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Finance Bill
Schedule 33 — Insurance companies

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                    (b)                   the numerator is so many of those allowable losses as are

allowed as a deduction from BLAGAB chargeable gains

accruing to the company in the accounting period.

              (9)             If the BLAGAB allowable losses accruing to the company in the

subsequent accounting period exceed the BLAGAB chargeable gains

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so accruing, the amount arrived at under subsection (7)(a) above is

increased by the shareholders’ share of the amount by which those

allowable losses exceed those chargeable gains.

              (10)            For the purposes of this section the policy holders’ share of

chargeable gains or allowable losses accruing to an insurance

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company in an accounting period—

                    (a)                   if the policy holders’ share of the relevant profits for the

accounting period exceeds the BLAGAB profits of the

company for the period (within the meaning of section 89(1B)

of the Finance Act 1989), is the whole amount of the

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chargeable gains or allowable losses, and

                    (b)                   otherwise, is the same proportion of that whole amount as

the policy holders’ share of the relevant profits of the

company for the accounting period bears to those relevant

profits.

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              (11)            In arriving at the policy holders’ share of chargeable gains accruing

to an insurance company under subsection (10) above there is to be

ignored—

                    (a)                   any deduction under section 202(9) (mineral leases: capital

losses),

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                    (b)                   any reduction under section 213(3) (spreading of losses from

deemed disposal of holdings of unit trust etc), and

                    (c)                   any amount carried back under paragraph 4(3) of Schedule

11 to the Finance Act 1996 (non-trading deficit on loan

relationships).

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              (12)            For the purposes of this section the shareholders’ share of chargeable

gains or allowable losses in relation to an accounting period of an

insurance company is the proportion of the whole which is not

represented by the policy holders’ share of them in relation to the

accounting period.

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              (13)            In this section—

                                      “BLAGAB allowable losses”, in relation to an insurance

company, means allowable losses referable to the company’s

basic life assurance and general annuity business,

                                      “BLAGAB chargeable gains”, in relation to an insurance

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company, means chargeable gains referable to the company’s

basic life assurance and general annuity business,

                                      “non-BLAGAB allowable losses”, in relation to an insurance

company, means allowable losses of the company which are

not BLAGAB allowable losses,

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                                      “non-BLAGAB chargeable gains”, in relation to an insurance

company, means chargeable gains of the company which are

not BLAGAB chargeable gains, and

 

 

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Schedule 33 — Insurance companies

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                                      “the relevant profits” and “the policy holders’ share of the

relevant profits” have the same meaning as they have for the

purposes of subsection (1) of section 88 of the Finance Act

1989 by virtue of subsection (3) of that section and section 89

of that Act.”.

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          (2)      Sub-paragraph (1) has effect to limit the deductions which may be made

from chargeable gains accruing in—

              (a)             any accounting period of an insurance company beginning on or

after 23rd December 2002, and

              (b)             any accounting period of an insurance company beginning before

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that date but ending on or after it,

                   in respect of allowable losses accruing in any accounting period (whenever

beginning or ending).

          (3)      In relation to an accounting period within sub-paragraph (2)(b) the

limitations imposed by virtue of sub-paragraph (1) apply only as respects

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chargeable gains accruing on or after 23rd December 2002.

  15      (1)      In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 210A

(inserted by paragraph 14(1)) insert—

       “210B Disposal and acquisition of section 440A securities

              (1)             Subsections (2) to (4) below apply in a case where, within a period of

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10 days, an insurance company disposes of a number of section 440A

securities and (whether subsequently or previously) acquires a

number of section 440A securities if—

                    (a)                   the securities disposed of decrease the size of a chargeable

section 440A holding,

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                    (b)                   the securities acquired increase the size of the same

chargeable section 440A holding, and

                    (c)                   (apart from this section) an allowable loss would accrue on

the disposal.

              (2)             The securities disposed of shall be identified with the securities

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acquired.

              (3)             The securities disposed of shall be identified with securities acquired

before the disposal rather than securities acquired after the disposal

and—

                    (a)                   in the case of securities acquired before the disposal, with

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those acquired later rather than those acquired earlier, and

                    (b)                   in the case of securities acquired after the disposal, with those

acquired earlier rather than those acquired later.

