Office of Public Sector Information
SCHEDULE 2 continued PART 5 continued
79 Despite the repeal by this Act of section 104(4) of FA 2002, sections 430(5) and 442 (securities issued in accordance with qualifying earn-out right) apply whenever the security was issued.
80 (1) Despite the repeal by this Act of paragraph 14(4) of Schedule 13 to FA 1996, a person who was deemed under that paragraph to have transferred a strip on 5th April 2005 is treated for the purposes of Chapter 8 of Part 4 (profits from deeply discounted securities) as if the person had re-acquired the strip under that paragraph on 6th April 2005 for an amount equal to the amount for which it was deemed to have been transferred.
(2) That Chapter and this Part of this Schedule apply to a deemed transfer and reacquisition under that paragraph (including a reacquisition within sub-paragraph (1)) as if it were a transfer and reacquisition under section 445(2) and (3).
(3) Section 452 (power to modify that Chapter for strips) applies as if this paragraph were in that Chapter.
81 (1) Sections 447 and 448 (restriction of profits and losses on strips by reference to original acquisition cost) do not apply to a strip acquired before 15th January 2004.
(2) For the purposes of paragraph (1) any deemed acquisitions under paragraph 14(4) of Schedule 13 to FA 1996 or section 445(3) of this Act are ignored.
82 The references in section 454(4) and (5) to trustees include any person who, had the loss been a profit—
(a) would have been eligible for relief from tax for the tax year in which the loss is sustained as a result of section 505(1) of ICTA (exemption from income tax for certain income forming part of the income of a charity), or
(b) would have been so eligible but for section 505(3) of that Act (income that is not exempt in some circumstances for charities incurring non-qualifying expenditure).
83 The references in section 454(4) and (5) to trustees include any person who, had the loss been a profit, would have been eligible for relief from tax for the tax year in which the loss is sustained as a result of—
(a) section 592(2) of ICTA (exemption from income tax for income from investments or deposit held for exempt approved pension schemes),
(b) section 608(2)(a) of ICTA (corresponding exemption for superannuation funds approved before 6th April 1980),
(c) section 613(4) of ICTA (corresponding exemption for parliamentary pension funds),
(d) section 614(2), (3), (4) or (5) of ICTA (corresponding exemption for certain overseas pension funds),
(e) section 620(6) of ICTA (corresponding exemption for retirement annuity funds), or
(f) section 643(2) of ICTA (corresponding exemption for approved personal pension schemes).
84 Securities only fall within paragraph (f) of section 710(3) of ICTA (meaning of “securities” for purposes of sections 711 to 728), as substituted by Schedule 1 to this Act, if the disposal of the securities on or after 6th April 2005 would be a disposal of deeply discounted securities for the purposes of Chapter 8 of Part 4 of this Act.
85 (1) This paragraph modifies the application of—
(a) section 474(4) (foreign policies of life insurance which are not qualifying policies),
(b) section 531(6) (foreign policies of life insurance to which section 530 applies), and
(c) section 532 (relief for policies and contracts with European Area Insurers),
in relation to a policy of life insurance which meets conditions A and B.
(2) Condition A is that the policy is a foreign policy of life insurance by virtue of paragraph (a) of the definition of that term in section 476(3).
(3) Condition B is that the income of the company which issued the policy was charged to corporation tax under section 445 of ICTA for an accounting period ending on or after the day on which the policy was issued.
(4) The policy is treated as having been a qualifying policy for any part of the chargeable period when—
(a) it would have been treated as a qualifying policy apart from section 474(4), and
(b) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met.
(5) The policy meets condition B in section 531(6) if—
(a) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met throughout the chargeable period, and
(b) the conditions in sub-paragraph (3) of that paragraph are met throughout the period—
(i) beginning immediately after the end of the chargeable period, and
(ii) ending with the date on which the gains mentioned in section 531(1) arise.
(6) Despite the definition of “policy period” in section 532(5), for the purposes of determining whether conditions A to C in that section have been met in relation to the policy or contract throughout the policy period, that period is to be taken not to include—
(a) any part of the chargeable period when the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met, and
(b) any subsequent period when the conditions in sub-paragraph (3) of that paragraph are met.
