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Finance Bill
Schedule 22 — Offshore funds
Part 1 — Meaning of “offshore fund”

236

 

3     (1)  

Section 41 (tax treatment of participants in offshore funds) is amended as

follows.

      (2)  

In subsection (2), omit the definition of “offshore fund” (and the “and”

before it).

      (3)  

Omit subsections (3) to (9).

5

4     (1)  

Section 42 (regulations under section 41: supplementary) is amended as

follows.

      (2)  

In subsection (2), for paragraphs (a) and (b) substitute—

“(a)   

an offshore fund comprising a part of umbrella

arrangements, and

10

(b)   

an offshore fund comprising arrangements relating to a class

of interest in other arrangements (see section 40D).”

      (3)  

In subsection (3), for the words from “may” to the end substitute “, in

particular—

(a)   

repeal Chapter 5 of Part 17 of ICTA (offshore funds), and

15

(b)   

make provision consequential on the repeal of provisions of

that Chapter.”

      (4)  

In subsection (4)(e), insert at the end “and savings”.

      (5)  

For subsection (5) substitute—

“(5)   

Regulations under section 41 may, in particular, provide for

20

provisions to have effect in relation to the tax year, or accounting

periods, current on the day on which the regulations are made.”

      (6)  

In subsection (6), for “and “offshore fund” have” substitute “has”.

5          

After that section insert—

“42A    

Regulations: procedure

25

(1)   

Regulations under this group of sections are to be made by statutory

instrument.

(2)   

The following regulations may not be made unless a draft of the

instrument containing them has been laid before, and approved by a

resolution of, the House of Commons—

30

(a)   

regulations under section 40B(6),

(b)   

regulations under section 40G(1), and

(c)   

the first regulations under section 41(1).

(3)   

A statutory instrument containing any other regulations under this

group of sections is subject to annulment in pursuance of a resolution

35

of the House of Commons, unless a draft of the instrument has been

laid before, and approved by a resolution of, the House of

Commons.”

Restriction on regulation-making power under section 41 of FA 2008

6     (1)  

Regulations under section 41 of FA 2008 may not make provision about the

40

treatment of a person in respect of any rights in an affected offshore fund

that are acquired by the person—

 
 

Finance Bill
Schedule 22 — Offshore funds
Part 2 — Application of TCGA 1992 to offshore funds

237

 

(a)   

before 1 December 2009, or

(b)   

in accordance with sub-paragraph (2),

           

(but see sub-paragraph (4)).

      (2)  

Rights are acquired in accordance with this sub-paragraph if—

(a)   

the rights are acquired by the participant in accordance with a legally

5

enforceable agreement in writing that was entered into by the

participant before 30 April 2009,

(b)   

if the agreement was conditional, the conditions are satisfied before

that date, and

(c)   

the agreement is not varied on or after that date.

10

      (3)  

Rights of a person in a fund are rights in an affected offshore fund if—

(a)   

the fund is an offshore fund within the meaning of section 40A of FA

2008, but

(b)   

on the date on which the person acquired them, the fund was not an

offshore fund within the meaning of Chapter 5 of Part 17 of ICTA.

15

      (4)  

Sub-paragraph (1) does not prevent regulations under section 41 of FA 2008

making—

(a)   

provision for a person to elect to be treated in accordance with the

regulations in respect of rights referred to in that sub-paragraph, or

(b)   

provision that does not increase the person’s liability to tax in respect

20

of such rights.

Part 2

Application of TCGA 1992 to offshore funds

TCGA 1992

7          

TCGA 1992 is amended as follows.

25

8          

In Chapter 3 of Part 3 (collective investment schemes), insert at the end—

“103A   

 Application of Act to certain offshore funds

(1)   

This Act applies in relation to a relevant offshore fund as if—

(a)   

the fund were a company, and

(b)   

the rights of the participants in the fund were shares in the

30

company.

(2)   

An offshore fund is a relevant offshore fund if—

(a)   

it is not constituted by a company, and

(b)   

it is not a unit trust scheme (see section 99).

