Finance Act 1989

Life assurance U.K.

[F1 82 Calculation of profits: bonuses etc U.K.

(1) This section and sections 82A [F2 to 82C] below have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

(2) Any amounts which are allocated to policy holders or annuitants in respect of a period of account are allowed as a deduction in calculating the profits for the period of account.

(3) For the purposes of subsection (2) above, an amount is allocated to policy holders or annuitants if (but only if)—

(a) bonus payments are made to them,

(b) reversionary bonuses are declared in their favour, or

(c) a reduction is made in the premiums payable by them.

(4) Where an amount is allocated to policy holders or annuitants for the purposes of subsection (2) above, the amount of the allocation is—

(a) in the case of bonus payments, the amount of the payments,

(b) in the case of declared reversionary bonuses, the amount of the liabilities assumed by the company in consequence of the declaration, and

(c) in the case of a reduction in premiums, the amount of the liabilities assumed by the company in consequence of the reduction.

Textual Amendments

F1 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

F2 Words in s. 82(1) substituted (with effect in accordance with Sch. 7 para. 5(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 7 para. 5(1)

Modifications etc. (not altering text)

C1 S. 82 modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (SI 1997/473), reg. 32 (as substituted (8.4.2004) by S.I. 2004/822, regs. 1, 27)

C2 S. 82(1)(b) modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 26

82A Calculation of profits: policy holders' tax U.K.

(1) Tax expended on behalf of policy holders or annuitants is allowed as a deduction in calculating the profits to the extent (but only to the extent) that regulations made by the Treasury so provide.

(2) The regulations may include provision for tax so expended to be so allowed even if it is not brought into account.

(3) The regulations—

(a) may make different provision for different cases, and

(b) may include provision having effect in relation to periods of account during which they are made.

Textual Amendments

F1 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

82B Unappropriated surplus on valuation U.K.

(1) This section applies in relation to a period of account of the insurance company (“ the period of account in question ”) where—

(a) at the end of the period of account in question the company has an unappropriated surplus on valuation as shown in the return deposited with the Financial Services Authority under section 9.6 of the Prudential Sourcebook (Insurers) (an “ unappropriated surplus ”), and

(b) the company has not made an election in accordance with [F3 Rule 9.10(c)] of the Prudential Sourcebook (Insurers) covering the period of account in question.

(2) Where the company did not have an unappropriated surplus at the end of the period of account immediately preceding the period of account in question, so much of the unappropriated surplus at the end of the period of account in question as is required to meet the duty of fairness is allowed as a deduction in calculating the profits for the period of account in question.

(3) Where the company did have an unappropriated surplus at the end of that immediately preceding period of account—

(a) if so much of the unappropriated surplus at the end of the period of account in question as is required to meet the duty of fairness exceeds so much of the unappropriated surplus at the end of that immediately preceding period of account as was required to meet that duty, the excess is allowed as a deduction in calculating the profits for the period of account in question, but

(b) if so much of the unappropriated surplus at the end of that immediately preceding period of account as was required to meet the duty of fairness exceeds so much of the unappropriated surplus at the end of the period of account in question as is required to meet that duty, the excess is to be taken into account as a receipt of the period of account in question.

(4) In arriving for the purposes of this section at the amount of the unappropriated surplus which is or was required to meet the duty of fairness there is to be deducted the aggregate of amounts which—

(a) for periods of account ending before 14th March 1989 (and the first notional period of account, within the meaning of section 82 above as originally enacted) have been excluded, by virtue of section 433 of the Taxes Act 1988, as being reserved for policy holders or annuitants, and

(b) have not before that date either been allocated to or expended on behalf of policy holders or annuitants or been treated as profits of an accounting period on ceasing to be so reserved.

(5) References in this section to the company’s duty of fairness are to the company’s duty to treat its policy holders and annuitants fairly with regard to terminal bonuses.]

Textual Amendments

F1 Ss. 82-82B substituted for s. 82 (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(1)

F3 Words in s. 82B(1)(b) substituted (with effect in accordance with Sch. 9 para. 10(3) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 10(2)

Modifications etc. (not altering text)

C3 S. 82B applied (with modifications) (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 1(6)

C4 S. 82B modified by SI 1997/473 reg. 32A (as inserted (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 28 (as amended (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2005 (S.I. 2005/2005), regs. 1(1), 7)

C5 S. 82B modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 27

[F4 82C Relevant financial reinsurance contracts U.K.

(1) This section applies where—

(a) an insurance company (“the company”) enters into a contract of reinsurance which is a relevant financial reinsurance contract, and

(b) [F5 condition A] is met.

(2) A contract of reinsurance is a relevant financial reinsurance contract if, under the contract—

(a) some or all of the liabilities reinsured may cease to be reinsured (without the cedant having any right of recovery against the reinsurer), or

(b) the cedant may become liable to pay premiums wholly or partly determined (directly or indirectly) by reference to any amount which the reinsurer becomes liable to pay to the cedant under the contract.

(3) Condition A is that the reduction in the company’s liabilities resulting from the reinsurance under the relevant financial reinsurance contract is not taken into account in calculating the profits of the company.

F6 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The reinsurance offset amount for each period of account of the company beginning before the termination of the relevant financial reinsurance contract is to be taken into account as a receipt of the period of account.

(7) The reinsurance offset amount for a period of account is the amount of any decrease in the period of account in the difference between the full liabilities and the reduced liabilities where—

(a) “the full liabilities” is the amount which would be brought into account for the period as liabilities but for the relevant financial reinsurance contract, and

(b) “the reduced liabilities” is the amount of the liabilities actually so brought into account.

F7 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F4 S. 82C inserted (with effect in accordance with Sch. 7 para. 5(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 7 para. 5(2)

F5 Words in s. 82C(1)(b) substituted (with effect in accordance with Sch. 9 para. 11(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 11(2)

F6 S. 82C(4)(5) repealed (with effect in accordance with Sch. 9 para. 11(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 11(3), Sch. 11 Pt. 2(10)

F7 S. 82C(8)(9) repealed (with effect in accordance with Sch. 9 para. 11(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 11(3), Sch. 11 Pt. 2(10)

[F8 83 Receipts to be [F9 taken] into account. U.K.

(1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

[F10 ( 2 ) There shall be taken into account as receipts of a period of account amounts (so far as referable to that business) brought into account for the period of account as—

(a) investment income receivable before deduction of tax,

(b) an increase in the value of non-linked assets,

(c) an increase in the value of linked assets, F11 ...

(d) other income; [F12 or

(e) business transfers-in.]

and if amounts (so far as so referable) are brought into account for a period of account as a decrease in the value of non-linked assets or a decrease in the value of linked assets they shall be taken into account as an expense of the period of account.

(2A) But subsection (2) above does not require to be taken into account as receipts of a period of account so much of the amounts brought into account as mentioned in [F13 paragraphs (a) to (e)] of that subsection for the period of account as—

[F14 (a) comprises notional income for the period of account (see subsections (2AA) and (2AB)),

(aa) represents an inter-fund transfer (see subsections (2AC) and (2AD)),]

(b) is exempted by section 444AC(2) of the Taxes Act 1988 (transfers of business), or

(c) consists of interest paid under section 826 of the Taxes Act 1988 (interest on tax overpaid) in respect of a repayment or payment relating to an accounting period of the company ending before 1st July 1999;

but, subject to that, the whole of the amounts so brought into account for a period of account shall be taken into account as receipts of the period of account.

[F15 (2AA) For the purposes of subsection (2A)(a) above, an amount brought into account as mentioned in paragraphs (a) to (d) of subsection (2) above for a period of account is to be regarded as notional income for the period of account if—

(a) it represents income which has not been received, and is not receivable, from another person, and

(b) a corresponding notional expense of the same amount is brought into account in the period of account;

and where particular income falls to be regarded as notional income under this subsection, the notional expense by virtue of which that income falls to be so regarded may not be taken into account for determining whether any other income is to be so regarded.

(2AB) In subsection (2AA) above “notional expense” means an expense which has not been paid, and is not payable, to another person and which—

(a) is not deductible in computing the profits of the company in respect of its life assurance business in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D, but

(b) had it represented an amount paid or payable to another person, would have been so deductible.

