The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2001

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473).

Regulation 1 provides for the citation and commencement of the Regulations and regulation 2 for interpretation.

Regulation 3 introduces the amendments to the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (“the principal Regulations”).

Regulation 4 amends regulation 13 of the principal Regulations (modifications of section 432A of the Income and Corporation Taxes Act 1988 (c. 1) (“the Taxes Act”) for the purposes of friendly societies). It replaces subsections (12) and (13) of section 432A, as inserted by regulation 13(5) before the amendment, with new subsections to the same effect. The new subsections express the propositions contained in the former subsections in algebraic, rather than purely verbal, form.

Regulation 5 omits regulations 17 and 18 of the principal Regulations consequent on the repeal of sections 434D and 434E of the Income and Corporation Taxes Act 1988 by the Capital Allowances Act 2001 (c. 2).

Regulation 6 inserts two new regulations, 21A and 21B, into the principal Regulations. They modify section 438B of the Taxes Act (inserted by paragraph 5 of Schedule 25 to the Finance Act 2001 (c. 9) and amended by S.I. 2001/3629). The new regulation 21A secures that, as not all of a friendly society’s income or chargeable gains arising from basic life assurance or general annuity business is taxable, such income and chargeable gains are treated as referable to the society’s taxable basic life assurance or general annuity business. The new regulation 21B provides a method for computing the proportion of the assets of a friendly society held for the purposes of long-term business where the society does not have a long-term insurance fund.

Regulation 7 omits regulation 41 of the principal Regulations, which became spent on the repeal of the Capital Allowances Act 1990 (c. 1) by the Capital Allowances Act 2001.

Regulation 8 inserts two new regulations, 53C and 53D, into the principal Regulations. They respectively modify sections 256 and 560 of the Capital Allowances Act 2001. The modifications made by the new regulation 53C operate to limit capital allowances on management assets of the life assurance business of friendly societies to that part of their basic life assurance and general annuity business which is taxable. The modification made by regulation 53D applies, to certain categories of transfer of friendly society business, the rules which apply to insurance companies where a transfer is in accordance with a scheme sanctioned by the court under Schedule 2C to the Insurance Companies Act 1982 (c. 50) or a qualifying overseas transfer within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act.

The new regulations 21A and 21B of the principal Regulations have effect from 6th April 2001, and the new regulations 53C and 53D have effect in respect of chargeable periods ending on or after 1st April 2001. The powers conferred by section 463(4) of the Taxes Act authorise the making of modifications having retrospective effect.