(3)   

In this section “offshore fund” and “participant”, in relation to a

35

fund, have the meanings given in section 40A of the Finance Act

2008.”

9          

Accordingly, in the title of Part 3 and in the title of Chapter 3 of that Part,

insert at the end “etc”.

10         

In section 288(1) (interpretation), in the definition of “company”, for “section

40

99” substitute “sections 99 and 103A”.

 
 

Finance Bill
Schedule 22 — Offshore funds
Part 2 — Application of TCGA 1992 to offshore funds

238

 

Consequential provision

11    (1)  

In TMA 1970, in—

(a)   

section 25(9) (issuing houses, stockbrokers, auctioneers, etc), and

(b)   

section 28(2) (non-resident companies and trusts),

           

after “sections 99” insert “, 103A”.

5

      (2)  

In section 842(4) of ICTA (investment trusts), after “sections 99” insert

“, 103A”.

      (3)  

In ITTOIA 2005—

(a)   

in section 149(4) (taxation of amounts taken to reserves), at the end of

paragraph (b) (before the “and”) insert—

10

“(ba)   

rights of participants in certain offshore funds to

which TCGA 1992 applies as a result of section 103A

of TCGA 1992,”, and

(b)   

in section 150(8) (conversion etc of securities held as circulating

capital), after paragraph (c) insert—

15

“(ca)   

rights of participants in certain offshore funds to

which TCGA 1992 applies as a result of section 103A

of TCGA 1992,”.

      (4)  

In section 834(5) of the Companies Act 2006 (investment company: condition

as to holdings in other companies), in the definition of “company” and

20

“shares”, after “sections 99” insert “, 103A”.

      (5)  

In section 332 of ITA 2007 (venture capital trusts: minor definitions), in the

definition of “company”—

(a)   

for “section 99” substitute “sections 99 and 103A”, and

(b)   

after “schemes” insert “and certain offshore funds”.

25

Commencement: general

12    (1)  

The amendments made by this Part of this Schedule have effect in relation

to the acquisition, holding and disposal of rights in a relevant offshore fund

on or after the commencement day, subject to paragraphs 13 and 15.

      (2)  

In this paragraph and paragraphs 15 to 18, “the commencement day”

30

means—

(a)   

in relation to the acquisition, holding and disposal of rights by a

person subject to the charge to capital gains tax, 1 December 2009,

and

(b)   

in relation to the acquisition, holding and disposal of rights by a

35

person subject to the charge to corporation tax, such day as the

Treasury may by order appoint.

Commencement: certain consequential amendments

13    (1)  

The amendment made by sub-paragraph (1)(a) of paragraph 11 comes into

force on 1 December 2009 (and has effect as if section 103A of TCGA 1992

40

had effect from that date in relation to the issue, placing, acquisition, holding

and disposal of rights in relevant offshore funds by any person).

      (2)  

The amendments made by sub-paragraphs (2), (4) and (5) of paragraph 11

come into force in accordance with an order made by the Treasury.

 
 

Finance Bill
Schedule 22 — Offshore funds
Part 2 — Application of TCGA 1992 to offshore funds

239

 

Commencement orders

14    (1)  

An order under paragraph 12(2)(b) or 13(2)—

(a)   

may make different provision for different cases or different

purposes, and

(b)   

may include transitional provision and savings.

5

      (2)  

Section 828(3) of ICTA, section 287(3) of TCGA 1992 and section 1014(4) of

ITA 2007 (orders etc subject to annulment) do not apply in relation to such

an order.

Election modifying commencement

15    (1)  

This paragraph applies if a person makes an election—

10

(a)   

for capital gains tax purposes, in respect of a relevant tax year, or

(b)   

for corporation tax purposes, in respect of a relevant accounting

period.

      (2)  

The amendments made by this Part of this Schedule (other than the

amendments made by paragraph 11(1)(a), (2), (4) and (5)) have effect, and

15

are to be treated as always having had effect, in relation to the acquisition,

holding and disposal by the person of rights in a relevant offshore fund on

or after the first day of that tax year or accounting period (“the election

day”).

