Finance Act 1991

16 (1) [F1 In the computation, otherwise than in accordance with the provisions applicable to Case I of Schedule D, of the [F2 relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of an insurance company for any accounting period], an amount equal to the lesser of the following amounts shall be treated (if it is not nil) as [F3 expenses payable which fall to be brought into account for that period at Step 3 in section 76(7) of the Taxes Act 1988,] that is to say—] U.K.

(a) A, and

(b) A - (R1 - R2 + C -SV - DB),

and if the result of the formula in paragraph (b) above is a negative amount, it shall be taken to be nil.

(2) For the purposes of sub-paragraph (1) above—

• A is the gross amount of any annuities paid in the accounting period so far as referable to old annuity contracts;

• R1 is the amount of the company’s opening liabilities for the accounting period in respect of old annuity contracts [F4 but taking that amount as nil if it would otherwise be below nil];

• R2 is the amount of the company’s closing liabilities for the accounting period in respect of old annuity contracts [F4 but taking that amount as nil if it would otherwise be below nil];

• C is the amount of any consideration received in the accounting period in respect of old annuity contracts;

• SV is the amount of any sums paid in the accounting period by reason of the surrender of rights conferred by old annuity contracts;

• DB is the amount of any death benefits paid in the accounting period in respect of old annuity contracts.

F5 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) If, in the case of an annuity under a group annuity contract made by an insurance company in an accounting period beginning before 1st January 1992—

(a) the company’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(b) the company’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the group annuity contract, so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

(6) If, in the case of an annuity which is subject to a reinsurance treaty made by the reinsurer in an accounting period beginning before 1st January 1992—

(a) the reinsurer’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(b) the reinsurer’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the reinsurance treaty, as respects the reinsurer and so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

(7) In this paragraph—

• “general annuity contract means an annuity contract so far as referable to general annuity business;

• “group annuity contract means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

• “old annuity contract means a general annuity contract made by an insurance company in an accounting period beginning before 1st January 1992;

• “reinsurance treaty means a contract under which one insurance company is obliged to cede, and another (in this paragraph referred to as a “reinsurer) to accept, the whole or part of a risk of a class or description to which the contract relates;

and, subject to that, expressions used in this paragraph and in Chapter I of Part XII of the Taxes Act 1988 have the same meaning in this paragraph as they have in that Chapter.

Textual Amendments

F1 Words in Sch. 7 para. 16(1) substituted (with effect in relation to accounting periods beginning after 5.3.1997 in accordance with s. 67(7) of the amending Act) by Finance Act 1997 (c. 16), s. 67(6)

F2 Words in Sch. 7 para. 16(1) substituted (with effect for accounting periods ending on or after 9.4.2003 in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(10)

F3 Words in Sch. 7 para. 16(1) substituted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 47(2)

F4 Words in Sch. 7 para. 16(2) inserted (with effect for periods of account ending on or after 31.12.2006 (whenever beginning)) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2007 (S.I. 2007/1031), arts. 1, 14(2)

F5 Sch. 7 para. 16(3)(4) repealed (with effect in relation to accounting periods beginning after 5.3.1997) by 1997 c. 16, s. 113, Sch. 18 Pt. VI(6) Note

Modifications etc. (not altering text)

C1 Sch. 7 para. 16 modified (10.8.1995) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655), reg. 20A (as inserted by S.I. 1995/1916, reg. 10)

C2 Sch. 7 para. 16 modified (with effect for accounting periods beginning on or after 1.1.2005) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1, 33

C3 Sch. 7 para. 16(7) modified (20.3.1997 but with retrospective effect to 1.1.1995) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(2), 42