Corporation Tax Act 2009 (c. 4)

Part 5 U.K. Loan Relationships

Modifications etc. (not altering text)

C1 Pt. 5 applied (with effect in accordance with Sch. 24 paras. 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 15(2)(3)

C2 Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)

C3 Pt. 5 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 5; S.I. 2012/628, art. 3(b)

C4 Pt. 5 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 2; S.I. 2011/2576, art. 5

C5 Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

C6 Pt. 5 modified (30.9.2013) by The BRB (Residuary) Limited (Tax Consequences) Order 2013 (S.I. 2013/2242), arts. 1, 7

C7 Pt. 5 modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 11(3)-(6)

C8 Pt. 5 modified by 2010 c. 4, s. 356NC(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)

C9 Pt. 5 modified by 2010 c. 4, s. 356NB(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)

C10 Pt. 5 modified by 2007 c. 3, s. 809FZZ(9) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))

C11 Pt. 5 modified by 2010 c. 4, s. 676AG(1) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 75)

Chapter 10 U.K. Insurance companies

Introduction U.K.

386 Overview of Chapter U.K.

(1) This Chapter contains special rules about the treatment of the loan relationships of insurance companies.

(2) In particular, it—

(a) provides for special rules to apply [F1 for the purposes of the I - E rules] in relation to an insurance company's non-trading deficits referable to BLAGAB instead of those in Chapter 16 (see sections 387 to 391), [F1 and]

(b) excludes some loan relationships of corporate members of Lloyd's from this Part (see section 392), F2 ...

F2 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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 F3 ... are treated as not constituting a trade or part of a trade) [F4 and section 88 of FA 2012 (equivalent rule for activities carried on in the course of BLAGAB)],

(b) Chapter 4 (continuity of treatment on transfers within groups or on reorganisations), and, in particular, sections 335(1) and (2), 336(4) and 337,

(c) section 405 (certain non-UK residents with interest on 3½% War Loan 1952 Or After),

(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 purposes of Chapter 2 of Part 6 in the case of companies carrying on insurance business), and

(f) section 486(4) (no exchange gains or losses to arise for the purposes of that Chapter where relevant debts prevented from being deductible [F5 as ordinary BLAGAB management expenses]).

(4) In this Chapter “BLAGAB” means basic life assurance and general annuity business.

Textual Amendments

F1 Words in s. 386(2)(a) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 150(2)(a)

F2 S. 386(2)(c) and the word immediately preceding it omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 150(2)(b)

F3 Words in s. 386(3)(a) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 150(3)(a)

F4 Words in s. 386(3)(a) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 150(3)(b)

F5 Words in s. 386(3)(f) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 150(3)(c)

Treatment of deficit on basic life assurance and general annuity business U.K.

387 Treatment of deficit on basic life assurance and general annuity business: introduction U.K.

(1) Sections 388 to 391 apply [F6 for the purposes of the I - E rules] instead of [F7 Chapters 16 and 16A] (non-trading deficits) if a company has a non-trading deficit from its loan relationships for BLAGAB for any accounting period.

(2) In those sections “the deficit” and “the deficit period” mean that deficit and that period respectively.

Textual Amendments

F6 Words in s. 387(1) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 151

F7 Words in s. 387(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 132

388 Basic rule: deficit set off against income and gains of deficit period U.K.

(1) The basic rule is that the deficit must be set off against any income and gains of the deficit period which are referable to BLAGAB.

(2) The income and gains are reduced accordingly.

(3) Any such reduction is made [F8 in accordance with step 4 in section 73 of FA 2012 (that is to say, before any deduction for the adjusted BLAGAB management expenses of the company for the deficit period)].

Textual Amendments

F8 Words in s. 388(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 152

389 Claim to carry back deficit U.K.

(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 permitted period, and

(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 accounting period.

[F9 (2A) If any of the claim amount is carried back in accordance with this section to an accounting period, the amount which is so carried back is to be left out of account for the purpose of applying section 93 of FA 2012 in the case of that period.]

(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—

(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 allows.

Textual Amendments

F9 S. 389(2A) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 153

390 Meaning of “available profits” U.K.

(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)).

(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 the permitted period.

(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) [F10 of the BLAGAB credits in respect of the company's loan relationships that count as income for the purposes of the I - E rules for that period (as determined by section 88(3) and (4) of FA 2012)].

(5) The unused part of the relevant deductions for an accounting period is found as follows.

Step 1

Add together—

(a) [F11 the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period], and

(b) so much of the sum of the deductions made in the case of the company in respect of [F12 qualifying charitable donations] for that period as is [F13 referable to BLAGAB].

Step 2

Add together—

[F14 (a) so much of the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period as, on the assumption that the company had no BLAGAB non-trading loan relationships profits for the period, could be subtracted at step 6 under that section without producing a negative amount, and]

(b) the total amounts [F15 referable to BLAGAB] which could be applied for the period in making deductions in respect of [F16 qualifying charitable donations] if those profits were disregarded.

Step 3

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 period.

[F17 (6) In the case of any claim under section 389, references in subsection (5) to the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period are references to that amount as determined on the assumptions in subsections (7) and (8).]

(7) The first assumption is that no account is taken of—

(a) that claim, or

(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 result of—

(a) the claim mentioned in subsection (6), or

(b) any such other claim as is mentioned in subsection (7)(b).

Textual Amendments

F10 Words in s. 390(4) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(2)

F11 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(a)

F12 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(2) (with Sch. 2)

F13 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(b)

F14 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(c)

F15 Words in s. 390(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(3)(d)

F16 Words in s. 390(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 612(3) (with Sch. 2)

F17 S. 390(6) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 154(4)

391 Carry forward of surplus deficit to next accounting period U.K.

(1) This rule applies if any of the deficit is not—

(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”).

[F18 (3) Any deficit so carried forward is treated for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the next period.]

Textual Amendments

F18 S. 391(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 155

Exclusion of loan relationships of members of Lloyd's U.K.

392 Exclusion of loan relationships of members of Lloyd's U.K.

(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—

(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).

F19 ... U.K.

Textual Amendments

F19 S. 393 and cross-heading omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 156

F19 393 General rules for some debtor relationships U.K.

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F20 394 Special rules for some debtor relationships U.K.

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Textual Amendments

F20 S. 394 omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 156