Finance Act 1996

1 (1) Nothing in this Chapter shall be construed as preventing profits and gains arising from loan relationships of an insurance company from being included, where— U.K.

(a) the relationship is referable to any life assurance business or capital redemption business carried on by the company, and

(b) that business is business in respect of which the I minus E basis is applied,

in profits and gains on which the company is chargeable to tax in accordance with that basis.

[F1 (1A) Where—

(a) the I minus E basis is applied for any accounting period in respect of any life assurance business carried on by an insurance company, and

(b) in that accounting period the insurance company is a party to a loan relationship which is to any extent referable to that business,

then, in applying the I minus E basis to that business, [F2 section 96(1)(b)] of this Act shall be disregarded in relation to that loan relationship to that extent.]

[F3 (1B) In applying the I minus E basis for any accounting period in respect of any life assurance business carried on by an insurance company, no exchange gains or losses shall be taken to arise for the purposes of section 100 of this Act except to the extent that the money debt for the purposes of that section—

(a) arises as a result of an amount of income or expenses which falls to be taken into account in applying the I minus E basis not being paid when it is due and payable; or

(b) is one that is treated as a money debt for the purposes of that section by virtue of subsection (11)(a) of that section in accordance with subsection (12) of that section by reference to a Schedule A business or an overseas property business.

This sub-paragraph has effect notwithstanding sub-paragraph (1) above.]

[F4 (1C) In applying the I minus E basis for any accounting period in respect of any life assurance business carried on by an insurance company, no credits or debits shall be brought into account in respect of any debtor relationship that represents a capital redemption policy, within the meaning of Chapter 2 of Part 13 of the Taxes Act 1988.]

(2) Where, for any accounting period, the I minus E basis is applied in respect of any life assurance business or capital redemption business carried on by an insurance company, the effect of applying that basis shall be—

(a) that none of the credits or debits falling for the purposes of this Chapter to be brought into account in respect of loan relationships of the company that are referable to that business shall be brought into account as mentioned in section 82(2) of this Act; but

(b) that (subject to the following provisions of this Schedule) all those credits and debits shall, instead, be brought into account, in applying that basis to that business, as non-trading credits or, as the case may be, non-trading debits;

and the reference in paragraph 2(1) below to non-trading credits and non-trading debits shall be construed accordingly.

Textual Amendments

F1 Sch. 11 para. 1(1A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 40(2)

F2 Words in Sch. 11 para. 1(1A) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 42

F3 Sch. 11 para. 1(1B) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 14(2) (with Sch. 23 Pt. 3 para. 25)

F4 Sch. 11 para. 1(1C) inserted (with effect in accordance with Sch. 7 para. 20(3) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 20(2)

Modifications etc. (not altering text)

C1 Sch. 11 para. 1(1)(a)(2) modified (23.3.1999) by S.I. 1999/498, reg. 15(2)