(1)This section applies where for any accounting period any division falls to be made between the pension business and any other kind of long-term business of an insurance company and any of the income or gains or losses of the company for that period relate to restricted government securities ; and where this section applies subsection (3) of section 323 of the Taxes Act shall have effect subject to the provisions of this section.
(2)All income, gains or losses of the company which relate to restricted government securities shall be referred to its pension business.
(3)Where the division of the other income, gains or losses of the company is made by reference to the liabilities at any time in the accounting period which are referable to pension business or to two or more kinds of business including pension business, those liabilities shall be treated as reduced by the appropriate amount.
(4)In subsection (3) above " the appropriate amount" means—
(a)in a case in which the total liabilities of the company at the time in question which are referable to long-term business are less than the market value at that time of the investments and deposits held by the company relating to all such business, such proportion of the market value of the restricted government securities held by the company at that time as those liabilities bear to the market value of those investments and deposits; and
(b)in any other case, the market value of the restricted government securities at that time.
(5)In this section—
" insurance company " has the same meaning as in the said section 323;
" long-term business " has the same meaning as in section 1(1) of the [1981 c. 31.] Insurance Companies Act 1981 ;
" pension business " has the same meaning as in the said section 323; and
" restricted government securities " means government securities issued on the condition that, except in such circumstances as may be specified in the conditions of issue, they are to be held by insurance companies against and applied solely towards meeting pension business liabilities.