(2AC) For the purposes of subsection (2A)(aa) above, where—

(a) one or more inter-fund transfers (“transfers-in”) are made into a fund and one or more inter-fund transfers (“transfers-out”) are made out of the fund, and

(b) the amount brought into account for the period of account as other income in respect of the transfers-in represents the amount by which—

(i) the amount or aggregate amount of the transfers-in, exceeds

(ii) the amount or aggregate amount of the transfers-out,

only the amount of that excess shall be taken to represent the transfers-in.

(2AD) In this section “inter-fund transfer” means a transfer between two funds which in the company’s periodical return is shown in, or included in amounts shown in, line 14 or 33 of the Forms 58 for the funds.]

(2B) If any assets of the company’s long-term insurance fund are transferred by the company so that they cease to be assets of that fund, but the transfer is not brought into account as part of total expenditure [F16 , or as a business transfer-out,] for the period of account in which the transfer takes place or any earlier period of account, the fair value of the assets at the time of the transfer shall be deemed to be brought into account for the period of account in which the transfer takes place as an increase in the value of the assets of that fund [F17 except to the extent that the assets (or their value)] are excluded from this subsection by—

(a) subsection (2C) [F18 , (2D) or (2DA)] below, or

(b) section 444AD of the Taxes Act 1988 (transfers of business).

[F19 For the purposes of this subsection “total expenditure”, in relation to a period of account of an insurance company, includes any expenses brought into account in line 12 of Form 40 (the revenue account) in the periodical return of the company for the period of account.]

(2C) Assets transferred to discharge liabilities in respect of deposits received from reinsurers or arising out of insurance operations, debenture loans or amounts borrowed from credit institutions are included in subsection (2B) above only if the deposits, loans or amounts borrowed—

(a) were brought into account for any period of account, but

(b) were not taken into account as receipts of the period of account under subsection (2) above.

(2D) Assets are excluded from subsection (2B) above if they are transferred for at least their fair value and the consideration for their transfer, when received, forms part of the company’s long-term insurance fund.

[F20 (2DA) If—

(a) assets of the company’s long-term insurance fund are transferred by the company to another person (“the transferee”),

(b) the transferee assumes, as a result of the transfer, a liability representing a debenture loan which, immediately before the transfer, was a liability of that fund, and

(c) the liability does not, as a result of the transfer, become a liability of any long-term insurance fund of the transferee,

so much of the fair value of the assets as does not exceed the fair value of the liability is excluded from subsection (2B) above.]

(2E) If subsection (2B) above applies in relation to the transfer of all the assets of the company’s long term insurance fund in accordance with—

(a) an insurance business transfer scheme, or

(b) a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State),

the reference in that subsection to an amount being deemed to be brought into account for the period of account in which the transfer takes place is to its being so deemed for the period of account ending immediately before the transfer takes place.]

[F21 (3) In ascertaining whether or to what extent a company has incurred a loss in respect of [F22 its life assurance business in a case where assets are] added to the company’s [F23 long-term insurance] fund as part of or in connection with—

(a) a transfer of business to the company, or

(b) a demutualisation of the company not involving a transfer of business,

that amount shall (subject to subsection (4) below) be taken into account [F24 under subsection (2) above], for the period for which it is brought into account, as an increase in value of the assets of [F25 the long-term insurance fund].

F21 ( 4 ) Subsection (3) above does not apply where, or to the extent that, the amount concerned—

(a) would fall to be taken into account as a receipt apart from this section,

(b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or

[F26 (c) represents so much of the proceeds of the disposal of an asset of the long-term insurance fund as does not exceed its fair value or an asset acquired for at least its fair value which is added to that fund.]

F21 ( 5 ) Any amount which is to be taken into account pursuant to subsection (3) above for a period of account shall be so taken into account—

(a) after the making of any reduction under subsection (6) of section 83AA below in relation to that period, F27 ...

F27 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F21 ( 6 ) In subsection (3) above “ transfer of business ” means—

[F28 (a) a transfer, under an insurance business transfer scheme, of business which consists of the effecting or carrying out of contracts of long-term insurance;]

(b) a qualifying overseas transfer, within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988; or

(c) the making of a contract of reinsurance which, in whole or in part, constitutes or forms part of a total reinsurance by the reinsured, unless the reinsurer under the contract falls within section 439A of the Taxes Act 1988 (pure reinsurance).

F29 [F30 (6A)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F31 (6B) A contract which reinsures risk in respect of insurances to be made only after the making of the contract of reinsurance can constitute a transfer of business by virtue of subsection (6)(c) above only if a potential advantage is conferred on the reinsurer by the contract.

(6C) For the purposes of subsection (6B) above a potential advantage is conferred on the reinsurer by the contract if, taking the contract as “the actual provision” for the purposes of Schedule 28AA to the Taxes Act 1988, the effect of making the actual provision instead of the arm’s length provision (within the meaning of that Schedule) would have in relation to the reinsurer the effect specified in paragraph 5(1)(b) of that Schedule.]

(7) For the purposes of subsection (3)(a) above, a transfer of business falling within subsection (6)(c) above shall be treated as a transfer of business to the company which is the reinsurer under the contract of reinsurance.

F21 ( 8 ) In this section—

• “ add ”, in relation to an amount and a company’s [F32 long-term insurance ] fund, includes transfer (whether from other assets of the company or otherwise);

• “ demutualisation ” means the conversion, under the law of any territory, of a company which has been carrying on insurance business without having a share capital into a company with a share capital, without any change of legal personality;

• [F33 “fair value” [F34 —

  (a)

  in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount;

  (b)

  in relation to liabilities, means the amount which would be paid to an independent person assuming them;]]

• “ total reinsurance ” means the reinsurance (whether effected by a single contract of reinsurance or by two or more such contracts, taken together, whether or not made with the same reinsurer) of the whole, or substantially the whole, of the reinsured’s risk—

(a) under policies of a particular description issued in respect of insurances made in the course of carrying on life assurance business F35 ...; or

(b) under contracts of a particular description so made.]

This subsection does not apply where, or to the extent that, the amount concerned—

(a)

would fall to be taken into account as a receipt apart from this section,

(b)

is otherwise taken into account under subsection (2) above, or

(c)

is specifically exempted from tax.]

Textual Amendments

F8 Ss. 83, 83A substituted for s. 83 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(1) (with Sch. 8 paras. 55(2), 57(1))

F9 Word in s. 83 heading substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(10)

F10 S. 83(2)-(2E) substituted for s. 83(2) (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(2)

F11 Word in s. 83(2)(c) omitted (with effect in accordance with art. 1 of the amending S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(2)(a)

F12 S. 83(2)(e) and preceding word added (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(2)(b)

F13 Words in s. 83(2A) substituted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(3)

F14 S. 83(2A)(a)(aa) substituted for s. 83(2A)(a) (with effect in accordance with Sch. 9 para. 12(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 12(2)

F15 S. 83(2AA)-(2AD) inserted (with effect in accordance with Sch. 9 para. 12(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 12(3)

F16 Words in s. 83(2B) inserted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) Order 2004 (S.I. 2004/3266), arts. 1, 8(4)

F17 Words in s. 83(2B) substituted (with effect in accordance with Sch. 11 para. 6(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 6(2)(a)

F18 Words in s. 83(2B)(a) substituted (with effect in accordance with Sch. 11 para. 6(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 6(2)(b)

F19 Words in s. 83(2B) inserted (with effect in accordance with Sch. 9 para. 12(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 12(4)

F20 S. 83(2DA) inserted (with effect in accordance with Sch. 11 para. 6(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 6(3)

F21 S. 83(3)-(8) substituted for s. 83(3) (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 4

F22 Words in s. 83(3) substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(a)

F23 Words in s. 83(2)(a)(3) substituted (1.12.2001) by S.I. 2001/329, art. 60(1)(a)

F24 Words in s. 83(3) inserted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(b)

F25 Words in s. 83(3) substituted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(3)(c)

F26 S. 83(4)(c) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 2(4)

F27 S. 83(5)(b) and preceding word repealed (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(5), Sch. 43 Pt. 3(12)

F28 S. 83(6)(a) substituted (1.12.2001 with effect as mentioned in art. 56(4) of the amending S.I.) by S.I. 2001/3629, art. 56(2)

