1.Section 46 and Schedule 23 replace existing guidance on the tax treatment of additions made by a life insurance company to its long term insurance fund (LTIF) with a clear statutory framework. Whilst ensuring that additions brought into account in the company’s regulatory return are not taxable receipts it also counteracts the tax benefit which can arise when an addition to the LTIF enables a company to realise a Case I loss that does not reflect an economic loss incurred in the company’s life assurance business.
2.The section and Schedule also clarify the transitional rules governing relief for repayments of contingent loans taxed under section 83ZA of the Finance Act (FA) 1989, amend the rules governing the calculation of the ‘floor’ for gross roll up business investment return, to ensure consistent treatment of foreign business assets and amend section 32 of the Taxation of Chargeable Gains Act 1992 (TCGA).