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Income and Corporation Taxes Act 1988

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436Annuity business and pension business: separate charge on profits

(1)Subject to the provisions of this section, profits arising to an insurance company from general annuity business or pension business shall be treated as income within Schedule D, and be chargeable under Case VI of that Schedule, and for that purpose—

(a)the business of each such class shall be treated separately, and

(b)subject to paragraph (a) above, and to subsection (3) below, the profits therefrom shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(2)Subsection (1) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its ordinary life assurance business.

(3)In making the computation referred to in subsection (1) above—

(a)section 433 shall apply with the necessary modifications and in particular with the omission of all references to policy holders (other than holders of policies referable to pension business);

(b)no deduction shall be allowed in respect of any expenses of management deductible under section 76;

(c)there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from pension business or general annuity business in any previous accounting period or year of assessment;

(d)where the computation in question is of profits arising to an insurance company from pension business—

(i)group income shall not be taken into account as part of those profits, and

(ii)annuities shall be deductible notwithstanding section 337(2);

and the company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to pension business; and

(e)distributions which are not qualifying distributions shall not be taken into account where the computation in question is of the profits arising to an insurance company or overseas life insurance company from general annuity business or pension business.

(4)Section 396 shall not be taken to apply to a loss incurred by a company on its general annuity business or pension business.

(5)Nothing in section 128 or 399(1) shall affect the operation of this section.

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