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Corporation Tax Act 2010

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[F1Exclusion for certain general insurance companiesU.K.

Textual Amendments

F1Pt. 7ZA inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 16

269ZGGeneral insurance companies: excluded accounting periodsU.K.

(1)Nothing in sections 269ZB to [F2269ZD] has effect for determining the taxable total profits of a general insurance company for an excluded accounting period.

(2)An accounting period of a general insurance company is an “excluded accounting period” if conditions A and B are met.

(3)Condition A is that—

(a)the company is subject to insolvency procedures (see section 269ZH) at the end of the accounting period,

(b)immediately before it became subject to insolvency procedures the company—

(i)was unable to pay its debts as they fell due, and

(ii)met the non-viability condition, and

(c)the company's liabilities in respect of qualifying latent claims (see section 269ZI) were the main factor contributing to the company's meeting the non-viability condition at that time.

(4)Condition B is that—

(a)at the end of the accounting period the company meets the non-viability condition, and

(b)the company's liabilities in respect of qualifying latent claims are the main factor contributing to the company's meeting that condition at that time.

(5)At any time, a general insurance company meets the non-viability condition if there is no realistic prospect that it will subsequently write any new insurance business.

(6)For the purposes of this section a person who carries on the activity of effecting or carrying out contracts of general insurance is a “general insurance company” if—

(a)the person has permission under Part 4A of the Financial Services and Markets Act 2000 to carry on that activity,

F3(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)The definition in subsection (6) is subject to the following qualifications—

(a)a friendly society within the meaning of Part 3 of FA 2012 is not a general insurance company, and

(b)an insurance special purpose vehicle (as defined in section 139 of FA 2012) is not a general insurance company.

(8)In this section—

  • contract of general insurance” means a contract of a type described in Part 1 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

  • liability” includes a contingent or prospective liability.

Textual Amendments

F2Word in s. 269ZG(1) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 31, 42 (with Sch. 4 paras. 43-46)

269ZH“Insolvency procedures”U.K.

(1)For the purposes of section 269ZG a company is subject to insolvency procedures if—

(a)it is in liquidation,

(b)it is in administration,

(c)it is in receivership, or

(d)a relevant scheme has effect in relation to it.

(2)A company is “in liquidation” for the purposes of this section if—

(a)it is in liquidation within the meaning of section 247 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19), or

(b)a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(3)A company is “in administration” for the purposes of this section if—

(a)it is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 or Schedule B1 to the Insolvency (Northern Ireland) Order 1989, or

(b)there is in force in relation to it under the law of a country or territory outside the United Kingdom any appointment corresponding to the appointment of an administrator under either of those Schedules.

(4)A company is “in receivership” for the purposes of this section if there is in force in relation to it—

(a)an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland Order) 1989, or

(b)any corresponding order under the law of a country or territory outside the United Kingdom.

(5)In this section “relevant scheme” means a compromise or arrangement—

(a)under section 425 of the Companies Act 1985, Article 418 of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) or Part 26 [F5or 26A] of the Companies Act 2006, or

(b)under any corresponding provision of the law of a country or territory outside the United Kingdom.

Textual Amendments

F5Words in s. 269ZH(5)(a) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 43(2) (with ss. 2(2), 5(2))

269ZI“Qualifying latent claims”U.K.

(1)This section applies for the purposes of section 269ZG.

(2)Where a general insurance company has a liability in respect of a claim, the claim is a “qualifying latent claim” if conditions A to C are met.

(3)In this section “claim” means a claim (whether actual or potential) under an insurance policy.

(4)Condition A is that—

(a)the claim is of a type that was not reasonably foreseeable at the time when the insurance policy concerned was entered into, and

(b)it is likely that, had the company foreseen that type of claim, the price or other terms of the policy would have been significantly different.

(5)Condition B is that the latency period associated with that type of claim (see subsection (7)) is more than 10 years.

(6)Condition C is that the insurance policy, or the part of the insurance policy under which the claim is or would be made, is—

(a)an employer's liability policy, or

(b)a public or products liability policy.

(7)The “latency period” associated with a type of claim is the mean period for claims of the type between—

(a)the insured event giving rise to the claim, and

(b)notification of the claim.

(8)The mean period mentioned in subsection (7) is to be determined as at the end of the accounting period mentioned in section 269ZG(2).

