Finance Act 1989

[F1 89 Policy holders’ share of profits. E+W+S+N.I.

(1) The references in [F2 sections 88 and 88A] above to the policy holders’ share of the relevant profits for an accounting period of a company carrying on life assurance business [F3 or, as the case may be, basic life assurance and general annuity business] are references to the amount arrived at by deducting from those profits the Case I profits of the company for the period in respect of [F4 its life assurance business], reduced in accordance with subsection (2) below.

(2) For the purposes of subsection (1) above, the Case I profits for a periodshall be reduced by—

F5 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the shareholders’ share of any F6 . . . franked investment incomearising in the period [F7 which is referable to the company’s basic life assurance and general annuity business][F8 , and

(c) the shareholders’ share of any foreign income dividends arising to the company in the period [F9 which are referable to the company’s basic life assurance and general annuity business].]

[F10 (2A) For the purposes of subsection (2) above—

(a) “foreign income dividends” shall be construed in accordance with Chapter VA of Part VI;

(b) the shareholders’ share of any foreign income dividends is so much of the income they represent as is the shareholders’ share.]

(3) For the purposes of thos section “the shareholders’share” in relation to any income is so much of the income as isrepresented by the fraction

where—

• A is an amount equal to the Case I profits of the company for the periodin question in respect of its life assurance business, and

• B is an amount equal to the excess of the company’s relevant non-premiumincome and relevant gains over its relevant expenses and relevant interest forthe period.

(4) Where there is no such excess as is mentioned in subsection (3) above, orwhere the Case I profits are greater than any excess, the whole of the incomeshall be the shareholders’ share; and (subject to that) where there are noCase I profits, none of the income shall be the shareholders’ share.

(5) In subsection (3) above the references to the relevant non-premium income,relevant gains, relevant expenses and relevant interest of a company for anaccounting period are references respectively to the following items asbrought into account for the period, so far as referable to the company’s lifeassurance business,—

(a) the company’s investment income from the assets of its long-term [F11 insurance]fund together with its other income, apart from premiums;

(b) any increase in the value (whether realised or not) of those assets;

(c) expenses payable by the company;

(d) interest payable by the company;

and if for any period there is a reduction in the value referred to inparagraph (b) above (as brought into account for the period), that reductionshall be taken into account as an expense of the period.

(6) Except in so far as regulations made by the Treasury otherwise provide,in this section “brought into account” means brought intoaccount in the revenue account prepared for the purposes of [F12 Chapter 9 of the Prudential Sourcebook (Insurers)]; and where the company’s period of account does not coincidewith the accounting period, any reference to an amount brought into accountfor the accounting period is a reference to the corresponding amount broughtinto account for the period of account in which the accounting period iscomprised, proportionately reduced to reflect the length of the accountingperiod as compared with the length of the period of account.

[F13 (7) In this section—

“Case I profits” means profits computed in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D;

“the Prudential Sourcebook (Insurers)” means the Interim Prudential Sourcebook for Insurers made by the Financial Services Authority under the Financial Services and Markets Act 2000.]

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

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Amendments (Textual)