(7) In this paragraph “the chargeable period” means the period—
(a) beginning with the date on which the policy was issued, and
(b) ending with the last day of the last accounting period for which the company which issued the policy was liable to tax under section 445 of ICTA.
86 (1) Subject to sub-paragraph (4), before 6th April 2006 Chapter 9 of Part 4 applies with the following amendments.
(2) For section 479 (exclusion of pension policies) substitute—
(1) This Chapter does not apply to a pension policy.
(2) In this section “pension policy” means—
(a) a policy of life insurance issued in connection with an approved scheme,
(b) a policy of insurance which is, or is evidence of, a contract for the time being approved under section 621 of ICTA (contracts to provide for surviving spouses and dependants), or
(c) a policy of life insurance held in connection with an approved personal pension scheme.
(3) In this section—
“approved scheme” has the meaning given by section 612(1) of ICTA, and
“personal pension scheme” and “approved”, in relation to such a scheme, have the meaning given by section 630(1) of ICTA.”
(3) In section 486 (exclusion of maturity of capital redemption policies in certain circumstances) for “non-registered occupational pension” substitute “sponsored superannuation”.
(4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained amendments—
(a) substituting section 479 of this Act for that section as substituted by sub-paragraph (2), and
(b) substituting “non-registered occupational pension” for “sponsored superannuation” in section 486 of this Act.
87 Section 505 (assignments involving co-ownership) does not have effect in relation to any transaction which—
(a) took place in relation to a policy or contract in an insurance year beginning on or before 5th April 2001, and
(b) would otherwise and by reason only of the application of that section fall to be taken into account as an assignment of a part of or a share in the rights conferred by the policy or contract in a calculation under—
(i) section 507 (periodic calculations in part surrender and assignment cases), or
(ii) section 511 (transaction-related calculations in part surrender and assignment cases).
88 (1) This paragraph applies if a calculation under section 507 or 511 in relation to a policy or contract requires account to be taken of any part of or share in the rights conferred by the policy or contract which has been assigned for money or money’s worth in an insurance year beginning on or before 5th April 2001.
(2) Section 508 (the value of rights partially assigned) applies for the purposes of the valuation of each such part or share as if—
(a) in subsection (1) after “surrendered” (in both places where it occurs) there were inserted “or assigned”,
(b) in that subsection after “surrender” there were inserted “or assignment”, and
(c) subsection (4) were omitted.
89 Regulations made under section 534 by virtue of paragraph 4 of this Schedule may apply—
(a) in relation to gains arising on or after 29th November 1994, and
(b) in relation to any gain arising before that date the income tax on which has not been the subject of an assessment that became final and conclusive before that date.
90 (1) For the purposes of Chapter 9 of Part 4, any event occurring before 9th April 2003 in relation to a policy of life insurance which, at the time of the event, was a pure protection group life policy is deemed not to be a chargeable event.
(2) For the purposes of this paragraph a policy of life insurance is at any time a pure protection group life policy if at that time it is a group life policy whose terms do not provide for any sums or other benefits to be paid or conferred except on death or disability.
91 Despite paragraph 4(1) of this Schedule, the references in section 151(2) of FA 1989 (assessment of trustees etc.) to gains treated as arising under Chapter 9 of Part 4 of this Act do not include references to gains treated as arising under Chapter 2 of Part 13 of ICTA on chargeable events before 6th April 1998.
92 Section 551 (charge to income tax on profits from disposal of deposit rights) does not apply if the person disposing of the rights acquired them before 7th March 1973.
93 (1) This paragraph applies if—
(a) a right falling within the definition of “uncertificated right” in section 552(2) is a right under an arrangement made on or before 16th July 1992, and
(b) the right to call for the issue of a certificate of deposit (as defined in that section) is a right under that arrangement.
(2) Chapter 11 of Part 4 (transactions in deposits) applies with the omission of section 552(1)(c) and (d)(i).
94 (1) A transaction consisting in the running of a future to delivery or the exercise of an option is not treated as a disposal for the purposes of Chapter 12 of Part 4 if it took place before 6th February 1998.
(2) Sub-paragraph (1) is to be read as if it were part of section 564 (deemed disposal where futures run to delivery or options are exercised) (see, in particular, section 565).
