Office of Public Sector Information

30 Omit section 439B (life reinsurance business: separate charge on profits).

31 (1) Section 440 (transfers of assets etc) is amended as follows.

(2) In subsection (3), for “(a) to (e)” substitute “(a), (d) and (e)”.

(3) In subsection (4), for paragraphs (a) to (c) substitute—

“(a) assets which are linked solely to gross roll-up business or are foreign currency assets;”,

and, in paragraph (e), for “any” substitute “either”.

32 In section 440A(2) (securities)—

(a) in paragraph (a), for sub-paragraphs (i) to (iii) substitute—

“(i) basic life assurance and general annuity business, or

(ii) gross roll-up business,”,

(b) omit paragraph (c), and

(c) in paragraph (d)—

(i) for “any of the preceding paragraphs” substitute “paragraph (a)”, and

(ii) for “any of the descriptions mentioned in those paragraphs” substitute “the description mentioned in that paragraph”.

33 In section 440B(4) (modifications where tax charged under Case I of Schedule D)—

(a) for “(a) to (e)” substitute “(a), (d) and (e)”, and

(b) for the notionally substituted paragraph (a) substitute—

“(a) so many of the securities as are included in the company’s long-term insurance fund shall be treated for the purposes of corporation tax as a separate holding which is an asset of that fund, and”.

34 Omit section 441 (overseas life assurance business).

35 In section 444A(3) (transfers of business)—

(a) for “436(3)(c) or 439B(3)(c)” substitute “436A(4)”,

(b) omit paragraph (b) and the word “or” before it, and

(c) for “the same category of business as that in which it arose)” substitute “gross roll-up business)”.

36 (1) Section 444AC (transfers of business: excess of assets or liabilities) is amended as follows.

(2) In subsection (2B)—

(a) for “each category of its life assurance business” substitute “its gross roll-up business”,

(b) for “a category of the transferee’s life assurance business” substitute “the transferee’s gross roll-up business”, and

(c) for “that category” substitute “gross roll-up business”.

(3) In subsection (2D), for “a category of its life assurance business” substitute “its gross roll-up business”.

(4) In subsection (10), in the definition of “the transferor’s business”, for paragraph (b) substitute—

“(b) its gross roll-up business.”

37 (1) Section 444AF (demutualisation surplus: life assurance business) is amended as follows.

(2) In subsection (4)(b), for “sections 432C and 432D apply” substitute “section 432C applies”.

(3) In subsection (5)(b), for “the profits of any category of the company’s life assurance business chargeable to tax under Case VI of Schedule D” substitute “profits of the company chargeable under Case VI of Schedule D under section 436A (gross roll-up business)”.

38 (1) Section 444AK (mutual surplus: Case VI categories of life assurance business) is amended as follows.

(2) In subsection (1), for paragraph (b) substitute—

“(b) the company carries on gross roll-up business.”

(3) In subsection (3), for “any category of the company’s life assurance business chargeable to tax under Case VI of Schedule D” substitute “the company’s gross roll-up business”.

(4) In subsection (5)(b), for “sections 432C and 432D apply” substitute “section 432C applies”.

(5) The heading accordingly becomes “Mutual surplus: gross roll-up business”.

39 Omit sections 458 and 458A (capital redemption business).

40 In section 460(2) (registered friendly societies: exemption from tax in respect of life or endowment business)—

(a) for “pension business” substitute “gross roll-up business”,

(b) at the end of paragraph (ca), insert “and”, and

(c) omit paragraph (cb).

41 In section 461 (registered friendly societies: other business), omit subsection (3A).

42 In section 461B (incorporated friendly societies), omit subsection (2A).

43 (1) Section 466 (interpretation of Chapter 2 of Part 12) is amended as follows.

(2) For subsection (1) substitute—

“(1) In this Chapter “life or endowment business” means, subject to subsections (1A) and (1B) below—

(a) any life assurance business, and

(b) any PHI business.”

(3) In subsection (2)—

(a) omit the definition of “life assurance business”, and

(b) insert the following definition at the appropriate place—

““gross roll-up business” shall be construed in accordance with section 431;”.

(4) Omit subsections (2ZA), (2A) and (2B).

44 In section 502H(2)(a)(ii) and (4)(b) (insurance company as lessor), for “long-term business which is not life assurance” substitute “PHI”.

45 In section 539(3) (life policies, life annuities and capital redemption policies), in the definition of “capital redemption policy”, for “as defined in section 458(3)” substitute “, within the meaning of Chapter 1 of Part 12”.

46 (1) Section 553B (overseas life assurance business: capital redemption policies) is amended as follows.

(2) In subsection (2), in the definition of “overseas policy”, for “431D(1)(a)” substitute “431D(1)”.

(3) In subsection (3), for the words from “after” to the end substitute “on or after 23rd March 1999.”