F29 S. 83(6A) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F30 S. 83(6A) inserted (1.12.2001 with effect as mentioned in art. 56(4) of the amending S.I.) by S.I. 2001/3629, art. 56(3)

F31 S. 83(6B)(6C) inserted (with effect in accordance with Sch. 33 para. 2(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(6)

F32 Words in the definition of “add” in s. 83(8) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(a)

F33 Words in s. 83(8) inserted (with effect in accordance with Sch. 33 para. 2(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(8)

F34 Words in s. 83(8) substituted (with effect in accordance with Sch. 11 para. 6(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 6(4)

F35 Words in s. 83(8) repealed (with effect in accordance with Sch. 33 para. 2(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 2(9), Sch. 43 Pt. 3(12)

Modifications etc. (not altering text)

C6 S. 83 applied (1.5.1995) by 1988 c. 1, s. 439B(3)(a) (as inserted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 27(1) (with Sch. 8 paras. 55(2), 57(1)))

S. 83 modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 33, 34

C7 S. 83 modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 33 (as amended (8.4.2004) by S.I. 2004/822, regs. 1, 29)

C8 S. 83 amendment to earlier affecting provision SI 1997/473 (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 30

C9 S. 83 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 28

C10 S. 83(6) modified (retrospective to 1.1.1996) by S.I. 1997/743, regs. 1(2), 35 (as amended (1.12.2001) by S.I. 2001/3629, arts. 160, 165(1)(b))

C11 S. 83(6) amendment to earlier affecting provision SI 1997/473 (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 30

[F36 83YA Changes in value of assets brought into account: non-profit companies U.K.

(1) This section applies if, in the case of any non-profit company,—

(a) the amount shown in line 51 of Form 14 of its periodical return in respect of the whole of its long-term business for any period of account (“the current period of account”), exceeds

(b) the aggregate amount of the amounts shown in line 51 of Form 14 of its periodical return in respect of its with-profits funds (if any) for that period.

(2) A comparison shall be made between—

(a) the appropriate line 51 amount of the company for the current period of account (“the current line 51 amount”), and

(b) the aggregate amount of the appropriate line 51 amount of the company for the previous period of account (if any) and the amount of any transfer-in amount of the company for that period.

(3) If the current line 51 amount is greater than that aggregate amount, an amount equal to the difference shall be deemed for the purposes of section 83(2) to be brought into account for the current period of account as an increase in the value of non-linked assets.

(4) If the current line 51 amount is less than that aggregate amount, an amount equal to the difference shall be deemed for the purposes of section 83(2) to be brought into account for the current period of account as a decrease in the value of non-linked assets.

(5) The amount brought into account by virtue of this section shall be deemed for the purposes of section 83(2) to be brought into account—

(a) in the revenue account mentioned in section 83A(2)(a), or

(b) if section 83A(4) is applicable, in the separate revenue account treated as prepared by virtue of that provision.

(6) Any amount brought into account by virtue of this section is in addition to any amount brought into account for the purposes of section 83(2) for the current period of account as an increase or decrease in the value of non-linked assets apart from this section.

(7) For the purposes of this section a company has a transfer-in amount for any period of account (“the previous period of account”) if—

(a) a transfer takes place in the following period of account, and

(b) the company, as the transferee, is a party to an election under section 444AD of the Taxes Act 1988 (transfers of business: modification of section 83(2B)),

and the amount of the transfer-in amount for the previous period of account is the amount specified in subsection (4) of that section.

(8) For the purposes of this section and section 83YB “non-profit company”, in relation to a period of account, means a company carrying on long-term business where, at the end of that period,—

(a) none of the liabilities of that business, or

(b) none but an insignificant proportion of those liabilities,

are with-profits liabilities.

(9) But if a company considers that, in relation to a period of account, it is no longer such a company, it may elect to be treated for the purposes of this section and section 83YB as if, in relation to that period of account and every subsequent period of account, it were a non-profit company.

(10) Any such election—

(a) is irrevocable, and

(b) must be made by notice to an officer of the Board on or before the end of the period of 6 months beginning with the day on which that period of account ends.

(11) For the purposes of this section and section 83YB—

• “amount”, in relation to line 51 of Form 14 of the company's periodical return, includes a nil amount;

• “with-profits fund” has the same meaning as in the [F37 Insurance Prudential Sourcebook] .

Textual Amendments

F36 Ss. 83YA, S. 83YB inserted (with effect in accordance with Sch. 11 para. 7(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 7(1)

F37 Words in s. 83YA(11) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 9(a)

Modifications etc. (not altering text)

C12 S. 83YA modified (19.7.2006) by Finance Act 2006 (c. 25), Sch. 11 para. 7(3)-(6)

83YB Meaning of “appropriate line 51 amount” for purposes of s.83YA U.K.

(1) For the purposes of section 83YA, the appropriate line 51 amount of a non-profit company for any period of account is determined as follows.

Step 1

Find the company's basic line 51 amount for the period of account.

Step 2

Reduce that amount (but not below nil) by the amount of any unrecognised capital amount of the company for the period of account.

But this step applies only if the period of account for which the appropriate line 51 amount of the company is being determined is the current period of account for the purposes of section 83YA.

Step 3

Increase the resulting amount by the amount of any relevant loan repayment made by the company in the period of account.

(2) For the purposes of step 1, the company's basic line 51 amount for any period of account is—

(a) in the case where no with-profits funds form part of its long-term business for that period, the amount shown in line 51 of Form 14 of its periodical return in respect of the whole of its long-term business for that period, and

(b) in any other case, so much of that amount as exceeds the aggregate amount of the amounts shown in line 51 of Form 14 of its periodical return in respect of its with-profits funds for that period.

(3) For the purposes of step 2, the company has an unrecognised capital amount for any period of account if—

(a) any assets (“the added assets”) become assets of its long-term insurance fund but do not become assets of any of its with-profits funds,

(b) the consideration for the acquisition of the added assets does not comprise any assets which, immediately before the acquisition, were assets of its long-term insurance fund,

(c) no amount is shown in respect of the added assets in any of lines 17 to 41 of Form 14 of its periodical return in respect of the whole of its long-term business for the period of account, and

(d) no amount is brought into account for the period of account in consequence of the acquisition of the added assets.

(4) For the purposes of step 2, the amount of the unrecognised capital amount for the period of account is the amount equal to the fair value of the added assets.

(5) For this purpose the “fair value of the added assets” means—

(a) the amount which would be obtained from an independent person purchasing them, or

(b) if the assets are money, its amount.

(6) For the purposes of step 3, a relevant loan repayment is made by the company in any period of account if—

(a) a repayment in respect of a loan is made by the company in the period of account, and

(b) the loan is one in relation to which the company has, for the purposes of step 2, an unrecognised capital amount for that or any other period of account.]

Textual Amendments

F36 Ss. 83YA, S. 83YB inserted (with effect in accordance with Sch. 11 para. 7(2) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 7(1)

Modifications etc. (not altering text)

C13 S. 83YB modified (19.7.2006) by Finance Act 2006 (c. 25), Sch. 11 para. 7(3)-(6)

[F38 83ZA Contingent loans U.K.

(1) For the purposes of this section a contingent loan is made to an insurance company if—

(a) a deposit is received by the company from a reinsurer or arises out of insurance operations of the company,

(b) a debenture loan is made to the company, or

(c) an amount is borrowed by the company from a credit institution,

and the deposit, debenture loan or amount borrowed is taken into account as a receipt of the company under section 83(2) above.

(2) For the purposes of this section the time when a contingent loan is made to an insurance company is the time when the assets constituting the deposit, debenture loan or amount borrowed are received by the company.

(3) For the purposes of this section an insurance company has unrepaid contingent loan liabilities at any time if—

(a) one or more contingent loans have been made to the company at or before that time, and

(b) amounts will or may at some later time become repayable by the company in respect of the contingent loan or contingent loans.

(4) Where, at the end of the period of account of an insurance company (“the period of account in question”), the company has unrepaid contingent loan liabilities—

(a) subsection (5) below applies if the company did not have unrepaid contingent loan liabilities at the end of the period of account immediately preceding the period of account in question, and

(b) subsection (6) below applies if it did.

