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Finance Bill
Schedule 33 — Insurance companies

    402

 

amount arrived at by deducting the excess from the aggregate of the

amounts shown as mentioned in subsection (7) above.

              (9)             For the purposes of subsection (4) above the non-BLAGAB fraction

of the previously untaxed amount is the fraction of which—

                    (a)                   the numerator is the amount of the liabilities transferred,

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apart from those which are liabilities of basic life assurance

and general annuity business, and

                    (b)                   the denominator is the amount of the liabilities transferred.

              (10)            References in this section to assets held by the transferor after the

transfer do not include any held on trust for the transferee or any of

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the transferees.

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

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

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

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

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

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

place in a period of account of the transferor beginning on or after 1st

January 2003.

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

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insert—  

       “444AC  Transfers of business: modification of s.83(2) FA 1989

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

has effect to transfer long-term business from one person (“the

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

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              (2)             If—

                    (a)                   the element of the transferee’s line 15 figure representing the

transferor’s long-term insurance fund, exceeds

                    (b)                   the amount of the liabilities to policy holders and annuitants

transferred to the transferee,

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                              the excess is not to be regarded as other income of the transferee for

the purposes of section 83(2)(d) of the Finance Act 1989.

              (3)             In this section and section 444AD “the element of the transferee’s line

15 figure representing the transferor’s long-term insurance fund”

means so much of—

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                    (a)                   the amount which is brought into account by the transferee as

other income in the period of account of the transferee in

which the transfer takes place, as represents

                    (b)                   the assets transferred to the transferee.

       444AD Transfers of business: modification of s.83(2B) FA 1989

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

has effect to transfer long-term business from one person (“the

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

              (2)             If the transferor and the transferee jointly elect, section 83(2B) of the

Finance Act 1989 does not apply to the transferor by reason of the

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Finance Bill
Schedule 33 — Insurance companies

    403

 

transfer as respects so much of the value of the assets to which it

would otherwise so apply as does not exceed the amount specified

in subsection (4) below.

              (3)             An election under subsection (2) above—

                    (a)                   is irrevocable, and

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                    (b)                   is to be made by notice to an officer of the Board no later than

the end of the period of 28 days beginning with the day

following that on which the transfer takes place;

                              and a copy of the notice containing the election must accompany the

tax return of the transferee for the first accounting period ending

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after the transfer.

            Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims

and elections for corporation tax purposes) do not apply to such an

election.

              (4)             The amount referred to in subsection (2) above is the amount by

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which—

                    (a)                   the fair value of the assets of the long-term insurance fund of

the transferee immediately after the transfer, is greater than

                    (b)                   the element of the transferee’s line 15 figure representing the

transferor’s long-term insurance fund.

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              (5)             In subsection (4) above “fair value”, in relation to assets, means the

amount which would be obtained from an independent person

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

       444AE             Transfers of business: modification of s.83ZA FA 1989

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

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has effect to transfer long-term business from one person (“the

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

              (2)             If a contingent loan made to the transferor (within the meaning of

subsection (1) of section 83ZA of the Finance Act 1989) is transferred

to the transferee, that section has effect as if—

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                    (a)                   the contingent loan had become repayable by the transferor

immediately before the transfer, and

                    (b)                   the contingent loan were made to the transferee immediately

after the transfer.”.

          (2)      In section 431(2) of the Taxes Act 1988, after the definition of “basic life

35

assurance and general annuity business” insert—

                                                          ““brought into account” has the meaning given by section 83A

of the Finance Act 1989;”.

          (3)      This paragraph has effect in relation to insurance business transfer schemes

taking place on or after 1st January 2003.

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          (4)      If 30th September 2003 is later than the end of the period specified in

subsection (3)(b) of section 444AD of the Taxes Act 1988 (inserted by sub-

paragraph (1)), an election under subsection (2) of that section may be made

no later than that date.

  21      (1)      In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 211

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Finance Bill
Schedule 33 — Insurance companies

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insert—

       “211ZA             Transfers of business: transfer of unused losses

              (1)             This section applies where—

                    (a)                   an insurance business transfer scheme has effect to transfer

business consisting of or including basic life assurance and

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general annuity business from one person (“the transferor”)

to another (“the transferee”) or more than one others (“the

transferees”), and

                    (b)                   the transferor has relevant unused losses.

