Office of Public Sector Information
SCHEDULE 33 continued
(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 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—
(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 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.
(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 insert—
(1) This section applies where—
(a) an insurance business transfer scheme has effect to transfer business consisting of or including basic life assurance and 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 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 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 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).
(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 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.
(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 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 shall be determined by the Special Commissioners who shall 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 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 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 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,
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—
(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 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 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 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,
B is the number of days in the period beginning with the day of the transfer and ending with the period of account, and
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.
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—
“(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 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 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 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—
“(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
(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 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.
25 In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to 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
(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 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 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;”.
28 Paragraphs 25 to 27 have effect in relation to periods of account beginning on or after 1st January 2003.
29 In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to insurance companies), after the definition of “periodical return” insert—
““period of account” means the period covered by a periodical return;”.
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 below”.
31 In the Finance Act 1989, after section 90 insert—
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 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—
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.”.
Finance Act 2003