The Insurance Companies (Taxation of Reinsurance Business) (Amendment No. 2) Regulations 2003

4

For the purposes of paragraph (1) above, the aggregate of the amounts of the investment returns treated as accruing in earlier accounting periods are the amounts treated as accruing in those accounting periods but—

a

prior to any setting off permitted by regulation 7A(2)(c), calculated in accordance with regulations 4 and 5 as if in regulation 7(7) the formula were—

$\genfrac{}{}{0.1ex}{}{\left(X\times 100\right)}{Y}$

; and

b

in any case falling within paragraph (10)(b)(iii) of regulation 7, adjusted by such an amount as the inspector determines to be just and reasonable in the circumstances after taking into account the factor specified in paragraph (12)(d) of that regulation.

7A

For the purposes of paragraph (7) above, the Relevant Fraction is—

a

in a case where, in finding X, the amount of investment income is increased by the amount of an increase in the value of the assets mentioned in sub-paragraphs (a) and (b) of that paragraph—

$\genfrac{}{}{0.1ex}{}{X-X1}{X}$

;

b

in a case where, in finding X, the amount of investment income is decreased by the amount of a reduction in the value of those assets and, after being so decreased, is not less than zero—

$\genfrac{}{}{0.1ex}{}{\left(X2-X1\right)}{X2}$

; or

c

in a case where X is an amount that is less than zero—

$0.5+\genfrac{}{}{0.1ex}{}{X1}{X\mathrm{2}}\text{;}$

where—

• X is the same as for the purposes of that paragraph;

• X1 is the amount included in the amount of investment income used in finding X which represents dividends and other distributions that are not chargeable to corporation tax by virtue of section 208 of the Taxes Act (which provides that dividends and other distributions of a company resident in the United Kingdom are not generally so chargeable); and

• X2 is the amount of investment income before it is decreased by the amount of any reduction in the value of the assets mentioned in sub-paragraphs (a) and (b) of that paragraph.

a

the rate found by expressing the amount of the expected income from non-linked assets for the accounting period concerned as a percentage of the value of the total non-linked assets (other than assets not providing income) as identified in the relevant part of the periodical return of the cedant company specified in paragraph (11) below; or

• ;

  1. a

     the extent to which the reinsurer is in receipt of dividends and other distributions which—

     1. i

        arise from assets held by the reinsurer which may reasonably be regarded as related to the reinsurance arrangement in question; and

     2. ii

        are not chargeable to corporation tax by virtue of section 208 of the Taxes Act.

Treatment of amounts of investment return which are less than zero7A

1

This regulation applies where the amount of investment return on a policy or contract, as calculated in accordance with regulation 3, 4 or 5, is less than zero (“the negative amount”).

2

The negative amount may be set off in the following order against the following amounts—

a

first, the amount of any income (other than any investment return which is treated under these Regulations as accruing) which—

i

accrues in the same accounting period as that in which the negative amount is treated as accruing; and

ii

is referable to basic life assurance and general annuity business and is charged to tax under Case VI of Schedule D;

b

secondly, the amount of any investment return which—

i

is treated under these Regulations as accruing in the same accounting period as that in which the negative amount is treated as accruing; and

ii

is more than zero; and

c

thirdly, the amount of any investment return which is treated under these Regulations as accruing—

i

in an accounting period subsequent to that in which the negative amount is treated as accruing; and

ii

in respect of the same policy or contract as that in respect of which the negative amount is treated as accruing;

and is more than zero.

3

Any setting off under paragraph (2)(c) above shall, so far as possible, reduce amounts accruing in an earlier accounting period before reducing amounts accruing in a later one.

4

Except as is provided for by paragraph (2) above, the negative amount shall be treated for the purposes of section 396 of the Taxes Act6 as if it were zero.

i

the mortality risk or the morbidity risk (but no other risk other than the expense risk) is being reinsured, or both the mortality risk and the morbidity risk (but no other risk other than the expense risk) are being reinsured, and

4A

The description prescribed by this paragraph is of any reinsurance arrangement which is not prescribed by paragraph (4) above and consists of a contract which—

a

has the effect of increasing the amount of assets that falls to be included at line 34 of Form 9 in the periodical return of the cedant company (representing assets available to meet its required minimum margin for long-term insurance business); and

b

includes—

i

terms for the transfer of liabilities to policyholders from the insurer; and

ii

a provision for the recapture of such liabilities in specified circumstances.

6A

For the purposes of regulation 7A, any negative amount that is available before the transfer to be set off by the transferor in accordance with paragraph (2)(c) of that regulation shall be treated as if it had accrued in an earlier accounting period of the transferee.