2004 No. 3266

INCOME TAX

The Insurance Companies (Corporation Tax Acts) Order 2004

Made

Laid before the House of Commons

Coming into force

In exercise of the powers conferred upon them by section 431A of the Income and Corporation Taxes Act 19881 the Treasury, being satisfied that it is expedient to amend Chapter 1 of Part 12 of that Act in consequence of the exercise of powers by the Financial Services Authority under the Financial Services and Markets Act 20002, and to amend other provisions of the Tax Acts in their application to insurance companies, make the following Order:

Citation, commencement and effect1

This Order may be cited as the Insurance Companies (Corporation Tax Acts) Order 2004, shall come into force on 1st January 2005, and shall have effect in relation to periods of account beginning on or after 1st January 2005.

Amendment of Chapter 1 of Part 12 of the Income and Corporation Taxes Act 1988

2

Chapter 1 of Part 12 of the Income and Corporation Taxes Act 1988 is amended as follows.

3

1

Amend section 432E (section 432B: apportionment: participating funds) 3 as follows.

2

At the end of subsection (1) add “but subject to section 432G”.

4

After section 432F insert—

Section 432B: apportionment of business transfer-in432G

1

This section applies where an amount falls within section 83(2)(e) of the Finance Act 1989.

2

Where—

a

this section applies, and

b

it is necessary in accordance with section 83 to determine what part of a business transfer-in is referable to life assurance business or any category of life assurance business,

a business transfer-in shall be apportioned to the categories of business of the transferee in the proportions which the amount of the liabilities transferred for each of those categories bear to the whole of the liabilities transferred.

5

1

Amend section 444AC4 (transfers of business: modification of section 83(2) of the Finance Act 1989) as follows.

2

In subsections (2) and (3)—

a

for “line 15 figure” substitute “line 31 figure”; and

b

for “as other income” substitute “as a business transfer-in”.

3

In subsection (2) for “83(2)(d)” substitute “83(2)(e)”.

6

1

Amend section 444AD (transfers of business: modification of section 83(2B) of the Finance Act 1989) as follows.

2

In subsection (4)(b) for “line 15 figure” substitute “line 31 figure”.

Amendment of the Finance Act 1989

7

The Finance Act 19895 is amended as follows.

8

1

Amend section 836 (receipts to be taken into account in computing profits of a life assurance company chargeable to Case I of Schedule D) as follows.

2

In subsection (2)—

a

at the end of paragraph (c) omit “or”;

b

at the end of paragraph (d) add—

; or

e

business transfers-in.

3

In subsection (2A) for “paragraphs (a) to (d)” substitute “paragraphs (a) to (e)”.

4

In subsection (2B) after “total expenditure” insert “, or as a business transfer-out, ”.

9

1

Amend section 83ZA 7(contingent loans) as follows.

2

In subsections (10)(b) and (12) for “line 15 figure” substitute “line 31 figure”.

3

In subsection (12) for “as other income” substitute “as business transfers-in”.

Derek TwiggJim MurphyTwo of the Lords Commissioners of Her Majesty’s Treasury

(This note is not part of the Order)

This Order amends Chapter 1 of Part 12 of the Income and Corporation Taxes Act 1988 (c. 1: “ICTA”) in consequence of the adoption by the Financial Services Authority, under the powers conferred upon the Authority by the Financial Services and Markets Act 2000 (c. 8), of an integrated prudential sourcebook for determining the solvency of insurance companies.

Article 1 of the Order provides for its citation, commencement and effect.

Article 2 introduces the amendments to Chapter 1 of Part 12 of ICTA.

Article 4 inserts a new section 432G of ICTA which specifies the manner of apportioning the amount of a business transfer-in for the purposes of section 432B where section 83(2)(e) of the Finance Act 1989 applies. Article 3 makes a consequential amendment to section 432E, which is subject to section 432G.

Articles 5 and 6 make amendments to sections 444AC and 444AD of ICTA in consequence of the restructuring of the Form 40 required to be delivered with the return deposited with the Financial Services Authority under section 9.6 of the Prudential Sourcebook (Insurers).

Article 7 introduces, and articles 8 and 9 make, amendments to sections 83 and 83ZA of the Finance Act 1989.

This Order does not impose new costs on business.