87Management expenses
(1)Section 76 of the Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.
(2)In subsection (1), after paragraph (b) there shall be inserted “and
(c)there shall be deducted from the amount treated as the expenses of management for any accounting period any repayment or refund (in whole or in part) of a sum disbursed by the company (for that or any earlier period) as acquisition expenses; and
(d)the amount treated as expenses of management shall not include any amount in respect of expenses referable to general annuity business or pension business; and
(e)the amount of profits from which expenses of management may be deducted for any accounting period shall not exceed the net income and gains of that accounting period referable to basic life assurance business;
and for this purpose “net income and gains” means income and gains after deducting any reliefs or exemptions which fall to be applied before taking account of this section.”
(3)For subsection (8) there shall be substituted—
“(8)In this section—
“acquisition expenses” means expenses falling within paragraphs (a) to (c) of subsection (1) of section 86 of the Finance Act 1989;
“basic life assurance business” has the meaning assigned by section 84(1) of that Act;
and other expressions have the same meaning as in Chapter I of Part XII.”
(4)In consequence of the amendment made by subsection (2) above, section 436(3)(b) of the Taxes Act 1988 (no deduction of expenses of management in certain cases) shall cease to have effect.
(5)This section has effect with respect to accounting periods beginning on or after 1st January 1990; and, in relation to a straddling period, sections 75, 76 and 436 of the Taxes Act 1988—
(a)shall have effect in relation to the 1989 component period without regard to the amendments made by subsections (2) to (4) above; and
(b)shall have effect in relation to the 1990 component period as amended by those subsections.
(6)If, for the 1989 component period, there is an amount of expenses of management available to be carried forward to the 1990 component period under section 75(3)(a) of the Taxes Act 1988 (as applied by section 76 thereof),—
(a)that amount shall form a pool to which the following provisions of this section shall apply and to which section 75(3)(b) of that Act (in this subsection referred to as “the carry-forward provision”) shall apply only to the extent specified in paragraph (c) below;
(b)if, for the 1990 component period or any subsequent accounting period, the amount which (disregarding the pool) may be deducted in respect of expenses of management is less than the amount of the profits from which, disregarding section 76(1)(e) of that Act (as set out in subsection (2) above), the expenses of management are deductible, paragraph (c) below shall apply for that period; and in that paragraph the difference between the amount which may be so deducted and that amount of profits is referred to as “the potetial deficiency” for the period;
(c)where this paragraph applies for an accounting period (including the 1990 component period) the carry-forward provision shall be taken to have had effect to carry forward to the accounting period (as if disbursed as expenses for that period) so much of the pool as does not exceed the potential deficiency for the period and is permitted under section 76(2) of the Taxes Act 1988; and the amount of the pool shall be reduced accordingly.
(7)In the case of a company which has an accounting period beginning on 1st January 1990, subsection (6) above shall apply as if—
(a)any reference therein to the 1989 component period were a reference to the accounting period ending on 31st December 1989; and
(b)any reference therein to the 1990 component period were a reference to the accounting period beginning on 1st January 1990.