      (3)  

Sub-paragraph (4) applies if, in respect of any time on or after the election

20

day but before the commencement day, the relevant offshore fund was not

certified as a distributing fund under Part 3 of Schedule 27 to ICTA

(distributing funds: certification procedure).

      (4)  

The acquisition, holding or disposal by the person of rights in the fund at

that time is to be treated as the acquisition, holding or disposal of rights in

25

an offshore fund that is so certified.

      (5)  

In this paragraph and paragraph 16—

“relevant accounting period” means an accounting period beginning

on or after 1 April 2003 but before the day appointed under

paragraph 12(2)(b);

30

“relevant tax year” means the tax year 2003-04 and any subsequent tax

year up to and including the tax year 2009-2010.

Making an election

16    (1)  

An election under paragraph 15 must be made—

(a)   

for capital gains tax purposes, by being included in a relevant return

35

under TMA 1970, and

(b)   

for corporation tax purposes, by being included in a relevant

company tax return.

      (2)  

A return under TMA 1970 is relevant if it is for—

(a)   

the tax year in respect of which the election is made, or

40

(b)   

a subsequent relevant tax year.

      (3)  

A company tax return is relevant if it is for—

(a)   

the accounting period in respect of which the election is made, or

 
 

Finance Bill
Schedule 23 — Insurance companies

240

 

(b)   

a subsequent relevant accounting period.

      (4)  

The references in sub-paragraph (1) to an election being included in a return

include an election being included by virtue of an amendment of the return.

      (5)  

An election under paragraph 15 is irrevocable.

Giving effect to elections

5

17         

If, in order to give effect to an election under paragraph 15, any adjustments

are required, whether by the discharge or repayment of tax, the making of

assessments or otherwise—

(a)   

the adjustments must be made, and

(b)   

any time limit for making the adjustments is to be disregarded.

10

Modification of acquisition cost

18    (1)  

This paragraph applies where a participant in a relevant offshore fund—

(a)   

holds rights in a relevant offshore fund immediately before the

effective date, and

(b)   

disposes of those rights on or after that date.

15

      (2)  

For the purposes of TCGA 1992, the participant is to be treated as if the

acquisition cost for those rights were the pre-commencement acquisition

cost.

      (3)  

“The effective date” means—

(a)   

if the participant has made an election under paragraph 15, the

20

election day, or

(b)   

otherwise, the commencement day.

      (4)  

“Acquisition cost” means the total of the consideration, costs and

expenditure described in section 38(1)(a) and (b) of TCGA 1992 (acquisition

and disposal costs etc).

25

      (5)  

“Pre-commencement acquisition cost” means the total of the consideration,

costs and expenditure that would have been allowable as a deduction under

section 38(1)(a) and (b) of TCGA 1992 if the participant had disposed of the

rights immediately before the effective date.

Schedule 23

30

Section 46

 

Insurance companies

Transfer from non technical account not to be receipt

1     (1)  

In section 83 of FA 1989 (receipts to be taken into account), after subsection

(2) insert—

“(2AZA)   

No amount shown as transfer from non technical account in line 32

35

of Form 58 in respect of the whole of the company’s long-term

business in the periodical return for a period of account is to be taken

into account as a receipt of the period of account.”

 
 

Finance Bill
Schedule 23 — Insurance companies

241

 

      (2)  

The amendment made by sub-paragraph (1) has effect in relation to periods

of account ending on or after 22 April 2009.

      (3)  

But, in relation to a period of account of a company beginning before that

date, that amendment has effect only insofar as the amount shown as

transfer from non technical account in line 32 of Form 58 covering the whole

5

of the company’s long-term business in the periodical return for the period

of account is attributable to transfers made on or after that date.

No deduction for capital allocations to with-profits policy holders

2     (1)  

In section 82 of FA 1989 (calculation of profits), after subsection (2) insert—

“(2A)   

But amounts are not allowed as such a deduction if they—

10

(a)   

are allocated to holders of policies under which they are

eligible to participate in surplus,

(b)   

are of a capital nature, and

(c)   

are not funded from amounts brought into account as part of

total income in line 19 of the revenue account prepared for

15

the purposes of Chapter 9 of the Prudential Sourcebook

(Insurers) in respect of the whole of the company’s long-term

business.

