Finance Act 1995

35 (1) After paragraph 5 of Schedule 19AC to the Taxes Act 1988 insert—

“5A (1) Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and the distribution (or part of the distribution)—

(a) would fall within paragraph (a), (aa) or (ab) of section 11(2) but for the exclusion contained in that paragraph, and

(b) is referable to life assurance business, but not to overseas life assurance business,

then the recipient shall be treated for the purposes of the Corporation Tax Acts as entitled to such a tax credit in respect of the distribution (or part of the distribution) as it would be entitled to under section 231 if it were resident in the United Kingdom.

(2) Where part only of a qualifying distribution would fall within paragraph (ab) of section 11(2) but for the exclusion contained in that paragraph, the tax credit to which the recipient shall be treated as entitled by virtue of sub-paragraph (1) above is the proportionate part of the tax credit to which the recipient would be so treated as entitled in respect of the whole of the distribution.

5B (1) An overseas life insurance company may, on making a claim for the purpose, require that any UK distribution income for an accounting period shall for all or any of the purposes mentioned in sub-paragraph (2) below be treated as if it were a like amount of profits chargeable to corporation tax; and where it does so—

(a) the provisions mentioned in that sub-paragraph shall apply to reduce the amount of the UK distribution income, and

(b) the company shall be entitled to have paid to it the amount of the tax credits comprised in the amount of UK distribution income which is so reduced.

(2) The purposes for which a claim may be made under this paragraph are those of—

(a) the setting of trading losses against total profits under section 393A(1);

(b) the deduction of charges on income under section 338 or paragraph 5 of Schedule 4;

(c) the deduction of expenses of management under section 76;

(d) the setting of certain capital allowances against total profits under section 145(3) of the 1990 Act.

(3) Subsections (3), (4) and (8) of section 242 shall apply for the purposes of a claim under this paragraph as they apply for the purposes of a claim under that section.

(4) In this paragraph “UK distribution income” means income of an overseas life insurance company which consists of a distribution (or part of a distribution) in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution (or part) and the amount of that credit).

5C (1) This paragraph applies to income from the investments of an overseas life insurance company attributable to the basic life assurance and general annuity business of the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2) Where, in computing the income to which this paragraph applies, 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 that it bears to the amount of relief which would be granted apart from this sub-paragraph the same proportion as the amount of that income excluding that interest bears to the amount of that income including that interest.”.

(2) In paragraph 2(1) of Schedule 19AC to the Taxes Act 1988, for “section 444D” substitute “ paragraph 5B of Schedule 19AC ”.

(3) After paragraph 6(4) of that Schedule insert—

“(4A) In that subsection the following definition shall be inserted at the appropriate place—

“UK distribution income” has the meaning given by paragraph 5B(4) of Schedule 19AC;”.

(4) In section 475(6) of the Taxes Act 1988 for “section 444E(2)” (twice) substitute “ paragraph 5C(2) of Schedule 19AC ”.

(5) In paragraph 2(2) of Schedule 8A to the Finance Act 1989 for “section 444D(4) of the Taxes Act 1988” substitute “ paragraph 5B(4) of that Schedule ”.