The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005

Modifications of section 432A of the Taxes Act

9.—(1) Paragraphs (2) and (4) prescribe modifications of section 432A of the Taxes Act(1) so far as it applies to the life or endowment business carried on by friendly societies; and paragraph (3) prescribes a further modification of that section so far as it applies to the life or endowment business carried on by partnership pension societies.

(2) After subsection (1A) insert the following subsections—

“(1B) Subsections (1C) to (1E) below apply where a friendly society with branches carries on more than one category of business.

(1C) In a case where—

(a) the society has caused the actuary to the society to prepare, as at the end of an accounting period and as at the end of the previous accounting period, reports prepared on the same basis as—

(i) the society’s valuation report but which are limited to an investigation of the matters referred to in Rule 5.1(3) of the Prudential Sourcebook (Friendly Societies), or

(ii) the society’s periodical return but which are limited to an investigation of the matters referred to in Rule 9.4(2) of the Prudential Sourcebook (Insurers),

in relation to the central body of the society (and not to any of its branches), and

(b) the society so chooses,

the apportionment of the income, gains or losses of the central body shall be determined by reference to the liabilities and the value of the assets estimated for the purposes of those reports.

(1D) Subject to subsection (1C) above, the apportionment shall be of the income, gains or losses of the society, together with all its branches.

(1E) Where, by virtue of this section, income, gains or losses are referable to any of the following categories, namely—

(a) individual savings account business,

(b) child trust fund business,

(c) pension business,

(d) taxable basic life assurance and general annuity business, or

(e) taxable class IV business,

that income, or those gains or losses, shall be attributable to the central body of the society and not to any of its branches unless the society shows that any business within any of those categories was written by a branch, in which case the income, gains or losses referable to any of those categories shall be attributed to any such branch in such manner as is just and reasonable.”.

(3) After subsection (1E) (inserted by paragraph (2)) insert the following subsection—

“(1F) In the case of a partnership pension society, the definitions of “liabilities” and “value” in section 431(2) shall not apply, and any apportionment required by this section shall be made in such manner as is just and reasonable.”.

(4) In subsection (2), for—

(a) paragraph (d) substitute—

“(d) taxable basic life assurance and general annuity business;

(da) tax exempt basic life assurance and general annuity business;”.

(b) paragraph (f) substitute—

“(f) taxable class IV business; and

(fa) tax exempt class IV business.”

(5) Where a non annual return society does not maintain a long-term insurance fund in respect of its life or endowment business, section 432A of the Taxes Act shall apply with the following modifications.

(6) In subsection (6) for paragraph (a) substitute—

“(a) the numerator is the mean of the opening and closing liabilities of the category, reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to the category; and”.

(7) Omit subsection (8).

(8) Omit paragraph (b) of subsection (9) and the word “and” which precedes it.

(1)

Section 432A was inserted by paragraph 4 of Schedule 6 to the Finance Act 1990 (c. 29) and relevantly amended by paragraph 13 of Schedule 8 to the Finance Act 1995, section 167 of the Finance Act 1996, section 109 of the Finance Act 2000, paragraph 8 of Schedule 7 to the Finance Act 2004(c. 12) and Article 52(2)(c) of S.I. 2001/3629.