C3C1C2Part 7Derivative contracts
Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
Chapter 6Special kinds of company
Insurance companies
634Insurance companies
F31
For the purposes of this Part, activities carried on by a company in the course of—
a
any mutual insurance or other mutual business which is not life assurance business, F4...
F4b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
are treated as not constituting the whole or any part of a trade.
F22
In the case of activities carried on by a company in the course of any basic life assurance and general annuity business, provision corresponding to that made by subsection (1) is made by section 88 of FA 2012 for the purpose of applying the I - E rules.
635Creditor relationships: embedded derivatives which are options
1
This section applies if in any accounting period—
a
a company is a party to a creditor relationship for the purposes of its F9basic life assurance and general annuity business, and
b
that creditor relationship is one in relation to which sections 415 and 585 (which both apply to loan relationships with embedded derivatives) would have effect but for the fact that the company accounts for the creditor relationship at fair value through profit and loss.
2
F8For the purpose of applying the I - E rules, this Part and Part 5 (loan relationships) have effect for that accounting period as they would if the creditor relationship were one in relation to which those sections have effect.
636Modifications of Chapter 5
1
Chapter 5 (continuity of treatment on transfers within groups) has effect in relation to insurance companies with the following modifications.
2
Section 625(1)(a) (which sets out one of the conditions for that section to apply) has effect as if for “section 626(2)” there were substituted “section 626(2), (2A) or (2B)”.
3
Section 626 (transactions to which section 625 applies) has effect as if after subsection (2) there were inserted—
2A
A transaction is within this subsection if it is a transfer between two companies of business consisting of the effecting or carrying out of contracts of long-term insurance which has effect under an insurance business transfer scheme.
2B
A transaction is within this subsection if it is a transfer between two companies which is a qualifying overseas transfer.
F102C
In subsection (2B) “qualifying overseas transfer” means so much of a transfer of the whole or any part of the business of an overseas life insurance company carried on through a permanent establishment in the United Kingdom as takes place in accordance with an authorisation granted outside the United Kingdom for the purposes of F6Article 39 of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).
4
Section 625 (group member replacing another as party to derivative contract) does not apply as a result of a transaction or series of transactions within section 626(2) or (3) in relation to a transfer of an asset, or of rights or duties under or an interest in an asset, ifF11, immediately before or after the transfer, the asset was held for the purposes of a company's long-term business (but, in the case of an overseas life insurance company, ignoring assets which are not UK assets (within the meaning of section 117 of FA 2012)).
5
Section 625 does not apply as a result of a transaction within section 626(2A) or (2B) in relation to a transfer of an asset, or of rights or duties under or an interest in an asset, if the asset—
a
was within one of F5the applicable categories immediately before the transfer, and
b
is not within that category immediately after it.
F15A
For the purposes of subsection (5)(a) “the applicable categories” means—
a
in the case of a UK life insurance company, the long-term business categories or a category of assets which are not held for the purposes of its long-term business, and
b
in the case of an overseas life insurance company, the UK long-term business categories, a category of UK assets which are not held for the purposes of its long-term business or a category of assets which are held by it but which are not UK assets.
6
Subsection (7) applies for the purposes of subsection (5) if one of the companies is an overseas life insurance company.
7
An asset is taken to be within the same category both immediately before the transfer and immediately after it if the asset—
a
was within one category immediately before the transfer, and
b
is within the corresponding category immediately after it.
F78
For the purposes of this section—
a
“the long-term business categories” has the same meaning as in section 116 of FA 2012, and “the UK long-term business categories” and “UK assets” have the same meanings as in section 117 of FA 2012, and
b
section 122 of FA 2012 applies as it applies for the purposes of Chapter 8 of Part 2 of that Act.
Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)