              (4)             Where securities acquired could be identified with securities

disposed of either at an earlier or at a later date, they shall be

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identified with the former rather than the latter; and the

identification of securities acquired with securities disposed of on

any occasion shall preclude their identification with securities

comprised in a later disposal.

              (5)             Subsections (2) to (4) above have effect subject to section 105(1).

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              (6)             Subsections (2) to (4) above do not apply to—

 

 

Finance Bill
Schedule 33 — Insurance companies

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                    (a)                   securities which are section 212 assets within the meaning of

section 214(1) (rights under authorised unit trusts and

interests in offshore funds), or

                    (b)                   securities deemed by section 440 of the Taxes Act to be

disposed of and immediately re-acquired by virtue of

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paragraph 3 of Schedule 19AA to the Taxes Act (assets

becoming or ceasing to be assets of overseas life assurance

fund).

              (7)             Subsections (2) to (4) above do not apply if—

                    (a)                   the securities disposed of are linked assets appropriated to a

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BLAGAB internal linked fund,

                    (b)                   the securities acquired are, on acquisition, appropriated to

that or another internal linked fund, and

                    (c)                   the disposal and acquisition are made with a view to

adjusting the value of the assets of that fund, or of those

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funds, in order to match its or their liabilities.

              (8)             In this section—

                                      “BLAGAB internal linked fund” means an internal linked fund

all the assets appropriated to which are linked solely to basic

life assurance and general annuity business,

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                                      “chargeable section 440A holding” means a holding which is a

separate holding by virtue of subsection (2)(a)(iii) or (d) of

section 440A of the Taxes Act (and subsections (3) and (4) of

that section),

                                      “internal linked fund” has the same meaning as in section

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432ZA of the Taxes Act, and

                                      “section 440A securities” means securities within the meaning

of section 440A of the Taxes Act.”.

          (2)      Sub-paragraph (1) has effect in relation to disposals on or after 23rd

December 2002.

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          (3)      But sub-paragraph (1) has effect in relation to disposals made by an

insurance company during the period—

              (a)             beginning with 23rd December 2002, and

              (b)             ending with 31st December 2002,

                   only if the amount of the allowable losses referable to the company’s life

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assurance business which would have accrued to the company on the

disposals (but for that sub-paragraph) would have been at least £10 million.

  16      (1)      Section 213 of the Taxation of Chargeable Gains Act 1992 (c. 12) (spreading

of gains and losses under section 212) is amended as follows.

          (2)                        In subsection (3)—

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              (a)             for “subsection (3A)” substitute “subsection (8H)”,

              (b)             in paragraph (b), for “one of the next 6” substitute “either of the next

2” and for “subsection” substitute “section”,

              (c)             in paragraph (c), for “any intervening accounting period” substitute

“the intervening accounting period (if there is one)”, and

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              (d)             in paragraph (ca), for “none of the intervening accounting periods is”

substitute “the intervening accounting period (if there is one) is not”.

          (3)                        Omit subsections (3A) and (3B).

 

 

Finance Bill
Schedule 33 — Insurance companies

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          (4)               For subsection (5) substitute—

              “(4A)                The following provisions apply where an insurance business transfer

scheme has effect to transfer business which consists of the effecting

or carrying out of contracts of long-term insurance from one person

(“the transferor”) to another (“the transferee”).

5

              (5)                Subject to subsections (5A) to (7) below, any chargeable gain or

allowable loss which (assuming that the transferor had continued to

carry on the business transferred) would have accrued to the

transferor by virtue of subsection (1) above after the transfer shall

instead be deemed to accrue to the transferee.”.

10

          (5)                        After subsection (8) insert—

              “(8A)                Subsection (8B) below applies where—

                    (a)                   immediately before the transfer the transferee did not carry

on business consisting of the effecting or carrying out of

contracts of long-term insurance,

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                    (b)                   the transferor and the transferee are, at the time of the

transfer, members of the same group,

                    (c)                   the net amount for the accounting period of the transferor

ending with the day of the transfer, or for the immediately

preceding accounting period of the transferor, (“the relevant

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pre-transfer period of the transferor”) represents an excess of

gains over losses,

                    (d)                   the net amount for the accounting period of the transferee in

which the transfer takes place, or for the immediately

following accounting period of the transferee, (“the relevant

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post-transfer period of the transferee”) represents an excess

of losses over gains (after taking account of any reductions

made by virtue of this section), and

                    (e)                   within 2 years after the end of the relevant post-transfer

period of the transferee, the transferor and the transferee

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make a joint election in respect of the whole or part of the net

amount for that period by notice to an officer of the Board.

