Finance Act 2007

Transfer schemes: anti-avoidanceE+W+S+N.I.

8(1)In ICTA, before section 444AF (and the italic cross-heading before it) insert—E+W+S+N.I.

444AEATransfer schemes: anti-avoidance rule

(1)This section applies where—

(a)as a result of the whole or any part of transfer scheme arrangements involving the transfer of long-term business from one person (“the transferor”) to another (“the transferee”) a Case I advantage is obtained by the transferor or the transferee (or by both), and

(b)the sole or main purpose, or one of the main purposes, of the whole or any part of the transfer scheme arrangements is the obtaining of that Case I advantage.

(2)In subsection (1) above “transfer scheme arrangements” means an insurance business transfer scheme (“the relevant transfer scheme”) together with any relevant associated operations.

(3)If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AEB), the amount of the transferor's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account of the transferor covering the transfer date.

(4)If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AEC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the first period of account of the transferee ending after the transfer date.

(5)In this section and sections 444AEB and 444AEC “relevant associated operations”, in relation to the relevant transfer scheme, means—

(a)any other insurance business transfer scheme,

(b)any contract of reinsurance,

(c)any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee, or

(d)any surplus-increasing transfer of assets,

which is effected in connection with the relevant transfer scheme.

(6)In subsection (5) above—

  • dependant” and “insurance undertaking” have the same meaning as in the Insurance Prudential Sourcebook, and

  • surplus-increasing transfer of assets” means a transfer of assets of the transferor's long-term insurance fund to the transferee which is not brought into account for any period of account of the transferee but increases the amount of total surplus shown in line 39 of Form 58 in any periodical return of the transferee.

(7)See section 444AA for the meaning of “the transfer date” in this section.

444AEBCase I advantage: transferor

(1)A Case I advantage is obtained by the transferor if—

(a)Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or

(b)Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.

(2)If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—

(a)the amounts (if any) by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, and

(b)the amounts (if any) by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.

(3)This section applies to a period of account if it is—

(a)the period of account of the transferor covering the transfer date,

(b)any earlier period of account of the transferor, or

(c)where any relevant associated operations are effected in any later period of account, that period of account.

(4)In this section and section 444AEC “Case I profits” and “Case I losses” means profits and losses computed in accordance with the provisions of Case I of Schedule D.

(5)See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.

444AECCase I advantage: transferee

(1)A Case I advantage is obtained by the transferee if—

(a)Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or

(b)Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.

(2)If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—

(a)the amount by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, or

(b)the amount by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.

(3)This section applies to a period of account if it is—

(a)the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),

(b)the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or

(c)any intervening period of account.

(4)See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses”, in this section.

444AEDClearance: no avoidance or group advantage

(1)Section 444AEA does not apply in relation to the transferor or the transferee if, on an application under this section, the Commissioners for Her Majesty's Revenue and Customs (“the HMRC Commissioners”) have given a notice under subsection (2) below.

(2)A notice under this subsection is a notice stating that the HMRC Commissioners are satisfied—

(a)that the obtaining of a Case I advantage by the applicant is not the sole or main purpose of the whole or any part of the transfer scheme arrangements, or

(b)that the transferor and the transferee are members of the same group of companies and that there is no advantage to the group arising from any Case I advantage obtained by the transferor or by the transferee.

(3)For the purposes of this section there is no advantage to a group arising from any Case I advantage obtained by the transferor or by the transferee if—

(a)as a result of transfer scheme arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group of companies, and

(b)the amount (or aggregate amount) of that increase is not less than the reduction in the liability to corporation tax of the transferor or the transferee (or both) arising from the obtaining of the Case I advantage.

(4)An application under this section must be in writing and contain particulars of the transfer scheme arrangements.

(5)The HMRC Commissioners may by notice require the applicant to provide further particulars in order to enable them to determine the application.

(6)A requirement may be imposed under subsection (5) above within 30 days of the receipt of the application or of any further particulars required under that subsection.

(7)If a notice under subsection (5) above is not complied with within 30 days or such longer period as the HMRC Commissioners may allow, they need not proceed further on the application.

(8)The HMRC Commissioners must give notice of their decision on an application under this section to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of that notice being complied with.

(9)If the HMRC Commissioners—

(a)give notice to the applicant under subsection (8) above that they are not satisfied as mentioned in subsection (2) above, or

(b)do not comply with subsection (8) above,

the applicant may require them to transmit the application to the Special Commissioners.

(10)A requirement under subsection (9) above must be imposed within 30 days of the giving of the notice or the failure to comply and must be accompanied by any notice given under subsection (5) above and further particulars provided pursuant to any such notice.

(11)Any notice given by the Special Commissioners has effect for the purposes of subsection (1) above as if it were given by the HMRC Commissioners.

(12)If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of the HMRC Commissioners or the Special Commissioners, any resulting notice that they are satisfied as mentioned in subsection (2) above is void.

(13)For the purposes of this section two companies are members of the same group of companies if they are for the purposes of Chapter 4 of Part 10.

(2)In section 432E(2A) of ICTA (as amended by paragraph 4(2)), after “444ABC,” insert “ 444AEA, ” and after paragraph (aa) insert—

(ab)section 444AEA of this Act;.