(9)In this section—

  • employer's liability policy” means an insurance policy against the risks of the person insured incurring liabilities to the insured's employees for injury, illness or death arising out of their employment during the course of business;

  • “general insurance company” is to be interpreted in accordance with section 269ZG;

  • insurance policy” includes any contract of insurance;

  • liability” includes a contingent or prospective liability;

  • public or products liability policy” means an insurance policy against the risks of the person insured incurring liabilities to third parties for damage to property, injury, illness or death, arising in the course of the insured's business.

269ZJExclusion of shock losses from restrictionsU.K.

(1)If a shock loss is—

(a)carried forward to an accounting period of an insurance company (see section 269ZP(2)), and

(b)deducted under section 45B (post-1 April 2017 trade losses carried forward against trade profits),

the deduction is to be treated as not falling within section 269ZB(3).

(2)If a shock loss is—

(a)carried forward to an accounting period of an insurance company, and

(b)deducted under section 463H of CTA 2009 (carry forward of unrelieved non-trading deficit from loan relationships against non-trading profits),

the company is to be treated for the purposes of sections 269ZC and 269ZD(2)(b)(ii) as not having made that deduction.

(3)If an insurance company makes a deduction of (or in respect of) a shock loss, that deduction is not a “relevant deduction” for the purposes of section 269ZD (restriction on deductions from total profits).

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

Textual Amendments

F6S. 269ZJ(4) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 10

269ZKMeaning of “shock loss”: requirement to make a claimU.K.

(1)If the conditions in subsection (3) are met, an insurance company may make a claim in respect of—

(a)a loss or other amount (the “specified loss”), and

(b)a period of 12 months (“the specified period”) which is a solvency shock period (see section 269ZM).

(2)A claim may specify more than one 12 month period under subsection (1)(b) (but periods specified by an insurance company under this section may not overlap with one another).

(3)The conditions are that—

(a)the accounting period (for corporation tax purposes) in which the specified loss arises (“the loss-making period”) begins on or after 1 April 2017,

(b)the specified loss is, or is capable of being, carried forward to a subsequent accounting period, and

(c)the loss-making period and the specified period have one or more days in common.

(4)A claim under this section must be made within—

(a)the period of two years after the end of the loss-making period, or

(b)such further period as an officer of Revenue and Customs allows.

(5)If—

(a)a claim is made under this section, and

(b)the whole of the loss-making period is, or falls within, the specified period,

the specified loss is a “shock loss”.

(6)If—

(a)a claim is made under this section, and

(b)the loss-making period falls partly, but not wholly, in the specified period,

the specified loss is a “shock loss” so far as it is attributable to the specified period.

(7)For the purposes of subsection (6) the specified loss is “attributable to” the specified period in the proportion—

Where P is the number of days of the loss-making period that fall within the specified period and N is the number of days in the loss-making period.

(8)If the method in subsection (7) would produce a result that is unjust or unreasonable, the apportionment of the specified loss for the purposes of subsection (6) is to be made on a just and reasonable basis.

269ZLFurther provision about claims under section 269ZKU.K.

(1)A claim under section 269ZK is not effective unless—

(a)the claim—

(i)states the company's solvency capital requirement at the beginning of the specified period,

(ii)states the company's shock loss threshold for that period, and sets out the calculation of that amount (as described in steps 2 to 5 of 269ZN(1)), and

(iii)states the amount of the company's solvency loss for that period (see section 269ZO), and

(b)the company submits with the claim—

(i)information (“the submitted information”) corresponding to the information specified in the template mentioned in point (i), (j) or (k) (as the case requires) of Article 4 of the technical standards implementing Regulation, and

(ii)a report provided by the appropriate person which meets the condition in subsection (2).

(2)The condition is that the report includes an opinion confirming that—

(a)the submitted information is prepared in all material respects in accordance with any relevant requirements which would apply if the submitted information were disclosed as part of the company's report on solvency and financial condition,

(b)the calculation of the company's shock loss threshold (not including step 1(a) of section 269ZN(1)) complies in all material respects with section 269ZN, and

(c)the company's solvency loss is calculated in all material respects in accordance with section 269ZO.

(3)In this section “relevant requirements” means—

(a)requirements under rules made by the Prudential Regulation Authority, and

(b)requirements under any directly applicable EU regulation made under the Solvency 2 Directive.

