Finance Act 1974

26 Life insurance companies

(1) The following provisions of this section shall have effect in relation to any accounting period of an insurance company carrying on life assurance business which falls wholly after 31st March 1973 and any part falling after that date of such an accounting period beginning before and ending after that date.

(2) The policy holders' share of the life assurance gains shall not be reduced under section 93(2) of the [1972 c. 41.] Finance Act 1972, but corporation tax charged on so much of that share as remains after setting against it the amounts referred to in subsection (3)(c) below shall be calculated as if the rate of corporation tax were whichever of the following is the less—

(a) the rate at which capital gains tax is chargeable under section 20(3) of the [1965 c. 25.] Finance Act 1965 for the year of assessment in which the accounting period ends; and

(b) 37.5 per cent.

(3) For the purposes of this section there shall be ascertained the policy holders' share and the remainder (in this subsection referred to as the residual part) of the life assurance gains and of the relevant reliefs ; and—

(a) the residual part of the relevant reliefs shall be set against so much of the residual part of those gains as remains after reducing it in accordance with section 93(2) of the Finance Act 1972 ; and

(b) if the residual part of the relevant reliefs exceeds the residual part, as so reduced, of those gains, the excess (or so much of it as does not, together with the policy holders' share of the relevant reliefs, exceed the policy holders' share of those gains) shall be added to the policy holders' share of the relevant reliefs ; and

(c) the policy holders' share of the relevant reliefs, with any addition made under paragraph (b) above, shall be set against the policy holders' share of the life assurance gains.

(4) For the purposes of this section—

(a) the life assurance gains are such part of the amount to be included, in accordance with section 265 of the Taxes Act, in the company's total profits as is attributable to gains from investments held in connection with the company's life assurance business ;

(b) the policy holders' share of the life assurance gains or of the relevant reliefs is such fraction thereof as is equal to the fraction of the profits of the company in respect of its life assurance business which, under section 309 of the Taxes Act, is excluded from the computation of those profits or would be so excluded if the profits were computed in accordance with the provisions applicable to Case I of Schedule D; and

(c) the relevant reliefs are such of the sums to be deducted from or set off against the company's profits as are deducted from or set off against the life assurance gains.

(5) Section 322 of the Taxes Act (deduction of tax from chargeable gains) shall have effect as if the proviso to subsection (3) thereof had not been included among the repeals made by the [1972 c. 41.] Finance Act 1972; and section 93(8) of that Act (which modified that subsection) shall cease to have effect.