(5) Where this subsection applies, the appropriate amount for the period of account in question is allowed as a deduction in calculating the profits of the company for the period of account in question.

(6) Where this subsection applies—

(a) if the appropriate amount for the period of account in question exceeds the appropriate amount for the immediately preceding period of account, the excess is allowed as a deduction in calculating the profits for the period of account in question, but

(b) if the appropriate amount for the immediately preceding period of account exceeds the appropriate amount for the period of account in question, the excess is to be taken into account as a receipt of the period of account in question.

(7) For the purposes of subsections (5) and (6) above the appropriate amount for a period of account is the amount of the unrepaid contingent loan liabilities at the end of the period of account reduced (but not below nil) by F39 ...—

(a) any relevant net transfers to shareholders, F40 ...

F40 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In subsection (7)(a) above “relevant net transfers to shareholders” means the aggregate of the positive amounts brought into account as transfers to non-technical account for—

(a) the period of account,

(b) the period of account in which the relevant contingent loan was made to the company, and

(c) any period of account falling between the periods of account mentioned in paragraphs (a) and (b) above,

as reduced in accordance with subsection (9) below.

(9) The reduction to be made from the positive amount brought into account as a transfer to non-technical account for any of the periods of account mentioned in subsection (8) above is so much of the positive amount as does not exceed 12% of the amount allocated to policy holders as bonuses in relation to the period of account.

F41 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) In [F42 subsection (8)] above “the relevant contingent loan” means—

(a) if amounts will or may at some later time become repayable by the company in respect of only one contingent loan, that contingent loan, and

(b) if amounts will or may at some later time become repayable by the company in respect of more than one contingent loan, whichever of those contingent loans was made to the company first.

F43 (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) Where in a period of account of an insurance company—

(a) an amount becomes repayable under a contingent loan made to the company, and

(b) the amount repayable is brought into account as other expenses for the period of account,

so much of the amount repayable as does not exceed the amount specified in subsection (14) below is allowed as a deduction in calculating the profits of the company for the period of account.

(14) The amount referred to in subsection (13) above is the amount arrived at by deducting from the amount taken into account as a receipt of the company under section 83(2) above in relation to the contingent loan the aggregate of any amounts which—

(a) have become repayable in respect of the contingent loan in any earlier period of account, and

(b) have been allowed as a deduction in calculating the profits of the company for any such period.

(15) The references in subsections (8)F44 ... and (13) above to an amount being brought into account—

(a) in a case where the amount taken into account as a receipt of the company under section 83(2) above in relation to the contingent loan or loans in question is an amount brought into account in an account concerned wholly with non-participating business, are to its being brought into account in that account or in any other account concerned wholly with non-participating business, and

(b) in a case where the amount so taken into account is an amount brought into account in an account concerned wholly or partly with participating business, are to its being brought into account in that account or in any other account concerned wholly or partly with participating business.

(16) Where—

(a) a transfer to another fund brought into account for a period of account as other expenditure in any account concerned wholly with non-participating business is brought into account as other income in an account concerned wholly or partly with participating business, or

(b) a transfer to another fund brought into account for a period of account as other expenditure in any account concerned wholly or partly with participating business is brought into account as other income in an account concerned wholly with non-participating business,

subsection (8) above has effect as if it were a positive amount brought into account as transfers to non-technical account for that period of account in the account in which it is brought into account as other expenditure.

(17) For the purposes of subsections (15) and (16) above—

(a) an account is concerned wholly with non-participating business if it relates exclusively to policies or contracts under which the policy holders or annuitants are not eligible to participate in surplus, and

(b) an account is concerned wholly or partly with participating business if it relates wholly or partly to other policies or contracts.]

Textual Amendments

F38 S. 83ZA inserted (with effect in accordance with Sch. 33 para. 3(3) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 3(1)

F39 Words in s. 83ZA(7) repealed (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(2)(a), Sch. 26 Pt. 3(14)

F40 S. 83ZA(7)(b) and preceding word repealed (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(2)(b), Sch. 26 Pt. 3(14)

F41 S. 83ZA(10) repealed (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(3), Sch. 26 Pt. 3(14)

F42 Words in s. 83ZA(11) substituted (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(4), Sch. 26 Pt. 3(14)

F43 S. 83ZA(12) repealed (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(5), Sch. 26 Pt. 3(14)

F44 Words in s. 83ZA(15) repealed (with effect in accordance with Sch. 11 para. 8(7) of the amending Act) by Finance Act 2006 (c. 25), Sch. 11 para. 8(6), Sch. 26 Pt. 3(14)

[F45 83A Meaning of “brought into account”. U.K.

(1) [F46 In sections [F47 82A] to 83AB ] “ brought into account ” means brought into account in an account which is recognised for the purposes of [F48 those sections ] .

(2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of [F49 those sections] are—

(a) a revenue account prepared for the purposes of [F50 Chapter 9 of the Prudential Sourcebook (Insurers)] in respect of the whole of the company’s [F51 long-term] business;

(b) any separate revenue account required to be prepared [F52 under that Chapter] in respect of a [F53 with-profits fund (see subsection (6))] .

F54 ...

(3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.

[F55 (3A) Where, in the case of any with-profits fund in respect of which there is prepared such a separate account (“the sub-fund”),—

(a) the sub-fund forms part of another with-profits fund (“the wider fund”) in respect of which such a separate account is also prepared,

(b) in the case of a company whose life assurance business is mutual business, the sub-fund and each other with-profits fund which forms part of the wider fund are 100:0 funds, and

(c) the wider fund—

(i) does not form part of another with-profits fund in respect of which such a separate account is also prepared, or

(ii) forms part of another with-profits fund in respect of which such a separate account is also prepared and that separate account is treated by this subsection as not being a recognised account for the purposes of those sections,

the account in respect of the wider fund shall not be a recognised account for the purposes of those sections.

(3B) Where, in the case of such a separate account prepared in respect of a with-profits fund,—

(a) the account is not prevented from being a recognised account for the purposes of those sections by virtue of subsection (3A) above, but

(b) if paragraph (b) of that subsection were to be omitted, the account would be prevented from being such a recognised account by virtue of that subsection,

no such separate account prepared in respect of a with-profits fund forming part of that fund shall be such a recognised account.

(3C) In subsection (3A) above “100:0 fund” means a fund in the case of which—

(a) the policy holders of the fund are entitled to participate in all the profits of the fund, and

(b) no other persons are entitled to participate in any of the profits of the fund.

(3D) Subsection (3E) below applies where there is prepared such a separate account (“the with-profits account”) in respect of a with-profits fund—

(a) of which no other with-profits fund forms part, but

(b) of which a non-profit fund (see subsection (6)) forms part.

(3E) Where this subsection applies—

(a) the with-profits account shall not be a recognised account for the purposes of those sections, but

(b) there shall be treated as having been required and prepared a further separate revenue account covering so much of the items brought into account in the with-profits account as remains after excluding the items brought into account in that account in respect of the non-profit fund.]

[F56 (4) If—

(a) a company prepares a revenue account in respect of the whole of its long-term business (“the main account”),

(b) it prepares one or more such separate accounts as are mentioned in subsection (2)(b) above, and

(c) the total of the items brought into account in the separate accounts—

(i) excluding any such accounts which by virtue of subsection (3A), (3B) or (3E)(a) above are not recognised accounts for the purposes of those sections, but

(ii) including any such accounts which by virtue of subsection (3E)(b) above are treated as having been required and prepared,

is not equal to the total amount brought into account in the main account,

there shall be treated as having been required and prepared a further separate revenue account covering the balance.]

F57 ( 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F58 (6) In this section “with-profits fund” and “non-profit fund” have the same meaning as in the [F59 Insurance Prudential Sourcebook] .]