95 For the tax year 2005-06 section 568(4) (by virtue of which income within Chapter 12 of Part 4 arising to certain pension trustees is not treated as income to which section 686 of ICTA applies) has effect with the substitution for the words from “held” onwards of the words “held—
(a) for the purposes of a fund or scheme established for the sole purpose of providing relevant benefits (within the meaning of section 612 of ICTA), or
(b) for the purposes of a personal pension scheme (within the meaning of section 630 of ICTA) making provision only for such benefits as are mentioned in section 633 of ICTA (annuities and lump sums meeting certain conditions).”
96 (1) Chapter 9 of Part 4 does not apply to—
(a) a policy of life insurance issued in respect of an insurance made before 20th March 1968,
(b) a contract for a life annuity made before that date, or
(c) a capital redemption policy where the contract was made before that date.
(2) For this purpose a policy of life insurance is treated as issued in respect of an insurance made on or after 20th March 1968 if it is varied on or after that date so as to extend its term or increase the benefits secured.
(3) A variation is ignored for the purposes of sub-paragraph (2) if—
(a) before the variation the policy complied with paragraph 2 of Schedule 9 to FA 1968 (general requirements for qualifying endowment policies) except for the amount guaranteed on death,
(b) the variation’s only effect was to make the policy comply with that paragraph,
(c) the variation was effected before 1st January 1969, and
(d) the variation did not increase the premiums payable under the policy.
97 Section 500(c) (events treated as part surrenders: loan by insurer) does not apply to a policy issued in respect of an insurance made before 27th March 1974 or a contract made before that date.
98 Section 531(3)(c) (certain contracts for life annuities excluded from section 530) does not apply to a contract made before 27th March 1974.
99 Section 484(1)(d) (chargeable events: death in case of contract for a life annuity which provides for payment of a capital sum on death) does not apply if the contract was made before 10th December 1974.
100 (1) This paragraph applies to—
(a) a policy in respect of an insurance made before 14th March 1975, and
(b) a contract made before that date.
(2) Section 507 (method for making periodic calculations under section 498) applies to a policy or contract to which this paragraph applies with the following modifications.
(3) In subsection (4) (calculation of net total value of rights assigned and surrendered)—
(a) in paragraph (a) of step 1 after “at any time”, in both places where it occurs, and
(b) in paragraph (b) of step 1 after “assigned”,
insert “during the reference period”.
(4) In subsection (5) (calculation of net total allowable payments), for step 1 substitute—
“Step 1
Find the allowable element in each allowable payment made during the reference period by multiplying the amount of the payment by—
where X is the number of insurance years in the period beginning with the year in which the payment is made and ending with the reference period or, if it is less, 20.”
(5) After that step insert—
“Step 1A
Find any allowable element in any allowable payment made before the reference period by multiplying the amount of the payment by—
where Y is the number of insurance years in the period beginning with the year in which the payment is made and ending with the last insurance year before the reference period or, if it is less, 20.”
(6) In subsection (6) insert the following definition in the appropriate place—
““the reference period” means the period beginning with the first insurance year which falls wholly after 13th March 1975 and ending with the insurance year as at the end of which the calculation under this section is required to be made,”.
101 Section 542 (replacement of qualifying policies) does not apply if the replacement policy comes into existence before 25th March 1982.
102 (1) Chapter 9 of Part 4 does not apply to a pre-1982 assigned policy or contract unless on a date after 23rd August 1982 it has met condition A, B or C.
(2) In sub-paragraph (1) “pre-1982 assigned policy or contract” means—
(a) a policy of life insurance issued in respect of an insurance made before 26th June 1982, or
(b) a contract for a life annuity made before that date,
the rights under which were assigned for money or money’s worth before that date and are not held by the original beneficial owner.
(3) Condition A is that the rights under the policy or contract are again assigned for money or money’s worth.
(4) Condition B is that a payment is made under the policy or contract by way of premium.
(5) Condition C is that a sum is lent—
(a) by, or by arrangement with, the body issuing the policy or the body with which the contract was made, and
(b) to or at the direction of an individual falling within sub-paragraph (6).