(2B)   

For the purposes of subsection (2A) above payments made in

connection with the reattribution of inherited estate are to be

20

regarded as being of a capital nature.”

      (2)  

The amendment made by sub-paragraph (1) has effect in relation to amounts

allocated on or after 22 April 2009 to holders of policies under which they are

eligible to participate in surplus.

Limits on loss relief for addition to non-profit funds

25

3     (1)  

In ICTA, after section 434A insert—

“434AZA 

 Reduced loss relief for additions to non-profit funds

(1)   

Where this section applies in the case of a company carrying on life

assurance business, relief allowable under section 393A or Chapter 4

of Part 10 in respect of losses incurred by the company in the life

30

assurance business in an accounting period is reduced in accordance

with section 434AZB.

(2)   

This section applies in the case of a company where—

(a)   

there has been a relevant addition to one or more non-profit

funds in a period of account ending no later than the

35

accounting period (“the relevant period of account”) (see

subsection (3)),

(b)   

the company is not a non-profit company in relation to the

relevant period of account and has not elected under

subsection (9) of section 83YA of the Finance Act 1989 to be

40

treated for the purposes of that section as if it were, and

(c)   

condition A or B is met,

   

and, if the relevant period of account is not the period of account

ending with the accounting period (“the current period of account”),

condition C is also met.

45

 
 

Finance Bill
Schedule 23 — Insurance companies

242

 

(3)   

For the purposes of subsection (2), there is a relevant addition to a

non-profit fund in the relevant period of account if an amount is

shown as a transfer from non-technical account in line 32 of the Form

58 of the non-profit fund in the periodical return for that period of

account.

5

(4)   

Condition A is that there is a relevant book value election in relation

to assets of a non-profit fund of the company.

(5)   

For the purposes of subsection (4), there is a relevant book value

election in relation to assets of a non-profit fund if an amount is

shown in relation to the non-profit fund as the excess of the value of

10

net admissible assets in line 51 of the Form 14 of the non-profit fund

in the periodical return for the current period of account.

(6)   

Condition B is that the company is party to arrangements the main

purpose, or one of the main purposes, of which is to reduce the

relevant admissible value of assets of a non-profit fund of the

15

company, other than any structural assets.

(7)   

For the purposes of subsection (6) (and section 434AZB), the

“relevant admissible value” means the value reflected in line 89 of

Form 13 of the periodical return for the current period of account.

(8)   

Condition C is that the surplus arising since the last valuation shown

20

in line 34 of the Form 58 of the non-profit fund, or any of the non-

profit funds, in relation to which condition A or B is met in the

periodical return for the current period of account is a negative

amount.

434AZB  

 Additions to non-profit funds: amount of loss reduction

25

(1)   

The amount of the relief allowable as mentioned in section

434AZA(1) is reduced by whichever of the following is the least—

(a)   

the amount of the loss,

(b)   

the amount specified in subsection (2), and

(c)   

the amount specified in subsection (4).

30

(2)   

The amount mentioned in subsection (1)(b) is—

(a)   

where only condition A in section 434AZA is met, the

relevant amount relating to the non-profit fund in relation to

which it is met or (where it is met in relation to more than one

non-profit fund) the sum of the relevant amounts relating to

35

them,

(b)   

where only condition B is met, the amount of the relevant

reduction relating to the non-profit fund in relation to which

it is met or (where it is met in relation to more than one non-

profit fund) the sum of the relevant reductions relating to

40

them, and

(c)   

where both condition A and condition B are met, the

aggregate of the amounts in paragraphs (a) and (b).

(3)   

In subsection (2)—

(a)   

“relevant amount”, in relation to a non-profit fund, means the

45

amount shown in relation to the non-profit fund as the excess

of the value of net admissible assets in line 51 of the Form 14

of the non-profit fund in the periodical return for the current

 
 

 
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