(4)In this section “the appropriate person” means—

(a)the company's chief actuary, or

(b)(if the company is not a PRA-authorised person) a person with equivalent functions.

(5)Subsections (1)(b)(i), (2)(a) and (3) have effect in relation to a third-country insurance undertaking as if it were an insurance undertaking.

269ZMMeaning of “solvency shock period”U.K.

A period of 12 months is a “solvency shock period” in relation to an insurance company if the company has a solvency loss for that period (see section 269ZO) which exceeds the company's shock loss threshold for that period (see section 269ZN).

269ZNDetermination of shock loss thresholdU.K.

(1)A company's shock loss threshold for a 12 month period is determined as follows.

  • Step 1

    (a)

    Calculate the company's solvency capital requirement at the beginning of that period.

    (b)

    But any adjustment for the loss-absorbing capacity of deferred taxes is to be calculated, and applied, on the assumption that that period is a solvency shock period in relation to the company.

    (c)

    The resulting amount is the company's “adjusted SCR”.

  • Step 2 Calculate the deductible amount (see subsection (2)) for each relevant ring-fenced fund of the company.

  • Step 3 Deduct the total of the amounts found under step 2 from the company's adjusted SCR.

  • Step 4 Multiply the amount found under step 3 by 90%.

  • Step 5 The result is the company's shock loss threshold for the period.

(2)The deductible amount for a relevant ring-fenced fund is the lesser of A and B, where—

(a)A is the amount of basic own funds within that fund at the beginning of the period (or zero, if greater);

(b)B is the notional solvency capital requirement for that fund at the beginning of that period.

(3)But in calculating amount A for the purposes of subsection (2)—

(a)no account is to be taken of the value of future transfers attributable to shareholders;

(b)a restricted own-fund item within the fund is to be disregarded if the company's with-profits actuary provides a written opinion confirming that the condition in subsection (4) is met.

(4)The condition is that—

(a)the item is available as a restricted own-fund item pursuant to conditional support arrangements, and

(b)if at the time mentioned in subsection (2)(a) or any subsequent time (when the conditional support arrangements are in place) the value of the company's interest in the item were to be (or is in fact) greater than zero, that value would be recognised for the purposes of a balance sheet drawn up at the time in question by the company in accordance with generally accepted accounting practice.

(5)In this section “conditional support arrangements” means arrangements under which the relevant restrictions would cease to apply if specified conditions relating to the financial strength of the fund were met.

(6)In subsection (5) “the relevant restrictions” means the restrictions on transferability as a result of which the item is a restricted own-fund item.

(7)In this section “adjustment for the loss-absorbing capacity of deferred taxes” means—

(a)an adjustment pursuant to Article 103(c) of the Solvency 2 Directive, or

(b)any corresponding adjustment made pursuant to Subsection 3 of Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive (solvency capital requirement full and partial internal models).

(8)Where the company is a third-country insurance undertaking—

(a)steps 1(b) and 2 to 5 of subsection (1), and

(b)subsections (2) to (7),

have effect with any modifications that are appropriate as a result of the reference in step 1(a) of subsection (1) to the “solvency capital requirement” having effect in accordance with section 269ZP(1)(b).

269ZOCalculation of solvency lossU.K.

(1)An insurance company's solvency loss (if any) for a 12 month period is determined as follows.

(2)Calculate, in the manner set out in subsections (5) to (11)—

(a)whether the total amount of the company's basic own funds at the beginning of the period (“opening BOF”) exceeds the total amount of the company's basic own funds at the end of the period (“closing BOF”), and

(b)if so, the amount by which opening BOF exceeds closing BOF.

(3)The company has a solvency loss for the 12 month period only if an excess of opening BOF over closing BOF is found under subsection (2)(a).

(4)The amount found under subsection (2)(b) is the amount of the solvency loss.

(5)The method of calculation under subsection (2) must fairly represent the method by which the company calculates its solvency capital requirement.

But this is subject to subsections (6) to (10).

(6)Closing BOF is to be calculated on the assumption that the 12 month period mentioned in subsection (1) is a solvency shock period in relation to the company.

(7)The following adjustments are to be made in calculating the company's basic own funds at the beginning and end of the period—

1Find (with respect to each of those times) what that amount would be in the absence of this subsection.

2Find the surplus in respect of each relevant ring-fenced fund of the company (at the time in question).