Textual Amendments

F45 SS. 83, 83A substituted for s. 83 (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 16(1) (with Sch. 8 paras. 55(2), 57(1))

F46 Words in s. 83A(1) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(1)(a)

F47 Word in s. 83A(1) substituted (with effect in accordance with Sch. 33 para. 1(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 1(2)

F48 Words in s. 83A(1) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(1)(b)

F49 Words in s. 83A(2) substituted (29.4.1996 with effect as mentioned in Sch. 31 para. 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 6(2)

F50 Words in s. 83A(2)(a) substituted (1.12.2001 with effect as mentioned in art. 57(2) of the amending Act) by S.I. 2001/3629, art. 57(1)(a)

F51 Words in s. 83A(2)(a) substituted (1.12.2001) by S.I. 2001/3629, art. 60(2)(a)

F52 Words in s. 83A(2)(b) substituted (1.12.2001 with effect as mentioned in art. 57(2) of the amending Act) by S.I. 2001/3629, art. 57(1)(b)

F53 Words in s. 83A(2)(b) substituted (with effect in accordance with Sch. 9 para. 13(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 13(2)(a)

F54 Words in s. 83A(2) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F55 Ss. 83A(3A)-(3E) inserted (with effect in accordance with Sch. 9 para. 13(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 13(3)

F56 S. 83A(4) substituted (with effect in accordance with Sch. 9 para. 13(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 13(4)

F57 S. 83A(5) repealed (1.1.1996) by 1996 c. 8, s. 205, Sch. 41 Pt. V(26), note

F58 S. 83A(6) inserted (with effect in accordance with Sch. 9 para. 13(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 13(5)

F59 Words in s. 83A(6) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 9(a)

Modifications etc. (not altering text)

C14 S. 83A modified (retrospective to 1.1.1995) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), regs. 1(2), 36, 37 (as amended (30.1.2003) by S.I. 2003/23, regs. 1, 8; (8.4.2004) by S.I. 2004/822, regs. 1, 32; S.I. 2005/2005, regs. 1(1), 8)

C15 S. 83A amendment to earlier affecting provision SI 1997/473 (8.4.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 32

C16 S. 83A modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 36, 37 (as amended (8.6.2004) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004 (S.I. 2004/822), regs. 1, 31, as amended (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2005 (S.I. 2005/2005), regs. 1(1), 8)

C17 S. 83A modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 29

C18 S. 83A modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 30

C19 S. 83A modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Group Relief for Overseas Losses (Modification of the Corporation Tax Acts for Non-resident Insurance Companies) Regulations 2006 (S.I. 2006/3218), regs. 1(1), 10

[F60 83B Changes in recognised accounts: attribution of amounts carried forward under s.432F of Taxes Act 1988 U.K.

(1) This section applies to a company where any revenue account that is recognised for a period of account (the “new period of account”) relates to funds or business which is different from the funds or business to which a revenue account that was recognised for the preceding period of account relates.

(2) Any subsection (2) excess (within the meaning of section 432F(2) of the Taxes Act 1988) which would have been available under section 432F(3) or (4) of that Act to reduce a subsection (3) figure (within the meaning of section 432F(1) of that Act) of the company in the new period of account shall be attributed between the revenue accounts that are recognised for that period of account in such manner as is appropriate.

(3) In this section “recognised” means recognised, by virtue of section 83A, for the purposes of sections 82A to 83AB.]

Textual Amendments

F60 S. 83B inserted (with effect in accordance with Sch. 9 para. 14(2) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 14(1)

[F61 83AA Amounts added to [F62 long term insurance] fund of a company in excess of that company’s loss. U.K.

(1) If one or more relevant amounts are brought into account for a period of account of a company and either—

(a) the aggregate of those amounts exceeds the loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, or

(b) no such loss would have so arisen,

the surplus for that period shall be applied in accordance with the following provisions of this section and section 83AB below.

(2) In this section—

• “ relevant amount ” means so much of any amount which is added to the [F63 long-term insurance ] fund of a company as mentioned in subsection (3) of section 83 above as does not fall within any of the paragraphs of subsection (4) of that section;

  “ surplus ”, in relation to a period of account of a company, means (subject to section 83AB(2) below)—

(a) if the aggregate of the relevant amounts brought into account for that period exceeds the amount of any loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, the amount of the excess; or

(b) if no such loss would have so arisen, the aggregate of the relevant amounts brought into account for that period.

F64 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F64 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F64 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Any loss arising to a company in respect of its life assurance business in a period of account subsequent to one for which there is a surplus shall be reduced (but not below nil) by so much of that surplus as cannot be applied—

F65 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) under this subsection, in the reduction of a loss arising to the company in an earlier period of account; or

(c) under section 83AB below, in relation to a transfer of business from the company in that or any earlier period of account.

(7) Any reduction pursuant to subsection (6) above of a loss arising to a company in a period of account shall be made—

(a) before any application of section 83(3) above in relation to that period, F66 ...

F66 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) A surplus in respect of an earlier period of account shall be applied under subsection (6) above before a surplus in respect of a later period of account.

(9) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(10) In this section—

• “ add ” has the same meaning as in section 83 above;

  F67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“ transfer of business ” has the same meaning as in section 83(3) above;

F67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance.]

Textual Amendments

F61 Ss. 83AA, 83AB inserted (29.4.1996 with effect as mentioned in Sch. 31 paras. 9(1), 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 5

F62 Words in s. 83AA(3)(4) and the sidenote substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(b)

F63 Words in the definition of “relevant amount” in s. 83AA(2) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(b)

F64 Ss. 83AA(3)-(5) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(a), Sch. 43 Pt. 3(12)

F65 S. 83AA(6)(a) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(b), Sch. 43 Pt. 3(12)

F66 S. 83AA(7)(b) and preceding word repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(c), Sch. 43 Pt. 3(12)

F67 Words in s. 83AA(10) repealed (with effect in accordance with Sch. 33 para. 4(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 4(1)(d), Sch. 43 Pt. 3(12)

Modifications etc. (not altering text)

C20 S. 83AA modified (29.4.1996) by 1996 c. 8, s. 163, Sch. 31 para. 9(1)

[F68 83AB Treatment of surplus where there is a subsequent transfer of business from the company etc. U.K.

(1) If an amount is added to the [F69 long-term insurance] fund of a company as part of or in connection with a transfer of business to the company, or a demutualisation of the company not involving a transfer of business, and—

(a) there is a surplus for the period of account of the company for which that amount is brought into account,

(b) at any time after the transfer of business or demutualisation, there is a transfer of business from the company (the “subsequent transfer”), and

(c) at the end of the relevant period of account there remains at least some of the surplus mentioned in paragraph (a) above which cannot be applied—

F70 (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ii) under subsection (6) of [F71 section 83AA above] , in the reduction of a loss arising to the company in an earlier period of account, or

(iii) under this section, in relation to an earlier subsequent transfer,

so much of the surplus falling within paragraph (c) above as, on a just and reasonable apportionment, is referable to business which is the subject of the subsequent transfer shall be applied under this section.

(2) An amount of surplus which is to be applied under this section shall be so applied by being treated as an amount of surplus (additional to any other amounts of surplus) for the period of account of the transferee company which last precedes the period of account of that company in which the subsequent transfer is effected, whether or not there is in fact any such preceding period of account.

(3) If, in a case where an amount is treated under subsection (2) above as an amount of surplus for a period of account of a company, the period is not one for which there is brought into account an amount added to the company’s [F69 long-term insurance] fund in connection with the subsequent transfer, subsection (1) above shall have effect in relation to any transfer of business from the company subsequent to that transfer as if an amount had been so added and had been brought into account for that period.

(4) Any question as to what is a just and reasonable apportionment in any case for the purposes of subsection (1) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but any person affected by the apportionment shall be entitled to appear and be heard or make representations in writing.

(5) A surplus in respect of an earlier period of account shall be applied under this section before a surplus in respect of a later period of account.

(6) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(7) In this section—

• “ add ” has the same meaning as in section 83 above;

  “ demutualisation ” has the same meaning as in section 83 above;

  “ the relevant period of account ” means the period of account of the company from which the subsequent transfer is effected which consists of or includes the accounting period of that company which—

(a) ends with the day on which the subsequent transfer is effected; or

(b) if the subsequent transfer is a transfer of business falling within section 83(6)(c) above and no accounting period of the company ends on that day, ends next after that day;

• “ surplus ” has the same meaning as in section 83AA above;

• “ transfer of business ” has the same meaning as in section 83(3) above;

• “ transferee company ” means the company to which the subsequent transfer of business is effected.

