Section 636: Modifications of Chapter 5
1743.This section makes modifications of Chapter 5 (continuity of treatment on transfers within groups) in respect of insurance companies. It is based on paragraphs 28(1) and (2) and 29 of Schedule 26 to FA 2002.
1744.Section 625 deals with the case where one member of a group of companies replaces another as a party to a derivative contract as the result of a related transaction or similar transactions. It determines the credits and debits to be brought into account by the transferor company and the transferee company by treating both as using the same consideration in relation to that transaction or transactions.
1745.This section first adds two further cases to the list in section 626 of transactions that trigger the operation of section 625. They are cases involving the transfer of classes of insurance business between two companies where the transfer does not already fall within section 625.
1746.Subsection (4) then disapplies section 625, in respect of a triggering transaction falling within the original categories listed in section 626, in relation to the transfer of derivative contracts moving into or out of a company’s long-term insurance fund.
1747.Subsection (5) disapplies section 625 in respect of a triggering transaction falling within the categories treated as added to section 626 by subsection (3), if derivative contracts are in one of the categories set out in section 440(4) of ICTA before the transfer and in a different category after the transfer.
1748.For the meaning of “contract of long-term insurance”, “insurance business transfer scheme”, “qualifying overseas transfer” and “overseas life insurance company”, see section 431(2) of ICTA (as modified, in relation to the meaning of “qualifying overseas transfer”, by regulation 6(5) of the Overseas Life Insurance Companies Regulations 2006 (SI 2006/3271)). Because the meaning of “overseas life insurance company” is provided by that section “for the interpretation of the life assurance provisions of the Corporation Tax Acts” (and this section is such a provision), it is unnecessary to rewrite paragraph 29(4) of Schedule 26 to FA 2002.