3Deduct the total of the amounts found under paragraph 2 from the amount found under paragraph 1.

The result is to be taken to be the amount of the company's basic own funds at the beginning, or (as the case may be) the end, of the period.

(8)The surplus in respect of a relevant ring-fenced fund (at any time) is equal to—

(a)the amount of basic own funds attributable to policyholders, or

(b)zero, if greater.

(9)For any relevant ring-fenced fund, the amount of basic own funds attributable to policyholders (at any time) is equal to—

where—

A is the amount of basic own funds within the relevant ring-fenced fund;

B is the total of any items in the fund that fall within subsection (10).

(10)The items are—

(a)the value of future transfers attributable to shareholders;

(b)any restricted own-fund item in relation to which the company's with-profits actuary provides a written opinion confirming that the condition in subsection (4) of section 269ZN is met.

(11)In subsection (5) the reference to the “method” of a calculation is to the—

(a)taking into account, and

(b)leaving out of account,

of variations in items of basic own funds for the purposes of the calculation.

(12)If the company is a third-country insurance undertaking, subsections (1) to (11) have effect in relation to it as if it were an insurance undertaking.

269ZPInterpretation of sections 269ZJ to 269ZOU.K.

(1)In sections 269ZJ to 269ZO “solvency capital requirement”—

(a)in relation to an insurance undertaking or a reinsurance undertaking, means the solvency capital requirement pursuant to Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive;

(b)in relation to a third-country insurance undertaking, means the amount that would be the undertaking's solvency capital requirement pursuant to Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive if that undertaking were an insurance undertaking.

(2)In sections 269ZJ to 269ZO and this section—

  • actuarial function”, in relation to a PRA-authorised person, has the meaning given by the PRA Rulebook;

  • “basic own funds” is to be interpreted in accordance with Article 88 of the Solvency 2 Directive;

  • chief actuary”, in relation to a PRA-authorised person, means a person who has the function of having responsibility for the actuarial function;

  • insurance company” means a company which is an insurance undertaking, a reinsurance undertaking or a third-country insurance undertaking;

  • insurance undertaking” has the meaning given in Article 13(1) of the Solvency 2 Directive;

  • notional solvency capital requirement”, in relation to a ring-fenced fund, has the same meaning as in Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

  • PRA-authorised person” has the same meaning as in the Financial Services and Markets Act 2000 (see section 2B(5) of that Act);

  • the PRA Rulebook” means the Rulebook made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as that Rulebook has effect from time to time);

  • reinsurance undertaking” has the meaning given in Article 13(4) of the Solvency 2 Directive;

  • relevant ring-fenced fund” means a ring-fenced fund that is a with-profits fund;

  • report on solvency and financial condition” means a report on solvency and financial condition pursuant to Article 51 of the Solvency 2 Directive;

  • “restricted own-fund item” is to be interpreted in accordance with Article 80(2) of Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

  • ring-fenced fund” has the same meaning as in Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

  • Solvency 2 Directive” means Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II);

  • technical standards implementing Regulation” means Commission Implementing Regulation (EU) 2015/2452 of 2 December 2015 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report in accordance with the Solvency 2 Directive;

  • third-country insurance undertaking” means an undertaking that has received authorisation under Article 162 of the Solvency 2 Directive from the Prudential Regulation Authority or the Financial Conduct Authority;

  • value of future transfers attributable to shareholders” has the same meaning as in Article 80 of Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

  • with-profits fund” has the meaning given by the Glossary forming part of the PRA Rulebook;

  • with-profits actuary” has the meaning given by the Glossary forming part of the Handbook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 (as that Handbook has effect from time to time).

269ZQPower to amendU.K.

(1)The Treasury may by regulations make such amendments of the provisions mentioned in subsection (2) as they consider appropriate in consequence of—

(a)any change made to, or replacement of, the PRA Rulebook or the FCA Handbook;

(b)any regulatory requirement, or change to a regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).

(2)The provisions are—

(a)sections 269ZJ to 269ZP,

(b)sections 124A to [F7124C] of FA 2012.

(3)Regulations under this section may include transitional provision.

(4)In this section—

  • the PRA Rulebook” means the Rulebook made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as that Rulebook has effect from time to time);

  • “the FCA Handbook means the Handbook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 (as that Handbook has effect from time to time).]

Textual Amendments

F7Word in s. 269ZQ(2)(b) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 11

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