              (8B)                Subject to subsections (8C) to (8E) and (8H) below, the net amounts

for both the relevant pre-transfer period of the transferor and the

relevant post-transfer period of the transferee shall be reduced by the

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amount in respect of which the election is made.

              (8C)                Subsection (8B) above does not apply if—

                    (a)                   the relevant post-transfer period of the transferee is the

accounting period immediately following that in which the

transfer takes place, and

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                    (b)                   the relevant pre-transfer period of the transferor is the

accounting period immediately preceding that ending with

the day of the transfer.

              (8D)                If—

                    (a)                   the relevant post-transfer period of the transferee is the

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accounting period immediately following that in which the

transfer takes place, and

 

 

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Schedule 33 — Insurance companies

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                    (b)                   the relevant pre-transfer period of the transferor is the

accounting period ending with the day of the transfer,

                              subsection (8B) above applies only if the conditions in subsection

(8F) below are satisfied in relation to the accounting period of the

transferee in which the transfer takes place.

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              (8E)                If—

                    (a)                   the relevant post-transfer period of the transferee is the

accounting period in which the transfer takes place, and

                    (b)                   the relevant pre-transfer period of the transferor is the

accounting period immediately preceding that ending with

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the day of the transfer,

                              subsection (8B) above applies only if the conditions in subsection

(8F) below are satisfied in relation to the accounting period of the

transferor ending with the day of the transfer.

              (8F)                The conditions referred to in subsections (8D) and (8E) above are

15

that—

                    (a)                   there is (after taking account of any reductions made by

virtue of this section) no net amount for the accounting

period, and

                    (b)                   the company whose accounting period it is did not join a

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group of companies in the accounting period.

              (8G)                A copy of the notice containing an election under subsection (8A)(e)

above must accompany the tax return for the relevant post-transfer

period of the transferee; and paragraphs 54 to 60 of Schedule 18 to

the Finance Act 1998 (claims and elections for corporation tax

25

purposes) do not apply to such an election.

              (8H)                Subsections (3) and (8A) and (8B) above have effect where the

company, or the transferee, in question joins a group of companies in

the accounting period for which the net amount represents an excess

of losses over gains as if a claim or election could not be made in

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respect of that net amount except to the extent (if any) that the net

amount is an amount which, assuming there to be gains accruing to

the company or transferee immediately after the beginning of that

period, would fall to be treated under paragraph 4 of Schedule 7AA

as a qualifying loss in relation to those gains.

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              (8I)                References in this section to a company joining a group of companies

are to be construed in accordance with paragraph 1 of Schedule 7AA

as if those references were contained in that Schedule; and in

subsection (8A)(b) above “group” has the same meaning as in that

Schedule.”.

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          (6)               This paragraph has effect where the accounting period for which the net

amount represents an excess of losses over gains is an accounting period

beginning on or after 1st January 2003.

  17      (1)      Section 171A of the Taxation of Chargeable Gains Act 1992 (c. 12) (notional

transfers within group) is amended as follows.

45

          (2)      After subsection (3) insert—

              “(3A)                Section 440(3) of the Taxes Act does not cause subsection (3) above to

prevent the making of an election in a case where B is an insurance

 

 

Finance Bill
Schedule 33 — Insurance companies

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company; and in such a case the asset or part deemed to be

transferred to B by A, and by B to C, is to be treated for the purposes

of subsections (2)(c) and (3) above as not being part of B’s long-term

insurance fund.

                              “Insurance company” and “long-term insurance fund” have the

5

same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section

431(2) of that Act).”.

          (3)      In subsection (4), for “that subsection” substitute “subsection (2) above”.

          (4)      This paragraph has effect in relation to disposals on or after 23rd December

2002.