47 (1) Section 755A (treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business) is amended as follows.

(2) In subsection (4), for the words after “referable to” substitute “gross roll-up business carried on by the UK company.”

(3) In subsection (6)(c), for “a category of business specified in paragraphs (a) to (c) of subsection (4) above” substitute “gross roll-up business”.

(4) In subsection (13), for paragraphs (a) to (d) substitute—

“(a) basic life assurance and general annuity business, or

(ba) gross roll-up business,”.

48 In section 804A(1) (life assurance companies with overseas branches etc: restriction of credit), for “any category of life assurance business” substitute “gross roll-up business”.

49 (1) Section 804B (insurance companies carrying on more than one category of business: restriction of credit) is amended as follows.

(2) In subsection (1)(a), after “category of” insert “long-term”.

(3) In subsection (2), omit “or section 438B”.

(4) For subsection (3) substitute—

“(3) Where the relevant income arises from an asset which is linked solely to a category of business, the whole of the foreign tax is attributable to that category of business, unless the case is one where subsection (7) below applies.

(3A) Where the relevant income arises from foreign currency assets, the whole of the foreign tax is attributable to gross roll-up business, unless the case is one where subsection (7) below applies.”

(5) In subsection (4)—

(a) for “long-term business which is not life assurance” substitute “PHI”, and

(b) omit “or 438B”.

(6) In subsection (5), for the words following “is” substitute “gross roll-up business.”

(7) In subsection (6)—

(a) omit “or 432D” (in both places), and

(b) for “the category of business in question” and “that category” substitute “gross roll-up business”.

(8) In subsection (7), for—

(a) “the category of business in question”, and

(b) “that category”,

substitute “gross roll-up business”.

(9) For subsection (9) substitute—

“(9) Where for the purposes of this section an amount of foreign tax is attributable to gross roll-up business, credit in respect of the foreign tax so attributable shall be allowed only against corporation tax in respect of profits chargeable under section 436A.”

50 In section 804C(14) (insurance companies: allocation of expenses etc in computations under Case I of Schedule D), for—

(a) “a category of life assurance business”, and

(b) “any category of life assurance business”,

substitute “gross roll-up business”.

51 (1) Section 804D (interpretation of section 804C in relation to life assurance business etc) is amended as follows.

(2) In subsection (1), for “a category of life assurance business” substitute “gross roll-up business”.

(3) In subsection (3), for “432F” substitute “432G”.

52 In section 804E (interpretation of section 804C in relation to other insurance business), for “any category of life assurance business” substitute “gross roll-up business”.

53 In section 806L(5) (carry forward or carry back of unrelieved foreign tax), for paragraph (b) substitute—

“(b) included in the profits of gross roll-up business chargeable under Case VI of Schedule D by virtue of section 436A.”

54 In section 808 (restriction on deduction of interest or dividends from trading income), for “436” substitute “436A”.

55 Omit Schedule 19AA (overseas life assurance fund).

56 In paragraph 2(1A)(a) of Schedule 25 (cases where section 747(3) does not apply), for “436, 439B or 441” substitute “436A”.

Finance Act 1989 (c. 26)

57 FA 1989 is amended as follows.

58 In section 88(3A) (corporation tax: policy holders' fraction of profits), for paragraph (b) substitute—

“(b) profits of the company chargeable under Case VI of Schedule D under section 436A of the Taxes Act 1988 (gross roll-up business).”

59 In section 89(1A) (policy holders' share of profits), for paragraph (a) substitute—

“(a) deducting from any profits of the company for the period chargeable under Case VI of Schedule D under section 436A of the Taxes Act 1988 so much of the Case I profits of the company for the period in respect of its life assurance business as does not exceed the amount of any profits of the company for the period so chargeable, and”.

Taxation of Chargeable Gains Act 1992 (c. 12)

60 TCGA 1992 is amended as follows.

61 In section 204(10) (policies of insurance and non-deferred annuities)—

(a) for “as defined in section 458(3)” substitute “within the meaning of Chapter 1 of Part 12”, and

(b) omit “other”.

62 In section 210B—

(a) omit paragraph (b) of subsection (6) and the word “or” before it, and

(b) in subsection (8) (disposal and acquisition of section 440A securities), in the definition of “chargeable section 440A holding”, for “(2)(a)(iii)” substitute “(2)(a)(i)”.

63 In section 212(2) (annual deemed disposal of holdings of certain assets), for the words from “pension business” to the end substitute “gross roll-up business”.

64 In section 213(1A) (spreading of gains and losses under section 212), omit the words following “general annuity business”.

Finance Act 1996 (c. 8)

65 FA 1996 is amended as follows.

66 In paragraph 12(3) of Schedule 9 (loan relationships: special computational provisions), for “440(4)(a) to (e)” substitute “440(4)(a), (d) and (e)”.