              (2)             For the purposes of subsection (1)(b) above the transferor has

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relevant unused losses if—

                    (a)                   BLAGAB allowable losses accrue to the transferor in the

accounting period ending with the day of the transfer or have

so accrued in any earlier accounting period, and

                    (b)                   they are not deducted from chargeable gains accruing to the

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transferor in that accounting period and have not been

deducted from chargeable gains so accruing in any previous

accounting period.

              (3)             Subject as follows—

                    (a)                   for the purposes of ascertaining the transferor’s total profits

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for any accounting period after that in which the transfer

takes place, the relevant unused losses are deemed not to

have accrued to the transferor, but

                    (b)                   (instead) they are treated as accruing to the transferee (in

accordance with subsection (4) below).

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              (4)             The losses treated as accruing to the transferee under subsection

(3)(b) above shall be deemed to be BLAGAB allowable losses

accruing to the transferee in the accounting period of the transferee

in which the transfer takes place.

              (5)             But those losses are not allowable as a deduction from chargeable

30

gains accruing before the transfer takes place.

              (6)             For the purposes of section 210A (ring-fencing of losses), the

shareholders’ share of those losses is to be taken to be the same

proportion as would be the shareholders’ share of them if they had

remained losses of the transferor.

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              (7)             If only part of the transferor’s basic life assurance and general

annuity business is transferred, subsection (3) above applies as if the

references to the relevant unused losses were to such part of the

relevant unused losses as is appropriate.

              (8)             If the transfer is to more than one others, subsection (3)(b) above

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applies as if the reference to the relevant unused losses being treated

as accruing to the transferee were to such part of the relevant unused

losses as is appropriate being treated as accruing to each of the

transferees.

              (9)             Any question arising as to the operation of subsection (7) or (8) above

45

shall be determined by the Special Commissioners who shall

 

 

Finance Bill
Schedule 33 — Insurance companies

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determine the question in the same manner as they determine

appeals; but both the transferor and the transferee (or the one of the

transferees concerned) shall be entitled to appear and be heard or to

make representations in writing.

              (10)            In this section “BLAGAB allowable losses” means allowable losses

5

referable to the transferor’s basic life assurance and general annuity

business.”.

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

schemes taking place on or after 1st January 2003.

  22      (1)      In section 431 of the Taxes Act 1988 (interpretative provisions relating to

10

insurance companies), after subsection (2) insert—

              “(2ZA)                Subsections (2ZB) and (2ZC) below apply where an insurance

business transfer scheme has effect to transfer long-term business

from one person (“the transferor”) to another (“the transferee”).

              (2ZB)                If the transfer takes place otherwise than on the last day of a period

15

of account of the transferor, references to—

                    (a)                   opening liabilities of the transferor,

                    (b)                   opening values or net values of assets of the transferor, or

                    (c)                   the opening amount of the investment reserve of the

transferor,

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                              for the period of account, so far as relating to the business

transferred, are to the part of those liabilities or values, or that

reserve, which bears to the whole the proportion A/C.

              (2ZC)                If the transfer takes place otherwise than on the first day of a period

of account of the transferee, references to—

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                    (a)                   closing liabilities of the transferee,

                    (b)                   closing values or net values of assets of the transferee, or

                    (c)                   the closing amount of the investment reserve of the

transferee,

                              for the period of account, so far as relating to the business

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transferred, are to the part of those liabilities or values, or that

reserve, which bears to the whole the proportion B/C.

              (2ZD)                                For the purposes of subsection (2ZC) above—

                    (a)                   closing liabilities of the transferee are to be taken not to relate

to the business transferred to the extent that they are

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liabilities which, immediately before the transfer, were

reinsured by the transferor with the transferee, but

                    (b)                   closing liabilities of the transferee are to be taken to relate to

the business transferred to the extent that they are liabilities

which, immediately before the transfer, were reinsured by

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the transferee with the transferor if the business transferred

consists of or includes that reinsurance business.

              (2ZE)                In subsections (2ZB) and (2ZC) above—

                                      A is the number of days in the period beginning with the period

of account and ending with the day of the transfer,

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                                      B is the number of days in the period beginning with the day of

the transfer and ending with the period of account, and

 

 

Finance Bill
Schedule 33 — Insurance companies

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                                      C is one-half of the number of days in the period of account.”.

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

schemes taking place on or after 1st January 2003 unless the accounting

period of the transferor which ends with the day of the transfer began before

that date.