10

Transfers of business

  18      (1)      In the Taxes Act 1988, after section 444A insert—         

       “444AA  Transfers of business: deemed periodical return

              (1)             This section applies where an insurance business transfer scheme

has effect to transfer the whole of the long-term business of one

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person (“the transferor”).

              (2)             Where the last period covered by a periodical return of the transferor

ends otherwise than immediately before the transfer, there is to be

deemed for the purposes of corporation tax to be a periodical return

of the transferor covering the period—

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                    (a)                   beginning immediately after the last period ending before the

transfer which is covered by an actual periodical return of the

transferor, and

                    (b)                   ending immediately before the transfer,

                              containing such entries as would have been included in an actual

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periodical return of the transferor covering that period (and so

making that period a period of account of the transferor).

              (3)             Where the last period covered by a periodical return of the transferor

(whether or not by virtue of subsection (2) above) ends immediately

before the transfer, there is to be deemed for the relevant purpose to

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be a periodical return of the transferor—

                    (a)                   covering the time of the transfer, and

                    (b)                   containing such entries as would have been included in an

actual periodical return covering the time of the transfer,

                              (and so making the time of the transfer a period of account of the

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transferor for the relevant purpose).

              (4)             Where the last period covered by a periodical return of the transferor

ends after the transfer, the periodical return covering that period is

to be ignored for all purposes of corporation tax other than the

relevant purpose.

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              (5)             In this section “the relevant purpose” means determining for the

purposes of section 83(2B) of the Finance Act 1989 whether a transfer

is brought into account as part of total expenditure.

              (6)             For the purposes of this section “insurance business transfer scheme”

includes a scheme which would be such a scheme but for section

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Finance Bill
Schedule 33 — Insurance companies

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105(1)(b) of the Financial Services and Markets Act 2000 (which

requires the business transferred to be carried on in an EEA State).”.

          (2)      Sub-paragraph (1) has effect in relation to insurance business transfer

schemes (within the meaning of section 444AA of the Taxes Act 1988) taking

place on or after 1st January 2003 unless the accounting period of the

5

transferor which ends with the day of the transfer began before that date.

  19      (1)      In the Taxes Act 1988, after section 444AA (inserted by paragraph 18(1))

insert—  

       “444AB  Transfers of business: charge on transferor retaining assets

              (1)             This section applies where, immediately after an insurance business

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transfer scheme has effect to transfer long-term business from one

person (“the transferor”) to one or more others (“the transferee” or

“the transferees”), the transferor—

                    (a)                   does not carry on long-term business, but

                    (b)                   holds assets which, immediately before the transfer, were

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assets of its long-term insurance fund.

              (2)             The transferor shall be charged to tax under Case VI of Schedule D in

respect of the taxable amount as if it had been received by the

transferor during the accounting period beginning immediately after

the day of the transfer.

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              (3)             If the transferor was charged to tax on the profits of its life assurance

business under Case I of Schedule D for the accounting period

ending with the day of the transfer, the taxable amount is the whole

of the previously untaxed amount.

              (4)             Otherwise, the taxable amount is the non-BLAGAB fraction of the

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previously untaxed amount.

              (5)             The previously untaxed amount is the lesser of—

                    (a)                   the fair value of such of the assets held by the transferor

immediately after the transfer as were assets of its long-term

insurance fund immediately before the transfer, and

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                    (b)                   the amount by which the fair value of the assets of the

transferor’s long-term insurance fund immediately before

the transfer exceeds the amount of the relevant pre-transfer

liabilities.

              (6)             In subsection (5) above “fair value”, in relation to assets, means the

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amount which would be obtained from an independent person

purchasing them or, if the assets are money, its amount.

              (7)             Subject to subsection (8) below, the amount of the relevant pre-

transfer liabilities is the aggregate of the amounts shown in column

1 of lines 14 and 49 of Form 14 in the periodical return of the

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transferor covering the period of account ending immediately before

the transfer.

              (8)             If the amount of the liabilities transferred exceeds the value of the

assets so transferred, as brought into account for the first period of

account of the transferee (or any of the transferees) ending after the

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transfer, the amount of the relevant pre-transfer liabilities is the

 

 

 
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