section, |
| |
| is greater than the excess mentioned in subsection (1)(c). |
| |
569 | Restriction on debits on old contracts: non-fair value accounting cases |
| 30 |
(1) | This section applies where— |
| |
(a) | the relevant company brings into account credits and debits in respect |
| |
of the old contract otherwise than on the basis of fair value accounting, |
| |
| |
(b) | the carrying value of the old contract, as recognised for accounting |
| 35 |
purposes immediately before the beginning of the first accounting |
| |
period, exceeds its fair value at that time. |
| |
(2) | No amount is to be brought into account as a debit in relation to the old |
| |
contract by the relevant company as a result of section 562 except so far as the |
| |
| 40 |
|
| |
|
| |
|
(a) | the amount of the debit, and |
| |
(b) | the amount of any other debits which have previously arisen in relation |
| |
to the contract as a result of that section, |
| |
| is greater than the excess mentioned in subsection (1)(b). |
| |
| 5 |
| |
| |
| |
| |
| 10 |
(1) | This Part is about how profits and losses arising to a company from its |
| |
derivative contracts are brought into account for corporation tax purposes. |
| |
(2) | For the meaning of “derivative contract”, see section 576 and the remainder of |
| |
| |
(3) | For how such profits and losses are calculated and brought into account, see— |
| 15 |
(a) | section 572 (profits and losses to be calculated using credits and debits |
| |
| |
(b) | section 573 (trading credits and debits to be brought into account under |
| |
| |
(c) | section 574 (non-trading credits and debits to be brought into account |
| 20 |
| |
(d) | Chapter 7 (chargeable gains arising in relation to derivative contracts). |
| |
(4) | For the priority of this Part for corporation tax purposes, see Chapter 12. |
| |
(5) | This Part also contains the following Chapters (which mainly relate to the |
| |
amounts to be brought into account in respect of derivative contracts)— |
| 25 |
(a) | Chapter 3 (credits and debits to be brought into account: general), |
| |
(b) | Chapter 4 (further provision about credits and debits to be brought into |
| |
| |
(c) | Chapter 5 (continuity of treatment on transfers within groups), |
| |
(d) | Chapter 6 (special kinds of company), |
| 30 |
(e) | Chapter 8 (further provision about chargeable gains and derivative |
| |
| |
(f) | Chapter 9 (European cross-border transfers of business), |
| |
(g) | Chapter 10 (European cross-border mergers), |
| |
(h) | Chapter 11 (tax avoidance), and |
| 35 |
(i) | Chapter 13 (general and supplementary provisions). |
| |
(6) | See also section 980 of ITA 2007 (payments under derivative contracts excepted |
| |
from duty to deduct income tax). |
| |
|
| |
|