(8) Where it is necessary for any purpose of this section to identify the time at which a demutualisation of a company takes place, that time shall be taken to be the time when the company first issues shares.

(9) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance to the company which is the reinsurer under that contract.]

Textual Amendments

F68 SS. 83AA, 83AB inserted (29.4.1996 with effect as mentioned in Sch. 31 paras. 9(1), 10(2) of the amending Act) by 1996 c. 8, s. 163, Sch. 31 para. 5

F69 Words in s. 83AB(1)(3) substituted (1.12.2001) by S.I. 2001/3629, art. 60(1)(c)

F70 S. 83AB(1)(c)(i) repealed (with effect in accordance with Sch. 33 para. 5(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 5(1)(a), Sch. 43 Pt. 3(12)

F71 Words in s. 83AB(1)(c)(ii) substituted (with effect in accordance with Sch. 33 para. 5(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 5(1)(b)

Modifications etc. (not altering text)

C21 S. 83AB modified (29.4.1996) by 1996 c. 8, s. 163, Sch. 31 para. 9(1)

84 Interpretation of sections 85 to 89 and further provisions about insurance companies. U.K.

F72 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Any reference in [F73 sections 85 to 89 below] or the following provisions of this section to a straddling period is a reference to an accounting period which begins before 1st January 1990 and ends on or after that date.

(3) For the purposes of [F74 sections 85 to 89 below] and for the purposes of subsection (5)(b) below it shall be assumed that a straddling period consists of two separate accounting periods—

(a) the first beginning at the beginning of the straddling period and ending on 31st December 1989; and

(b) the second beginning on 1st January 1990 and ending at the end of the straddling period;

and in those sections and subsection (5)(b) below the first of those two notional accounting periods is referred to as “the 1989 component period” and the second is referred to as “the 1990 component period”.

(4) Chapter I of Part XII of the Taxes Act 1988 (insurance companies) shall have effect subject to the amendments in Schedule 8 to this Act, being—

(a) amendments relating to franked investment income, loss relief and group relief; and

(b) amendments consequential on or supplemental to sections 82 and 83 above and sections 85 to 89 below.

(5) Subject to subsection (6) below, in Schedule 8 to this Act,—

(a) paragraphs 2 and 6 shall be deemed to have come into force on 14th March1989; and

(b) the remainder shall have effect with respect to accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

(6) Nothing in subsection (5) above affects the operation, by virtue of any provision of sections 82 and 83 above and sections 85 to 89 below, of any enactment repealed or amended by Schedule 8 to this Act and, so long as the provisions of that Schedule do not have effect in relation to sections 434 and435 of the Taxes Act 1988, nothing in subsection (5)(a) above affects the continuing operation of section 433 of that Act for the purpose only of determining the fraction of the profits referred to in subsection (6) of section 434 and subsection (1)(b) of section 435.

Textual Amendments

F72 S. 84(1) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F73 Words in s. 84(2) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 30

F74 Words in s. 84(3) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 30

85 Charge of certain receipts of basic life assurance business. U.K.

(1) Subject to subsection (2) below, where the profits of an insurance company in respect of its life assurance business are not charged under Case I of Schedule D, there shall be chargeable under Case VI of that Schedule any receipts referable to the company’s [F75 basic life assurance and general annuity business]—

(a) which, if those profits were charged under Case I of Schedule D, would betaken into account in computing those profits; and

(b) which would not be within the charge to tax (except under Case I of Schedule D) apart from this section;

and for the purposes of paragraph (a) above, the provisions of section 83 above as to the manner in which any item is to be taken into account shall be disregarded.

(2) The receipts referred to in subsection (1) above do not include—

(a) any premium; F76 ...

(b) any sum received by virtue of a claim under an insurance contract(including a re-insurance contract); or

F77 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F77 (ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F77 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) any sum which is not within the charge to tax (except under Case I of Schedule D) because of an exemption from tax[F78 ; or

(f) any payment received under the Financial Services Compensation Scheme to enable the company to meet its obligations to policy holders.]

[F79 (2A) Receipts falling within subsection (1) above are to be taken into account for the purposes of corporation tax when they are brought into account.

Subsection (6) of section 89 (meaning of “brought into account”) shall also apply for the purposes of this section.

(2B) Expenses fall to be deducted from receipts falling within subsection (1) above in accordance with the provisions of the Corporation Tax Acts applicable to Case VI of Schedule D.

(2C) For the purposes of subsection (1) above, a receipt is referable to basic life assurance and general annuity business if—

(a) in the case of a repayment or refund of acquisition expenses, the acquisition expenses fell within section 86 below,

[F80 (aa) in the case of a repayment or refund of expenses other than acquisition expenses, the expenses—

(i) were attributable to basic life assurance and general annuity business for the purposes of Step 1 in subsection (7) of the new section 76 (see subsection (8) of that section), or

(ii) fell to be deducted by virtue of subsection (1) of the old section 76;

and for this purpose, “the new section 76” and “the old section 76” have the same meaning as in section 44 of the Finance Act 2004 (see subsection (8) of that section),]

(b) in the case of a reinsurance commission, the policy or contract reinsured under the arrangement in respect of which the commission is paid constitutes basic life assurance and general annuity business, and

(c) in any other case, it is income which, if it were income from an asset, would by virtue of section 432A of the Taxes Act 1988 (apportionment of insurance companies' income) be referable to basic life assurance and general annuity business.]

(3) This section has effect with respect to the receipts of accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

Textual Amendments

F75 Words in s. 85(1) substituted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras.12, 18.

F76 Word in s. 85(2)(a) repealed (with effect in accordance with s. 42 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(3)

F77 S. 85(2)(c)-(d) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(2), Sch. 42 Pt. 2(3)

F78 S. 85(2)(f) and preceding word inserted (with effect in accordance with Sch. 9 para. 15(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 15(2)

F79 S. 85(2A)-(2C) inserted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 7(3)

F80 S. 85(2C)(aa) inserted (with effect in accordance with Sch. 9 para. 15(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 9 para. 15(3)

Modifications etc. (not altering text)

C22 S. 85(1) modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 38

C23 S. 85(1)(2C) modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 31

86 Spreading of relief for acquisition expenses. U.K.

[F81 (1) For the purposes of this section, the acquisition expenses for any period of an insurance company carrying on life assurance business are such of the following as for that period fall to be included at Step 1 in section 76(7) of the Taxes Act 1988 (expenses of insurance companies)—

(a) commissions (however described), other than commissions for persons who collect premiums from house to house,

(b) any other expenses payable solely for the purpose of the acquisition of business,

(c) so much of any other expenses payable partly for the purpose of the acquisition of business and partly for other purposes as are properly attributable to the acquisition of business,

reduced by the appropriate portion of the adjusted loss deduction (if any) for the purposes of Step 5 for the period.

The appropriate portion of the adjusted loss deduction is the amount which bears to the whole of that deduction the proportion which UAE bears to S1, where—

UAE is the amount of the acquisition expenses, before making the reduction required by this subsection; and

S1 is the sum of the amounts described in paragraphs (a) and (b) in Step 4.]

(2) The exclusion from paragraph (a) of subsection (1) above of commissions [F82 for persons who collect premiums from house to house] shall not prevent such commissions constituting [F83 expenses payable] for the purposes of paragraph(b) or paragraph (c) of that subsection.

(3) Nothing in subsections (1) and (2) above applies to commissions (however described) in respect of insurances made before 14th March 1989, but without prejudice to the application of those subsections to any commission attributable to a variation on or after that date in a policy issued in respect of an insurance made before that date; and, for this purpose, the exercise of any rights conferred by a policy shall be regarded as a variation of it.

F84 [( 3A ) Nothing in subsection (1), (2) or (3) above applies to commissions (however described) in respect of annuity contracts made in accounting periods beginning before 1st January 1992, but without prejudice to the application of subsections (1) and (2) above to any commission attributable to a variation, in an accounting period beginning on or after that date, of an annuity contract so made; and for this purpose the exercise of any rights conferred by an annuity contract shall be regarded as a variation of it.]

