The Friendly Societies (Transfers of Other Business) (Modification of the Corporation Tax Acts) Regulations 2008

Insertion of regulations 461E to 461G (apportionment)

7.  After section 461D insert—

“Apportionments following transfer of other business

461E.— (1) Where a friendly society carries on tax exempt other business and taxable other business sections 461F and 461G shall apply.

(2) In subsection (1)—

“tax exempt other business” means any business, other than long-term business, the profits arising from which are exempt from corporation tax by virtue of section 461(1), 461B(1) or 461D(1);

“taxable other business” means any business, other than long-term business, the profits arising from which are not exempt from corporation tax by virtue of section 461(1), 461B(1) or 461D(1).

Apportionment of income and gains

461F.— (1) This section has effect for determining for the purposes of the Corporation Tax Acts what parts of—

(a) income or losses arising from the assets of the friendly society, or

(b) gains or losses accruing on the disposal of such assets in accordance with the provisions of the Taxation of Chargeable Gains Act 1992(1),

are referable to each category of business referred to in section 461E.

(2) In subsection (1)(a)—

“income” has the meaning given in subsection (1ZA) of section 432A (apportionment of income and gains)(2), and

“losses” has the meaning given in subsection (1ZB) of that section.

(3) Income and losses arising from, and gains and losses accruing on the disposal of, assets linked (“linked assets”) to either category of business are referable to that category of business.

(4) For the purposes of subsection (3), “linked assets” shall be construed in accordance with section 432ZA.

(5) There is referable to each category of business the relevant fraction of any income and losses referred to in paragraph (a) of subsection (1), and any gains and losses referred to in paragraph (b) of that subsection, not directly referable to the other category of business.

(6) For the purposes of subsection (5), “the relevant fraction” in relation to each category of business is—

where—

A is the mean of the opening and closing liabilities of that category of business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business; and

B is the mean of the opening and closing liabilities of the other category of business which is carried on by the society (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets directly referable to that category of business.

(7) But if the denominator found in accordance with subsection (6) is nil the relevant fraction for the purpose of subsection (5) in relation to each category of business is such fraction as is just and reasonable.

(8) In subsection (6) “liabilities” means the technical provisions determined in accordance with Part 6 of Schedule 6 to the Friendly Societies (Accounts and Related Provisions) Regulations 1994(3).

Apportionment of expenses

461G.— (1) This section has effect for determining for the purposes of the Corporation Tax Acts the deduction for expenses in relation to each category of business referred to in section 461E.

(2) In subsection (1) “the deduction for expenses” means either—

(a) a deduction for expenses in computing profits in accordance with the provisions of Case I of Schedule D, or

(b) a deduction for management expenses under section 75(4).

(3) The expenses attributable to each category of business are the expenses attributable to that business in accordance with proper internal accounting practice.

(4) In subsection (3) “proper internal accounting practice” means the practice of friendly societies in allocating all the expenses of the society to each category of business in accordance with any applicable requirements of—

(a) generally accepted accounting practice,

(b) the Prudential Sourcebook (Friendly Societies), or

(c) the Insurance Prudential Sourcebook.

(5) In subsection (4)—

“the Prudential Sourcebook (Friendly Societies)” means the Interim Prudential Sourcebook for Friendly Societies made by the Financial Services Authority under the Financial Services and Markets Act 2000(5);

“the Insurance Prudential Sourcebook” has the same meaning as in section 431(2)(6).”.

(1)

1992 c. 12.

(2)

Section 432A was inserted by paragraph 4 of Schedule 6 to the Finance Act 1990 (c. 29) and subsections (1ZA) and (1ZB) were inserted by paragraph 17 of Schedule 17 to the Finance Act 2008.

(3)

S.I. 1994/1983.

(4)

Section 75 was substituted by section 38(1) of the Finance Act 2004 (c. 12) and amended by section 28 of the Finance Act 2007 (c. 11).

(5)

2000 c. 8.

(6)

The definition of “the Insurance Prudential Sourcebook” was inserted by article 4 of S.I. 2006/3270.