Replacement of assetsU.K.
3(1)Subject to sub-paragraph (2) below, paragraph 4 below applies where—
(a)after the end of 1989 an insurance company exchanges section 46 assets (“the old assets”) for other assets (“the new assets”) to be held as assets of the long term business fund,
(b)the new assets are not section 46 assets but are assets on the disposal of which any gains accruing would be chargeable gains,
(c)both the old assets and the new assets are linked solely to [F1basic life assurance and general annuity business], or both are neither linked solely to [F1basic life assurance and general annuity business] or pension business nor assets of the overseas life assurance fund, and
(d)the company makes a claim for the purpose within two years after the end of the accounting period in which the exchange occurs.
(2)Sub-paragraph (1) above shall have effect in relation to old assets only to the extent that their amount, when added to the amount of any assets to which paragraph 4 below has already applied and which are assets of the same class, does not exceed the aggregate of—
(a)the amount of the assets of the same class included in the long term business fund at the beginning of 1990, other than assets linked solely to pension business and assets of the overseas life assurance fund, and
(b)110 per cent. of the amount of the assets of that class which represents any subsequent increases in the company’s relevant linked liabilities in respect of benefits to be determined by reference to the value of assets of that class.
(3)The reference in sub-paragraph (2)(b) above to a subsequent increase in liabilities is a reference to any amount by which the liabilities at the end of an accounting period ending after 31st December 1989 exceed those at the beginning of the period (or at the end of 1989 if that is later); and for the purposes of that provision the amount of assets which represents an increase in liabilities is the excess of—
(a)the amount of assets whose value at the later time is equivalent to the liabilities at that time, over
(b)the amount of assets whose value at the earlier time is equivalent to the liabilities at that time.
Textual Amendments
F1Words in Sch. 8 para. 3(1)(c) substituted(retrospectively) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 15(1)(5).
4Where this paragraph applies, the insurance company (but not any other party to the exchange) shall be treated for the purposes of corporation tax on capital gains as if the exchange had not involved a disposal of the old assets or an acquisition of the new, but as if the old and the new assets were the same assets acquired as the old assets were acquired.
5References in paragraphs 3 and 4 above to the exchange of assets include references to the case where the consideration obtained for the disposal of assets (otherwise than by way of an exchange within paragraph 3(1)) is applied in acquiring other assets within six months after the disposal; and for the purposes of those paragraphs the time when an exchange occurs shall be taken to be the time when the old assets are disposed of.