Finance Act 2008

Section 44

SCHEDULE 18 Friendly societies

Introduction

1 Chapter 2 of Part 12 of ICTA (friendly societies etc) is amended as follows.

PHI business

2 (1) In section 466(1) (“life or endowment business”), for paragraph (b) substitute—

“(b) any PHI business (as defined in section 431) if—

(i) the contract is one made before 1 September 1996, or

(ii) the contract is one made on or after that date and the effecting and carrying out of the business also constitutes business within paragraphs I, II or III of Part II of Schedule 1 to the Financial Services and Markets Act (Regulated Activities) Order 2001.”

(2) The amendment made by sub-paragraph (1) has effect for periods of account beginning on or after 1 January 2007.

Transfers of exempt “other” business

3 (1) After section 461C insert—

“461D Transfers of other business

(1) Where—

(a) at any time a friendly society (“the transferee”) acquires by way of transfer of engagements or amalgamation from another friendly society (“the transferor”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and

(b) immediately before that time the transferor was exempt from corporation tax on profits arising from that business,

the transferee is so exempt after that time.

(2) But if during an accounting period of the transferee there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on that business, the transferee shall not be exempt from corporation tax by virtue of subsection (1) above for that or any subsequent accounting period.

(3) Where—

(a) at any time a friendly society (“the transferee”) acquires by way of transfer of engagements or amalgamation from another friendly society (“the transferor”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and

(b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business,

the transferee is not so exempt after that time.

(4) The Treasury may by regulations provide that, where any business of a friendly society is exempt from corporation tax by virtue of subsection (1) above, or not so exempt by virtue of subsection (3) above, the Corporation Tax Acts have effect subject to such modifications (or exceptions) as the Treasury consider appropriate.

(5) Regulations under subsection (4) above—

(a) may make different provision for different cases,

(b) may include any incidental, supplementary, consequential or transitional provisions which the Treasury consider appropriate, and

(c) may include retrospective provision.”

(2) The amendment made by sub-paragraph (1) has effect in relation to transfers of engagements and amalgamations taking place on or after the day on which this Act is passed.

Extension of section 463

4 In subsection (1) of section 463 (application of Corporation Tax Acts to life or endowment business carried on by friendly societies), for “the life or endowment” substitute “long-term”; and, accordingly, in the heading of that section, for “Life or endowment” substitute “Long-term”.

Repeal of obsolete provisions

5 (1) Omit—

(a) section 462(3) and (4) (tax exempt business: insurances made in 1984-85), and

(b) section 462A (election relating to profits attributable to pre-1991 contracts expressed not to be part of tax exempt business).

(2) In section 462(1), for “subsections (2) to (4)” substitute “subsection (2)”.

(3) In consequence of sub-paragraph (1), omit—

(a) paragraph 2 of Schedule 9 to FA 1991,

(b) paragraph 9 of Schedule 9 to F(No.2)A 1992, and

(c) section 45(4) and (5) of FA 2007.