(4) In subsection (1) above “the acquisition of business” includes

F85 [( a )] the securing on or after 14th March 1989 of the payment of increased or additional premiums in respect of a policy of insurance issued in respect of an insurance already made (whether before, on or after that date) [F86 and

(b) the securing, in an accounting period beginning on or after 1st January 1992, of the payment of increased or additional consideration in respect of an annuity contract already made (whether in an accounting period beginning before, or on or after, that date)].

F87 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F88 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F89 (6) Only a portion of the acquisition expenses for any accounting period (in this section referred to as “the base period”) is to be relieved under section 76 of the Taxes Act 1988 for that period.

That portion is one-seventh of the adjusted amount of the acquisition expenses for the period.

For the purposes of this section the adjusted amount of the acquisition expenses for the period is so much of those expenses as remains after—

(a) including the whole of those expenses at Step 1,

(b) making any reduction in those expenses which is required at Step 2, and

(c) deducting any amount of reinsurance commission or any repayment or refund (in whole or in part) that falls for the period to be charged to tax under section 85 above,

Effect is given to this subsection at Step 6 (which requires the deduction of six-sevenths of the adjusted amount of the acquisition expenses for the period).]

F90 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F91 (8) This subsection applies in any case where, in accordance with subsection (6) above, only a fraction of the adjusted amount of the acquisition expenses for the base period is to be relieved under section 76 of the Taxes Act 1988 for that period.

In any such case—

(a) a further fraction of the adjusted amount of those expenses is to be relieved under that section for each succeeding accounting period after the base period, until the whole of the adjusted amount has been relieved,

(b) the fraction is one-seventh, except that for any accounting period of less than a year the fraction is to be proportionately reduced, and

(c) the relief is given by including that fraction of the adjusted amount at paragraph (b) of Step 8,

but this is subject to subsection (9) below.

(9) For any accounting period for which—

(a) the fraction of the adjusted amount of the acquisition expenses for the base period which would otherwise fall to be relieved in accordance with subsection (8) above, exceeds

(b) the balance of that adjusted amount which has not been so relieved for earlier accounting periods,

only that balance shall be so relieved.]

[F92 (9A) In this section “expenses payable” has the same meaning as in Step 1.

(9B) Any reference in this section to a numbered Step is a reference to the Step so numbered in section 76(7) of the Taxes Act 1988.]

(10) This section has effect for accounting periods beginning on or after 1st January 1990 (including the 1990 component period).

Textual Amendments

F81 S. 86(1) substituted for s. 86(1)-(1B) (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(2)

F82 Words in s. 86(2) substituted (29.4.1996 with effect in relation to accounting periods beginning on or after 1.1.1996) by 1996 c. 8, s. 167(3)(b)(10)

F83 Words in s. 86(2) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(3)

F84 S. 86(3A) inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(2), 18.

F85 S. 86(4)"(a)" inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(3), 18.

F86 S. 86(4)(b) and word preceding it inserted(for accounting periods beginning on or after 01.01.1992) by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 paras. 13(3), 18.

F87 S. 86(5) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(4)(a), Sch. 42 Pt. 2(3)

F88 S. 86(5A) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(4)(b), Sch. 42 Pt. 2(3)

F89 S. 86(6) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(5)

F90 S. 86(7) repealed (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(6), Sch. 42 Pt. 2(3)

F91 S. 86(8)(9) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(7)

F92 S. 86(9A)(9B) inserted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 8(8)

Modifications etc. (not altering text)

C24 S. 86 modified (retrospective to 1.1.1995) by S.I. 1997/473, regs. 1(2), 39

87 Management expenses. U.K.

(1) Section 76 of the Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.

(2) In subsection (1), after paragraph (b) there shall be inserted “and

(c) there shall be deducted from the amount treated as the expenses of management for any accounting period any repayment or refund (in whole or in part) of a sum disbursed by the company (for that or any earlier period) as acquisition expenses; and

(d) the amount treated as expenses of management shall not include any amount in respect of expenses referable to general annuity business or pension business; and

(e) the amount of profits from which expenses of management may be deducted for any accounting period shall not exceed the net income and gains of that accounting period referable to basic life assurance business;

and for this purpose “net income and gains” means income and gains after deducting any reliefs or exemptions which fall to be applied before taking account of this section. ”

F93 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In consequence of the amendment made by subsection (2) above, section 436(3)(b) of the Taxes Act 1988 (no deduction of expenses of management in certain cases) shall cease to have effect.

(5) This section has effect with respect to accounting periods beginning on or after 1st January 1990; and, in relation to a straddling period, sections75, 76 and 436 of the Taxes Act 1988—

(a) shall have effect in relation to the 1989 component period without regard to the amendments made by subsections (2) to (4) above; and

(b) shall have effect in relation to the 1990 component period as amended by those subsections.

F94 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F95 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F93 S. 87(3) repealed by Finance Act 1991 (c. 31, SIF 63:1), s. 123, Sch. 19 Pt.V.

F94 S. 87(6) repealed (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 44(2)

F95 S. 87(7) repealed (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 44(2)

88 Corporation tax: policy holders’ fraction of profits. U.K.

(1) Subject to subsection (2) F96 [F97 ...] below, in the case of a company carrying on life assurance business, the rate of corporation tax chargeable for any financial year on

[F98 (a) the policy holders’ share of the relevant profits for any accounting period, or

(b) where the business is mutual business, the whole of those profits,

shall] be deemed to be the rate at which income tax at the [F99 lower] rate is charged for the year of assessment which begins on 6th April in the financial year concerned.

(2) Subsection (1) above does not apply in relation to profits charged under Case I of Schedule D.

[F100 (3) For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the income and gains of the company’s life assurance business reduced by the aggregate amount of—

[F101 (aa) amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996,] [F102 and

( a) the basic deduction given by Step 8 in [F103 section 76(7)] of the Taxes Act 1988.]]

[F104 (3A) In subsection (3) above “income and gains of the company’s life assurance business” means the aggregate of—

(a) income and chargeable gains referable [F105 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business, F106 ... [F107 and]

F108 (aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F108 (ab) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F108 (ac) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) profits of the company chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (pension business, life reinsurance business and overseas life assurance business).

(3B) In subsection (3A)(a) above (and section 89(1B) below) “chargeable gains referable [F109 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business”, in relation to an accounting period, means the chargeable gains so far as [F110 so referable] accruing to the company in the accounting period after deducting—

(a) any allowable losses so referable accruing to the company in the accounting period, and

(b) so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.]

(4) In determining for the purposes of section 13 of the Taxes Act 1988 (small companies’ relief) the profits and basic profits (within the meaning of that section) of an accounting period of a company carrying on life assurance business, the policy holders’ [F111 share] of the company’s relevant profits for that period [F112 , or where the business is mutual business the whole of those profits,] shall be left out of account.

(5) This section has effect with respect to the profits of a company for accounting periods beginning on or after 1st January 1990 (including the 1990 component period); and, for this purpose, the profits of the 1990 component period shall be taken to be that portion of the profits of the straddling period which the length of the 1990 component period bears to the length of the straddling period.

Textual Amendments

F96 Words in s. 88(1) repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(2)(a), Sch. 43 Pt. 3(12)

F97 Words in s. 88(1) inserted (29.4.1996 with effect for the financial year 1996 and subsequent financial years) by 1996 c. 8, s. 73(4), Sch. 6 para. 26(1)(4)

F98 Words in s. 88(1) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(1)(10)

F99 Word in s. 88(1) substituted (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(2)(b)

F100 S. 88(3) substituted (1.5.1995) by 1995 c. 4, s. 51, Sch. 8 Pt. I para. 21(2) (with Sch. 8 paras. 55(2), 57(1))

F101 S. 88(3)(aa) inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 56 (with savings in Ch. II, ss. 80-105 of Pt. IV)

F102 Words in s. 88(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 45(2)

F103 Words in s. 88(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Miscellaneous Amendments) Order 2006 (S.I. 2006/3270), arts. 1(1), 9(b)

F104 S. 88(3A)(3B) inserted (with effect in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(1)

F105 Words in s. 88(3A)(a) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(a)

F106 Word in s. 88(3A)(a) repealed (with effect in accordance with Sch. 11 Pt. 2(10) Note 4 of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 11 Pt. 2(10)

F107 Word in s. 88(3A)(a) inserted (with effect in accordance with art. 1 of the amending S.I.) by The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), arts. 1, 8(2)(a)

F108 S. 88(3A)(aa)-(ac) omitted (with effect in accordance with art. 1 of the amending S.I.) by virtue of The Insurance Companies (Corporation Tax Acts) (Amendment) Order 2005 (S.I. 2005/3465), arts. 1, 8(2)(b)

F109 Words in s. 88(3B) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(b)

F110 Words in s. 88(3B) substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)

F111 Word in s. 88(4) substituted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

F112 Words in s. 88(4) inserted (and deemed always to have had effect) by Finance Act 1990 (c. 29), s. 45(2)(10)

Modifications etc. (not altering text)

C25 S. 88(3A)(a) modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 39A (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 33)

C26 S. 88(3A)(a)(ab) modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 32

F113 88A Lower corporation tax rate on certain insurance company profits. U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F113 S. 88A repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(3), Sch. 43 Pt. 3(12)

[F114 89 Policy holders’ share of profits. U.K.