F1 Finance Act 1990 (c. 29), s. 45(3).Previously

“Shareholders' and policy holders' fractions.89.– (1) Inrelation to an accounting period of an insurance company carrying on lifeassurance business, any reference to the shareholders' fraction or the policyholders' fraction is a reference to the appropriate fraction determined,subject to subsections (7) and (8) below, by the formulae in subsection (2)below. (2) The formulae referred to in subsection (1) above are–(a) forthe shareholders' fraction, A/A+B and (b) for the policy holders' fraction,B/A+B, where “A” and “B” are determined in accordance with thefollowing provisions of this section. (3)In the formulae in subsection (2)above “A” is the profits of the company for the accounting period inrespect of its life assurance business, computed in accordance with theprovisions of the Taxes Act 1988 applicable to Case I of Schedule D, and, ifthere are no such profits (or there is a loss), “A” is zero. (4) Subjectto subsection (6) below, in those formulae “B” is such a sum as, afterdeduction of corporation tax at the rate provided for by subsection (1) ofsection 88 above in relation to the policy holders' fraction of the company'srelevant profits for the accounting period (within the meaning of thatsubsection), is equal to the excess (if any) for the corresponding period ofaccount of— (a) the aggregate of— (i) the closing liabilities topolicy holders referable to the company's basic life assurance business, (ii)the sums paid to policy holders in the period in respect of claims referableto that business, and (iii) any amounts allocated to policy holders in respectof that period which do not fall within sub-paragraph (i) or sub-paragraph(ii) above and which are referable to that business, over (b) the aggregateof the premiums receivable by the company for the period in respect of itsbasic life assurance business and the opening liabilities to policy holdersreferable to that business, and, if there is no such excess, “B” is zero.(5) The references in subsection (4) above to the opening and closingliabilities to policy holders are references to those liabilities includingany such amount as is referred to in section 82(1)(b) above. (6) In relationto an accounting period, references in subsection (4) above to thecorresponding period of account are references,— (a) if the accountingperiod coincides with a period of account, to that period; and (b) in anyother case, to the period of account in which the accounting period iscomprised; and, for the purpose of determining “B” in a case whereparagraph (b) above applies, the aggregates referred to in paragraphs (a) and(b) of subsection (4) above shall each be proportionately reduced to reflectthe length of the accounting period as compared with the length of thecorresponding period of account. (7) Subject to subsection (8) below, if inthe case of any accounting period of a company both “A” and “B” inthe formulae in subsection (2) above are zero,— (a) the shareholders'fraction shall be taken to be the whole; and (b) the policy holders' fractionshall be taken to be nil. (8) In relation to an accounting period of aninsurance company carrying on mutual life assurance business,— (a) anyreference to the shareholders' fraction is a reference to nil; and (b) anyreference to the policy holders' fraction is a reference to the whole.”.Definition of shareholders' share (subsection (3))employedfor purposes of Income and Corporation Taxes Act 1988, s.438(6A)–pension business

F2 Words in s. 89(1) substituted (29.4.1996 with effect for the financial year 1996 and subsequent financial years) by 1996 c. 8, s. 73(4), Sch. 6 para. 26(3)(a)(4)

F3 Words in s. 89(1) inserted (29.4.1996 with effect for the financial year 1996 and subsequent financial years) by 1996 c. 8, s. 73(4), Sch. 6 para. 26(3)(b)(4)

F4 Words in s. 89(1) substituted (29.4.1996 with effect for the financial year 1996 and subsequent financial years) by 1996 c. 8, s. 73(4), Sch. 6 para. 26(3)(c)(4)

F5 S. 89(2)(a) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(a)(4), Sch. 8 Pt. II(6), note

F6 Words in s. 89(2)(b) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(b)(i)(4), Sch. 8 Pt. II(6), note

F7 Words in s. 89(2)(b) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(b)(ii)(4)

F8 S. 89(2)(c) and word

“and”

immediately preceding it repealed (31.7.1997 with effect in relation to distributions made on or after 6.4.1999) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(2)(4), Sch. 8 Pt. II(11), note

F9 Words in s. 89(2)(c) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(c)(4)

F10 S. 89(2A) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(3)(4), Sch. 8 Pt. II(11), note

F11 Word in s. 89(5)(a) substituted (1.12.2001) by S.I. 2001/3629, art. 60(3)

F12 Words in s. 89(6) substituted (1.12.2001) by S.I. 2001/3629, art. 58(2)

F13 S. 89(7) substituted (1.12.2001) by S.I. 2001/3629, art. 58(3)

Modifications etc. (not altering text)

C1 S. 89 amended (27.7.1993 with application as mentioned in s. 78(11) of the amending Act) by 1993 c. 34, s. 78(6)(11)