(6) An individual falls within this sub-paragraph at any time if—
(a) were a gain to arise in respect of the policy or contract at that time the individual—
(i) would be liable for tax in respect of it as a result of section 465 (person liable: individuals), or
(ii) would be so liable apart from the requirement in section 465(1) that the individual must be UK resident in the tax year in which the gain arises, or
(b) at that time the rights under the policy or contract are held on charitable trusts created by the individual.
(7) In the case of a qualifying policy, condition C is not met if—
(a) interest is payable on the loan at a commercial rate, or
(b) the loan is to a full-time employee of the body to assist the employee in purchasing or improving a dwelling to be used as the employee’s only or main residence.
(8) In the case of a policy issued in respect of an insurance made before 27th March 1974 or a contract made before that date, this paragraph applies as if sub-paragraph (1) did not refer to condition C.
(9) A loan which causes condition C to be met is treated for the purposes of sections 500(c) and 501 (loans treated as part surrenders) as having been made at a time when Chapter 9 of Part 4 does apply to gains on the policy or contract.
103 (1) A policy of life insurance is not a “foreign policy of life insurance” for the purposes of Chapter 9 of Part 4 (see the definition in section 476(3)) if it is issued in respect of an insurance made before 18th November 1983.
(2) For the purposes of sub-paragraph (1), a policy issued in respect of an insurance made before 18th November 1983 is treated as issued in respect of one made on or after that date if it is varied on or after that date so as—
(a) to increase the benefits secured, or
(b) to extend the term of the insurance.
(3) A change in the terms of a policy counts as its variation for the purposes of sub-paragraph (2) if it results from the exercise of an option conferred by the policy to have another policy substituted for it or to have any of its terms changed.
104 A capital redemption policy is not a “foreign capital redemption policy” for the purposes of Chapter 9 of Part 4 (see the definition in section 476(3)) if it is issued in respect of a contract made before 23rd February 1984.
105 In the case of a policy issued in respect of an insurance made before 14th March 1984, any amount treated under section 72(9) of FA 1984 as an additional premium is to be ignored for the purposes of—
(a) calculating the total allowable deductions for the policy under section 494(1), and
(b) the definition of “allowable payment” in section 507(6).
106 (1) This paragraph makes provision for the application of section 529(1) (exceptions to section 528) in relation to—
(a) a foreign policy of life insurance issued in respect of an insurance made on or before 19th March 1985, and
(b) a foreign capital redemption policy issued in respect of a contract made on or before that date.
(2) Section 529(1)(a) (which disapplies section 528 if when the chargeable event occurs or at any time during the policy period the policy is or was held by a non-UK resident trustee) does not apply if the policy was held by a non-UK resident trustee on 19th March 1985.
(3) Section 529(1)(b) (which disapplies section 528 if when the chargeable event occurs or at any time during the policy period the policy is or was held by non-UK resident trustees) does not apply if on 19th March 1985 the policy was held by a non-UK resident trustee or by two or more trustees any of whom was non-UK resident.
107 (1) In the case of a policy issued in respect of an insurance made before 14th March 1989, section 485(2) and (3) (by virtue of which certain events are only chargeable events if the condition in paragraph (a) or (b) is met) have effect with the omission of paragraph (b) (company interest in the rights under the policy) and the word “or” preceding that paragraph.
(2) For this purpose a policy is treated as issued in respect of an insurance made on or after 14th March 1989 if it is varied on or after that date so as—
(a) to increase the benefits secured, or
(b) to extend the term of the insurance.
(3) Any exercise of rights conferred by a policy counts as its variation for the purposes of sub-paragraph (2).
108 (1) In the case of a policy issued in respect of an insurance made before 14th March 1989 or a contract made before that date, section 501 (part surrenders: loans) does not apply if—
(a) a company beneficially owns the rights under the policy,
(b) they are held on trusts which a company created, or
(c) they are held as security for a company’s debt.
(2) For the purposes of this paragraph, a policy is treated as issued in respect of an insurance made on or after 14th March 1989 if it is varied on or after that date so as—
(a) to increase the benefits secured, or
(b) to extend the term of the insurance.
(3) Any exercise of rights conferred by a policy counts as its variation for the purposes of sub-paragraph (2).
109 (1) This paragraph applies to a contract for a life annuity made—
(a) after 26th March 1974, but
(b) in an accounting period of the insurance company or friendly society beginning before 1st January 1992.
