The Insurance Companies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1999

Explanatory Note

(This note is not part of the Regulations)

These Regulations replace and revoke the Insurance Companies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1995 (S.I. 1995/3223) (“the 1995 Regulations”).

Section 51B of the Income and Corporation Taxes Act 1988 (“the 1988 Act”), inserted by section 78(1) of the Finance Act 1995, provides that the Treasury may by regulations provide that persons to whom payments of interest on relevant gilt-edged securities are made without deduction of tax shall make periodic returns to an officer of the Commissioners of Inland Revenue. This regulatory power was exercised by the Treasury in the Gilt-edged Securities (Periodic Accounting for Tax on Interest) Regulations 1995 (S.I. 1995/3224) (“the Gilts Regulations”). The 1995 Regulations made further provision in exercise of the same regulatory power in relation to companies carrying on life assurance business, and in particular made provision modifying the operation of Schedule 19AB to the 1988 Act (“Schedule 19AB”) in relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to insurance companies carrying on pension business.

Following the making of the 1995 Regulations, Schedule 19AB was amended by Schedule 34 to the Finance Act 1996 with effect in relation to accounting periods of insurance companies ending on or after 1st July 1999, being the day appointed under section 199 of the Finance Act 1994 (corporation tax self assessment). In addition, section 51B of the 1998 Act is repealed in relation to payments of interest on gilt-edged securities falling due on or after 1st April 1999 (section 37 of the Finance Act 1998 (c. 36) and S.I. 1999/619 (C.16)). The present Regulations accordingly replace the 1995 Regulations in relation to payments of interest on relevant gilt-edged securities made without deduction of tax to an insurance company that fall within an accounting period of that company beginning before 1st April 1999 and ending on or after 1st July 1999, and in doing so modify the operation of Schedule 19AB as amended by Schedule 34 to the Finance Act 1996 and later Finance Acts.

Regulation 1 provides for citation, commencement and effect, and regulation 2 for interpretation.

Regulation 3 contains the basic rule that, notwithstanding the provisions of the Gilts Regulations, an insurance company carrying on life assurance business shall not be required to include in its return for a return period the amount of tax on the amount of excess gilt interest received where the tax is identified in a claim for a notional repayment under paragraph 1A of Schedule 19AB (inserted by regulation 6 of these Regulations).

Regulation 4 provides for regulations 5 to 9 to make provision modifying the operation of Schedule 19AB in relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to insurance companies carrying on pension business; and regulations 5 to 9 make modifications of that Schedule.

Regulation 10 revokes the 1995 Regulations and Regulations amending those Regulations in relation to payments of interest on gilt-edged securities made without deduction of tax that fall within an accounting period of an insurance company beginning before 1st April 1999 and ending on or after 1st July 1999.

By virtue of section 463(1) of the 1988 Act, these Regulations also apply to friendly societies carrying on pension business as they apply to insurance companies carrying on pension business.