The Insurance Companies (Reserves) (Tax) Regulations 1996

EC companies

7.—(1) This regulation applies in any case where for any accounting period—

(a) an equivalent reserve is maintained, otherwise than by virtue of section 34A regulations, by an EC company carrying on business in the United Kingdom through a branch, and

(b) the three conditions specified in paragraphs (2) to (4) are satisfied.

(2) The first condition is that the branch in the United Kingdom has submitted, together with its return under section 11 of the Management Act, a balance sheet (“the branch balance sheet”) in respect of the trade of the branch.

(3) The second condition is that the branch balance sheet includes as a liability an amount in respect of an equalisation reserve which is equal to the amount which it would have been required to include as a liability in respect of an equalisation reserve maintained by virtue of section 34A regulations if the branch had been subject to such regulations.

(4) The third condition is that a balance sheet drawn up on the same day as the branch balance sheet for the purposes of the company’s statutory accounts (“the company balance sheet”), either—

(a) includes as a liability an amount in respect of an equalisation reserve equal to or greater than the amount in respect of the equalisation reserve included in the branch balance sheet, or

(b) in a case where the amount in respect of the equalisation reserve included in the branch balance sheet exceeds the amount in respect of the equalisation reserve included in the company balance sheet, shows the amount of the excess in the company balance sheet otherwise than as funds belonging to, or available for distribution either immediately or prospectively to, the proprietors of the company.

(5) For the purpose of calculating the amount of the excess referred to in paragraph (4), any amount in the company balance sheet denominated in a currency other than sterling is to be translated into sterling at the London closing exchange rate on the last day of the accounting period in question.

(6) Section 444BA shall have effect, subject to the modification specified in paragraph (7), in relation to the equalisation reserve included in the branch balance sheet as it has effect in relation to equalisation reserves maintained by virtue of section 34A regulations.

(7) Section 444BA shall be modified so as to provide in addition that in any case where, after the conditions specified in paragraphs (2) to (4) have been satisfied in an earlier accounting period, any of those conditions ceases to be satisfied in a later accounting period, then, for the purposes of the Tax Acts—

(a) any balance which exists in the reserve at the end of the later accounting period shall be deemed to have been transferred out of the reserve immediately before the end of that accounting period;

(b) that transfer shall be deemed to be a transfer in respect of that company’s business for that accounting period; and

(c) the amount of the reserve shall thereupon be deemed to be nil.