67 (1) Schedule 11 (loan relationships: special provisions for insurers) is amended as follows.

(2) In paragraph 2, for sub-paragraph (1) substitute—

“(1) Where an insurance company carries on basic life assurance and general annuity business, a separate computation, using only the non-trading credits and non-trading debits referable to that business, shall be made for the purposes of this Chapter in relation to that business.”

(3) In paragraph 3A(5)—

(a) after “(6A)” insert “, (6B)”,

(b) for “subsections (6)(a) and (6A)(a)” substitute “subsection (6)”, and

(c) omit paragraph (c) and the word “and” before it.

(4) In paragraph 4—

(a) in sub-paragraph (1), omit paragraph (b) and the word “or” before it,

(b) in sub-paragraph (2)(a), for “the relevant category of business” substitute “basic life assurance and general annuity business”,

(c) in sub-paragraph (7), for “the relevant category of business” substitute “its basic life assurance and general annuity business”,

(d) in sub-paragraph (10), for “the relevant category of business” (in both places) substitute “basic life assurance and general annuity business”, and

(e) omit sub-paragraph (16).

Capital Allowances Act 2001 (c. 2)

68 CAA 2001 is amended as follows.

69 (1) Section 255 (apportionment of allowances and charges) is amended as follows.

(2) For subsections (1) and (1A) substitute—

“(1) Except where subsection (3) applies, any allowance to which the company is entitled, and any charge to which it is liable, for a chargeable period in respect of a management asset must be apportioned between basic life assurance and general annuity business, gross roll-up business and PHI business in accordance with subsections (1A) and (1B).

(1A) The allowance or charge is to be apportioned to a category of business using the formula—

(1B) If C is nil or below nil, the allowance or charge to be apportioned to a category of business is such as is just and reasonable.”

(3) Omit subsection (2).

(4) In subsection (3)—

(a) in paragraph (a), for “section 441 of ICTA in respect of its overseas life assurance business” substitute “section 436A of ICTA (gross roll-up business)”, and

(b) in paragraph (b), for “provided outside the United Kingdom for use for the management of that business” substitute “held for the purposes of a permanent establishment outside the United Kingdom at or through which the company carries on gross roll-up business”.

70 (1) Section 256 (different giving effect rules for different categories of business) is amended as follows.

(2) In subsection (3), for paragraphs (a) to (c) substitute “section 436A of ICTA (gross roll-up business)”.

(3) In subsection (4)—

(a) for “profit” substitute “profits”,

(b) in paragraph (a), for “any particular category of business” substitute “gross roll-up business” and for “that category of business” substitute “its gross roll-up business”, and

(c) in paragraph (b), for “any particular category of business” substitute “gross roll-up business” and for “that category of business” substitute “its gross roll-up business”.

71 (1) Section 545 (investment assets) is amended as follows.

(2) In subsection (3), in the second sentence, for “sections 432ZA to 432E, or section 438B,” substitute “section 432A”.

(3) In subsection (5)—

(a) for the words from “under—” to “no allowance” substitute “under section 436A of ICTA (gross roll-up business), no allowance”, and

(b) for “the category of life assurance business in question” substitute “gross roll-up business”.

Finance Act 2001 (c. 9)

72 In paragraph 20 of Schedule 22 to FA 2001 (remediation of contaminated land), for the words from the beginning to “Schedule D,” substitute “In computing in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D the profits for any accounting period arising to an insurance company from its life assurance business, or from its gross roll-up business,”.

Finance Act 2002 (c. 23)

73 FA 2002 is amended as follows.

74 (1) Schedule 12 (tax relief for expenditure on research and development) is amended as follows.

(2) In paragraph 13, for sub-paragraph (3) substitute—

“(3) Part 3 of this Schedule has effect in relation to any gross roll-up business of the company as if the references to the trade carried on by the company were references to that business (and sub-paragraph (2) does not apply in relation to that business).”

(3) In paragraph 15(3)—

(a) for “(profits of life assurance business chargeable to tax under Case VI of Schedule D)” substitute “(gross roll-up business)”,

(b) for “a part of the life assurance business” substitute “the gross roll-up business”, and

(c) for “that part” substitute “the gross roll-up business”.

75 (1) Schedule 26 (derivative contracts) is amended as follows.

(2) In paragraph 12(2), for “section 458” substitute “Chapter 1 of Part 12”.

(3) In paragraph 29(1), for “440(4)(a) to (e)” substitute “440(4)(a), (d) and (e)”.

Income Tax (Trading and Other Income) Act 2005 (c. 5)

76 ITTOIA 2005 is amended as follows.

77 In section 473(2) (policies and contracts to which Chapter 9 applies), in the definition of “capital redemption policy”, for “as defined in section 458(3)” substitute “within the meaning of Chapter 1 of Part 12”.

