The Insurance Companies (Taxation of Reinsurance Business) (Amendment) Regulations 2007

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Insurance Companies (Taxation of Reinsurance Business) Regulations 1995 (SI 1995/1730) (“the principal Regulations”). The principal Regulations make provision for the purposes of section 442A of the Income and Corporation Taxes Act 1988 (“the Taxes Act”: c. 1) in relation to the calculation of the investment return on an insurance policy or annuity contract which is the subject of a reinsurance arrangement.

Regulation 1 provides for citation, commencement and effect. Authority for the retrospective effect of certain of the amendments is given by paragraph 58 of Schedule 8 to the Finance Act 1995 (c. 4).

Regulation 2 introduces the amendments to the principal Regulations. The amendments take account of changes made by the Finance Act 2007 (“FA 2007”: c. xx) and update the principal Regulations in other respects.

Regulation 3 amends regulation 2 (interpretation) so as to take into account amendments made to the Interpretation Act 1978 (c.30) by the Legislative and Regulatory Reform Act 2006 (c. 51) as well as amendments made to the Taxes Act by FA 2007.

Regulation 4 amends regulations 4 (calculation of investment return in first accounting period) and 5 (calculation of investment return in second and subsequent accounting periods other than final accounting period) so as to take account of changes to rules made by the Financial Services Authority.

Regulation 5 amends regulation 7A (treatment of amounts of investment return which are less than zero) so as to take into account the modification of section 442A of the Taxes Act by the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014).

Regulations 6, 7 and 8 amend respectively regulation 11(1) (exclusion of certain business from section 431C), regulation 11A (election for certain business to be excluded from section 431C) and regulation 12 (exclusion of certain insurance business from section 439A) so as to take into account amendments made to the Taxes Act by FA 2007.

These Regulations, together with the relevant legislation in FA 2007 (c. 11), are part of the outcome of a continuing consultation process. A draft regulatory impact assessment was included as part of a consultation document, “Life Assurance Company Taxation – A Technical Consultative Document”, which was published by Her Majesty’s Revenue and Customs in May 2006. This is available at www.hmrc.gov.uk/consultations.

(1)

Regulation 11 was amended by S.I. 1996/1621 and 2003/1828.