(1) The references in [F115 section 88] above to the policy holders’ share of the relevant profits for an accounting period of a company carrying on life assurance business F116 ... are references to —

[F117 (a) in a case where there are no Case I profits of the company for the period in respect of its life assurance business, the amount of the relevant profits, and

(b) in any other case, the amount arrived at in accordance with subsection (1A) below.]

[F118 (1A) An amount is arrived at in accordance with this subsection by—

(a) deducting from any profits of the company for the period chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (as reduced by any losses under those sections and any charges on income referable to any category of business other than basic life assurance and general annuity business) so much of the Case I profits of the company for the period in respect of its life assurance business as does not exceed the amount of any profits of the company for the period so chargeable, and

(b) deducting any remaining Case I profits of the company for the period in respect of its life assurance business from any BLAGAB profits of the company for the period.

(1B) For the purposes of this section, the BLAGAB profits of a company for an accounting period are the income and chargeable gains referable [F119 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business reduced by the aggregate amount of—

[F120 (a) amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996, and

(b) the basic deduction given by Step 8 in section 76(7) of the Taxes Act 1988.]]

(2) For the purposes of [F121 subsections (1) and (1A)] above, the Case I profits for a period shall be reduced by—

F122 ( a ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the shareholders’ share of any F123 ... [F124 distributions received from companies resident in the United Kingdom in the period which are] [F125 referable [F126 (in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business][F127 , and

(c) the shareholders’ share of any foreign income dividends arising to the company in the period [F128 which are referable to the company’s basic life assurance and general annuity business].]

[F129 (2A) For the purposes of subsection (2) above—

(a) “ foreign income dividends ” shall be construed in accordance with Chapter VA of Part VI;

(b) the shareholders’ share of any foreign income dividends is so much of the income they represent as is the shareholders’ share.]

(3) For the purposes of those section “ the shareholders’ share ” in relation to any income is so much of the income as is represented by the fraction

where—

• A is an amount equal to the Case I profits of the company for the period in question in respect of its life assurance business, and

• B is an amount equal to the excess of the company’s relevant non-premium income and relevant gains over its relevant expenses and relevant interest for the period.

(4) Where there is no such excess as is mentioned in subsection (3) above, or where the Case I profits are greater than any excess, the whole of the income shall be the shareholders’ share; and (subject to that) where there are no Case I profits, none of the income shall be the shareholders’ share.

(5) In subsection (3) above the references to the relevant non-premium income, relevant gains, relevant expenses and relevant interest of a company for an accounting period are references respectively to the following items as brought into account for the period, so far as referable to the company’s life assurance business,—

(a) the company’s investment income from the assets of its long-term [F130 insurance] fund together with its other income, apart from premiums;

(b) any increase in the value (whether realised or not) of those assets;

(c) expenses payable by the company;

(d) interest payable by the company;

and if for any period there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of the period.

(6) Except in so far as regulations made by the Treasury otherwise provide, in this section “ brought into account ” means brought into account in the revenue account prepared for the purposes of [F131 Chapter 9 of the Prudential Sourcebook (Insurers)]; and where the company’s period of account does not coincide with the accounting period, any reference to an amount brought into account for the accounting period is a reference to the corresponding amount brought into account for the period of account in which the accounting period is comprised, proportionately reduced to reflect the length of the accounting period as compared with the length of the period of account.

[F132 (7) In this section—

• “Case I profits” means profits computed in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D [F133 and adjusted in respect of losses in accordance with [F134 the second sentence of section 76(10)] of the Taxes Act 1988;]

• F135 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

F136 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F114 S. 89 substituted retrospectively by Finance Act 1990 (c. 29) {s. 45(3)}

F115 Words in s. 89(1) substituted (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(4)(a)

F116 Words in s. 89(1) repealed (with effect in accordance with Sch. 33 para. 13(11) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 13(4)(b), Sch. 43 Pt. 3(12)

F117 S. 89(1)(a)(b) substituted (with effect in accordance with Sch. 33 para. 6(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(3)

F118 S. 89(1A)(1B) inserted (with effect in accordance with Sch. 33 para. 6(11)(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(4)

F119 Words in s. 89(1B) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(c)

F120 Words in s. 89(1B) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 46(2)

F121 Words in s. 89(2) substituted (with effect in accordance with Sch. 33 para. 13(12) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 6(5)

F122 S. 89(2)(a) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(a)(4), Sch. 8 Pt. II(6), note

F123 Words in s. 89(2)(b) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(2)(b)(i)(4), Sch. 8 Pt. II(6), note

F124 Words in s. 89(2)(b) substituted (with effect in accordance with Sch. 33 para. 12(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 12(4)

F125 Words in s. 89(2)(b) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(b)(ii)(4)

F126 Words in s. 89(2)(b) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 9(2)(d)

F127 S. 89(2)(c) and word immediately preceding it repealed (31.7.1997 with effect in relation to distributions made on or after 6.4.1999) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(2)(4), Sch. 8 Pt. II(11), note

F128 Words in s. 89(2)(c) substituted (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, s. 23, Sch. 3 para. 14(2)(c)(4)

F129 S. 89(2A) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 36, 52, Sch. 6 para. 19(3)(4), Sch. 8 Pt. II(11), note

F130 Word in s. 89(5)(a) substituted (1.12.2001) by S.I. 2001/3629, art. 60(3)

F131 Words in s. 89(6) substituted (1.12.2001) by S.I. 2001/3629, art. 58(2)

F132 S. 89(7) substituted (1.12.2001) by S.I. 2001/3629, art. 58(3)

F133 Words in s. 89(7) inserted (with effect in accordance with Sch. 33 para. 7(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 7(1)

F134 Words in s. 89(7) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 46(3)

F135 Words in s. 89(7) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 43 Pt. 3(12)

F136 S. 89(8) repealed (31.7.1997 with effect in relation to distributions made on or after 2.7.1997) by 1997 c. 58, ss. 23, 52, Sch. 3 para. 14(3)(4), Sch. 8 Pt. 2(6) Note

Modifications etc. (not altering text)

C27 S. 89 amended (27.7.1993 with application as mentioned in s. 78(11) of the amending Act) by 1993 c. 34, s. 78(6)(11)

C28 S. 89(1B) applied (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 6(11)

C29 S. 89(1B) modified by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/437), reg. 40A(1) (as inserted (8.4.2004) by S.I. 2004/822, regs. 1, 35)

F137 89A Modification of sections 82 to 83A, 88 and 89 in relation to overseas life insurance companies. U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F137 S. 89A repealed (with effect in accordance with reg. 1 of the amending S.I.) by The Overseas Life Insurance Companies Regulations 2006 (S.I. 2006/3271), reg. 1, Sch. Pt. 1

90 Life policies etc. held by companies. U.K.

Schedule 9 to this Act (which imposes tax on certain benefits relating to life policies, life annuities and capital redemption policies held by companies, and makes related provision) shall have effect.

[F138 90A Interpretation U.K.

Expressions used in any of sections 82 to 90 above (or Schedule 8A to this Act) and in Chapter 1 of Part 12 of the Taxes Act 1988 have the same meaning in those sections (or that Schedule) as in that Chapter.]

Textual Amendments

F138 S. 90A inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 33 para. 31