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Finance Act 1989

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Amendments of Chapter I of Part XII of Taxes Act 1988 (Insurance Companies)

1In section 431 (interpretative provisions relating to insurance companies), at the end of subsection (2) there shall be added—

  • “policy holders' fraction” and “shareholders' fraction” shall be construed in accordance with section 89 of the Finance Act 1989.

2Section 433 (profits reserved for policy holders or annuitants) shall cease to have effect.

3(1)In section 434 (franked investment income etc.), for subsection (3) there shall be substituted the following subsections—

(3)Subject to sections 437 and 438, the policy holders' fraction of the franked investment income from investments held in connection with a company’s life assurance business shall not be used under Chapter V of Part VI to frank distributions made by the company and, accordingly, for the purposes of that Chapter (other than the application of franked investment income under section 241), in relation to any unrelieved income of a company falling within subsection (1) above, the surplus of franked investment income for any accounting period means the aggregate of—

(a)the policy holders' fraction of that franked investment income; and

(b)the amount determined under section 241(3) on the basis that the reference therein to franked investment income is a reference only to the shareholders' fraction of that income.

(3A)The policy holders' fraction of the franked investment income from investments held in connection with a company’s life assurance business shall be left out of account in determining, under subsection (7) of section 13, the franked investment income forming part of the company’s profits for the purposes of that section.

(2)Subsections (4) and (5) of that section shall be omitted.

(3)In subsection (6) of that section for the words from “such fraction” onwards there shall be substituted “the policy holders' fraction thereof”.

(4)In subsection (7) of that section for “(4)” there shall be substituted “(3)” and after the words “against which” there shall be inserted “disregarding relief under section 242”.

4After section 434 there shall be inserted the following section—

434ALimitations on loss relief and group relief

(1)In the case of a company carrying on life assurance business, no relief shall be allowable under Chapter II (loss relief) or Chapter IV (group relief) of Part X against the policy holders' fraction of the relevant profits for any accounting period.

(2)For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the total profits of its life assurance business, less any deduction due under section 76, but before allowing any relief under Chapter II or Chapter IV of Part X.

5Section 435 (taxation of gains reserved for policy holders and annuitants) shall cease to have effect.

6In section 436 (annuity and pension business: separate charge on profits) in subsection (3)(a) for the words “section 433” there shall be substituted “sections 82 and 83 of the Finance Act 1989”.

7In section 441 (foreign life assurance funds) in subsection (5)(b) after “which” there shall be inserted “in respect of its general annuity business only”.

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