Income and Corporation Taxes Act 1988

445 Charge to tax on investment income

(1) Any income of an overseas life insurance company from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any), wherever received, shall, to the extent provided in this section, be deemed to be profits comprised in Schedule D and shall be charged to corporation tax under Case III of Schedule D.

(2) In subsection (1) above “income” shall not include—

(a) distributions which are not qualifying distributions or income attributable to offshore income gains; or

(b) annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3).

(3) Qualifying distributions received from companies resident in the United Kingdom shall be brought into account under this section notwithstanding their exclusion from the charge to corporation tax.

(4) A portion only of the income from the investments of the life assurance fund (excluding the pension fund and general annuity fund, if any) shall be charged in accordance with subsection (1) above, and for any accounting period that portion shall be determined by the formula—

where—

• A is the total income from those investments for that period;

• B is the average of the liabilities for that period to policy holders resident in the United Kingdom and to policy holders resident abroad whose proposals were made to the company at or through its branch or agency in the United Kingdom; and

• C is the average of the liabilities for that period to all the company’s policy holders;

but any reference in this subsection to liabilities does not include liabilities in respect of general annuity and pension business.

(5) For the purposes of subsection (4) above the average of any liabilities for an accounting period shall be taken as one half of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

(6) For the purposes of this section the liabilities of an insurance company attributable to any business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return.

(7) Section 73 shall not apply to tax in respect of income to which subsection (1) above applies.

(8) In the case of an overseas life insurance company—

(a) in computing for the purposes of this section the income from the investments of the life assurance fund of the company, any interest, dividends and other payments whatsoever to which section 48 or 123(4) extends shall be included notwithstanding the exemption from tax conferred by those sections respectively; and

(b) where in computing that income any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so as to bear to the amount of relief which would be granted but for the provisions of this paragraph the same proportion as the amount of that income, excluding that interest, bears to the amount of that income including that interest.