78 In section 476(3) (special rules: foreign policies), in the definition of “foreign capital redemption policy”, for “431D(1)(a)” substitute “431D(1)”.

79 In Schedule 2 (transitionals and savings etc), in paragraph 118(2), for “from “other than” onwards in the definition of “annuity business”” substitute “following paragraph (b) in the definition of “life assurance business””.

Part 2 Transitional provisions

Introduction

80 (1) A loss incurred by an insurance company in a pre-commencement period may not be set off against profits of the company chargeable under section 436A of ICTA in a post-commencement period, except in accordance with this Part of this Schedule.

(2) In this Part of this Schedule—

• “the commencement period”, in relation to an insurance company, means the first period of account of the company to begin on or after 1st January 2007,

• “pre-commencement period”, in relation to an insurance company, means a period of account of the company beginning before 1st January 2007, and

• “post-commencement period”, in relation to an insurance company, means a period of account of the company beginning on or after 1st January 2007.

(3) Expressions which are—

(a) used in this Part of this Schedule in relation to a period of account, and

(b) used in Chapter 1 of Part 12 of ICTA,

have the same meaning in this Part of this Schedule in relation to that accounting period as they have in that Chapter (as that Chapter has effect in relation to that period of account).

Carry forward of unused pension business losses

81 (1) An unused pension business loss of an insurance company (see sub-paragraph (4)) is to be treated as if it were a loss incurred by the company on its gross roll-up business in the period of account immediately preceding the commencement period.

(2) Subsections (4) and (5) of section 436A of ICTA accordingly apply to the loss, but subject to sub-paragraph (3) (and to subsection (7) of that section).

(3) The amount by which the company’s profits charged under that section in a period of account is to be treated as reduced under subsection (4)(b) of that section by virtue of this paragraph must not exceed—

(4) In this paragraph “unused pension business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its pension business in any pre-commencement period as were not set off under section 436(3)(c) of ICTA against profits in any such period.

Carry forward of unused non-pension business losses

82 (1) An unused non-pension business loss of an insurance company (see paragraph 83) is to be treated as if it were a loss incurred by the company on its gross roll-up business in the period of account immediately preceding the commencement period.

(2) Subsections (4) and (5) of section 436A of ICTA accordingly apply to the loss, but subject to sub-paragraph (3) (and to subsection (7) of that section).

(3) The amount by which an insurance company’s profits charged under that section in a period of account are to be treated as reduced under subsection (4)(b) of that section is to be determined—

(a) first by giving effect to subsection (4)(b) in respect of a loss treated as incurred by the company on its gross roll-up business by virtue of paragraph 81, and

(b) then by giving effect to subsection (4)(b) in respect of a loss treated as incurred by the company on its gross roll-up business by virtue of this paragraph,

(before giving effect to subsection (4)(b) in respect of losses incurred by the company on its gross roll-up business in post-commencement periods).

83 (1) In paragraph 82 “unused non-pension business loss”, in relation to an insurance company, means the aggregate of the following amounts—

(a) any unexhausted individual savings account business loss (see sub-paragraph (2)),

(b) any unexhausted child trust fund business loss (see sub-paragraph (3)),

(c) any unexhausted life reinsurance business loss (see sub-paragraph (4)), and

(d) any unexhausted overseas life assurance business loss (see sub-paragraph (5)).

(2) In this paragraph “unexhausted individual savings account business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its individual savings account business in any pre-commencement period as were not set off by virtue of a relevant provision (see sub-paragraph (6)) against profits in any such period.

(3) In this paragraph “unexhausted child trust fund business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its child trust fund business in any pre-commencement period as were not set off by virtue of a relevant provision against profits in any such period.

(4) In this paragraph “unexhausted life reinsurance business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its life reinsurance business in any pre-commencement period as were not set off under section 439B(3)(c) of ICTA against profits in any such period.

(5) In this paragraph “unexhausted overseas life assurance business loss”, in relation to an insurance company, means so much of any losses incurred by the company on its overseas life assurance business in any pre-commencement period as were not set off under section 441(4)(b) of ICTA against profits in any such period.

(6) In this paragraph “relevant provision” means—

(a) regulation 13 of the Individual Savings Account (Insurance Companies) Regulations 1998 (S.I. 1998/1871), or

(b) regulation 11 of the Child Trust Funds (Insurance Companies) Regulations 2004 (S.I. 2004/2680).

“Section 432F(2) excesses”

84 Where there is a subsection (2) excess (within the meaning of section 432F of ICTA) for any category of business of an insurance company in the period of account immediately preceding the commencement period it shall be taken to be, or form part of, the subsection (2) excess falling to be carried forward under subsection (3) of that section (as amended by this Schedule) and used in a post-commencement period.