(2) Section 530 (income tax treated as paid etc.) does not apply to gains from such a contract, except for the purposes of calculating relief under section 535 (top slicing relief).
(3) Sub-paragraph (2) is subject to—
(a) section 532 (relief for policies and contracts with European Economic Area insurers), and
(b) section 534 (regulations providing for relief in other cases where foreign tax chargeable).
(4) Section 539(3) (relief for deficiencies: application of section 539(1) only for determining individual’s extra liability) does not apply where the deficiency arises from such a contract.
(5) In sub-paragraph (1) “accounting period” is to be read in accordance with section 12 of ICTA.
110 (1) This paragraph makes provision for the application of section 529(1) (exceptions to section 528) in relation to—
(a) a foreign policy of life insurance issued in respect of an insurance made before 17th March 1998, and
(b) a foreign capital redemption policy issued in respect of a contract made before that date.
(2) Section 529(1)(c) (which disapplies section 528 if when the chargeable event occurs or at any time during the policy period the policy is or was held by a foreign institution) does not apply if the policy was held by a foreign institution on 16th March 1998.
111 (1) A policy of life insurance issued in respect of an insurance made before 17th March 1998 is only a “foreign policy of life insurance” for the purposes of Chapter 9 of Part 4 if—
(a) it falls within paragraph (a) of the definition of that expression in section 476(3), and
(b) it is not excluded by paragraph 103 (certain pre-18th November 1983 policies not foreign policies of life insurance).
(2) For the purposes of sub-paragraph (1), a policy issued in respect of an insurance made before 17th March 1998 is treated as issued in respect of one made on or after that date if it is varied on or after that date so as—
(a) to increase the benefits secured, or
(b) to extend the term of the insurance.
(3) Any exercise of rights conferred by a policy counts as its variation for the purposes of sub-paragraph (2).
112 (1) In the case of a 1998 Act excluded policy or contract, section 467 (person liable: UK resident trustees) does not apply if—
(a) the trusts were created before 17th March 1998, and
(b) the person or at least one of the persons who created them was an individual who died before that date.
(2) For the purposes of sub-paragraph (1)(b), section 472(1) is ignored.
(3) In this paragraph “a 1998 Act excluded policy or contract” means—
(a) a policy of life insurance issued in respect of an insurance made before 17th March 1998,
(b) a contract for a life annuity made before that date, or
(c) a capital redemption policy where the contract was made before that date,
but excluding a policy or contract within sub-paragraph (4).
(4) A policy or contract is within this sub-paragraph if it has been varied on or after 17th March 1998 so as—
(a) to increase the benefits secured, or
(b) to extend the term of the insurance, annuity or capital redemption policy.
(5) Any exercise of rights conferred by a policy or contract counts as its variation for the purposes of sub-paragraph (4).
113 A capital redemption policy where the contract was made before 23rd March 1999 is only a “foreign capital redemption policy” for the purposes of Chapter 9 of Part 4 if—
(a) it falls within paragraph (a) of the definition of that expression in section 476(3), and
(b) it is not excluded by paragraph 104 (certain pre-23rd February 1984 policies not foreign capital redemption policies).
114 (1) In the case of a 2003 Act excluded policy or contract, section 467(1) (person liable: UK resident trustees) has effect with the omission of the reference to condition C (the effect of which is to extend the circumstances in which trustees holding rights under a policy or contract on non-charitable trusts may be liable for tax).
(2) In this paragraph “a 2003 Act excluded policy or contract” means—
(a) a policy of life insurance issued in respect of an insurance made before 9th April 2003,
(b) a contract for a life annuity made before that date, or
(c) a capital redemption policy where the contract was made before that date,
but excluding a policy or contract within sub-paragraph (3).
(3) A policy or contract is within this sub-paragraph if—
(a) it has been varied on or after that date (but before the chargeable event on which the gain arises) so as to increase the benefits secured or extend the term of the insurance, annuity or capital redemption policy, or
(b) there has been an assignment of the rights, or a share in the rights, conferred by the policy or contract to trustees of a non-charitable trust.
(4) Any exercise of rights conferred by a policy or contract counts as its variation for the purposes of sub-paragraph (3)(a).
Income Tax (Trading and Other Income) Act 2005