5

  23      (1)      Section 442A of the Taxes Act 1988 (investment return treated as accruing in

respect of reinsured risk) is amended as follows.

          (2)      In subsection (1), for “over the period of” substitute “while the risk remains

reinsured by the company under”.

          (3)      After subsection (3) insert—

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              “(3A)                Where a transfer of the reinsurance arrangement from one insurance

company (“the transferor”) to another (“the transferee”) is effected

by novation or an insurance business transfer scheme, for the

purpose of calculating the investment return to be treated as

accruing to the transferee in respect of the policy or contract after the

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transfer, the references to the company in subsection (3)(a), (b) and

(c) above include (as well as the transferee)—

                    (a)                   the transferor, and

                    (b)                   any insurance company from which the reinsurance

arrangement was transferred on an earlier transfer effected

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by novation or an insurance business transfer scheme.”.

          (4)      In subsection (4), omit “to the company”.

          (5)      This paragraph has effect in relation to transfers of reinsurance

arrangements taking place on or after 1st January 2003.

  24      (1)      Section 444A of the Taxes Act 1988 (transfers of business: losses etc) is

25

amended as follows.

          (2)      In subsection (3), insert at the end “if the conditions in paragraphs (a) and (b)

of section 343(1) are satisfied in relation to the business transferred

(construing references to an event as to the transfer).”.

          (3)      After that subsection insert—

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              “(3ZA)                Where subsection (3) above has effect, sections 343(2), (4), (5) and (7)

to (12) and 344 apply in relation to the business in which the loss

arose construing—

                    (a)                   references to the predecessor and the successor as to

(respectively) the transferor and the transferee, and

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                    (b)                   references to section 343(3) as to subsection (3) of this section,

                              except that nothing in section 343(8) to (10) and (12) applies in

relation to the transferee.”.

          (4)      This paragraph has effect in relation to insurance business transfer schemes

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

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transferor which ends with the day of the transfer, or the accounting period

of the transferee during which the transfer takes place, began before that

date.

Meaning of “investment reserve” etc

  25       In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to

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Finance Bill
Schedule 33 — Insurance companies

    407

 

insurance companies), after the definition of “insurance company” insert—

                                                          ““investment reserve”, in relation to an insurance company,

means the excess of the value of the assets of the company’s

long-term business over the aggregate of—

                           (a)                          the value of the liabilities of that business, and

5

                           (b)                          any money debts (within the meaning of Chapter 2 of

Part 4 of the Finance Act 1996) of the company not

within paragraph (a) above which are owed in respect

of that business;”.

  26       In section 432A(9A) of the Taxes Act 1988 (apportionment of income and

10

gains: meaning of “net value”), for the words after “assets over” substitute

“the value of money debts (within the meaning of Chapter 2 of Part 4 of the

Finance Act 1996) attributable to an internal linked fund which are not owed

in respect of long-term liabilities.”.

  27       In paragraph 4(5) of Schedule 19AA to the Taxes Act 1988 (overseas life

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assurance fund), in the definition of “investment reserve”, for paragraphs (a)

and (b) substitute—

                    “(a)                      the value of the liabilities of that business, and

                    (b)                      any money debts of the company not within paragraph (a)

above which are owed in respect of that business;”.

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  28       Paragraphs 25 to 27 have effect in relation to periods of account beginning

on or after 1st January 2003.

Meaning of “period of account”

  29                In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to

insurance companies), after the definition of “periodical return” insert—

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                    ““period of account” means the period covered by a periodical return;”.

Rationalisation of interpretation provisions

  30       In section 84(2) and (3) of the Finance Act 1989 (c. 26) (interpretation of

sections 85 to 89 and further provisions about insurance companies), for “the

sections referred to in subsection (1) above” substitute “sections 85 to 89

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below”.

  31       In the Finance Act 1989, after section 90 insert—

       “90A            Interpretation

Expressions used in any of sections 82 to 90 above (or Schedule 8A to

this Act) and in Chapter 1 of Part 12 of the Taxes Act 1988 have the

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same meaning in those sections (or that Schedule) as in that

Chapter.”.

  32       In the Taxation of Chargeable Gains Act 1992 (c. 12), after section 214B

insert—

       “214BA             Interpretation

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Expressions used in this Chapter and in Chapter 1 of Part 12 of the

Taxes Act have the same meaning in this Chapter as in that

Chapter.”.

 

 

 
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