Finance Act 1995 (c. 4)

(The document as of February, 2008)

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29 (1) In section 9 of the Capital Allowances Act 1990 (manner of making industrial buildings allowance), in subsection (1), for "mentioned in subsections (2) to (7) below" there shall be substituted "where subsections (2) to (7) below apply".

(2) After that subsection there shall be inserted the following subsections--

" (1A) In the case of an allowance or charge made to or on a person whose interest in the building or structure is subject to a lease at the relevant time, subsection (1) above shall have effect for the purposes of income tax--

(a) as if any Schedule A business carried on by that person at any time in the chargeable period for which the allowance or charge is made were the trade in the taxing of which the allowance or charge were to be made; or

(b) where that person is not carrying on such a business at any time in that period, as if he were carrying on such a business and the business were the trade in the taxing of which the allowance or charge is to be made;

and this Act shall have effect in each case as if the Schedule A business which is deemed to be a trade for the purposes of this subsection were a trade set up and commenced on or after 6th April 1995.

(1B) In subsection (1A) above "the relevant time"--

(a) in relation to an initial allowance, means the time when the expenditure is incurred or any subsequent time before the building or structure is used for any purpose;

(b) in relation to a writing-down allowance, means the end of the chargeable period for which the allowance is made; and

(c) in relation to a balancing allowance or charge, means the time immediately before the event giving rise to the allowance or charge. "

(3) At the beginning of subsections (2), (3), (4) and (6) of that section there shall be inserted, in each case, the words "For the purposes of corporation tax"; and in subsection (6), paragraph (a) and, in paragraph (b), the words "if it is a charge to corporation tax" shall be omitted.

30 In subsection (2) of section 15 of that Act of 1990 (method of making allowances and charges in the case of buildings falling temporarily out of use), at the beginning there shall be inserted "For the purposes of corporation tax" and after that subsection there shall be inserted the following subsection--

" (2A) For the purposes of income tax any allowance or charge falling to be made to any person in respect of a building or structure during a period while the building or structure--

(a) is temporarily out of use, but

(b) is deemed by virtue of subsection (1) above still to be an industrial building or structure,

shall be made, in a case falling within subsection (2)(a) or (b) above, in accordance with section 9(1A) as if (where section 9(1A) does not otherwise apply) the building or structure were subject to a lease at the relevant time. "

31 Section 29(1) of that Act of 1990 (commercial letting of furnished holiday accommodation to be treated as trade for the purposes of Part II), except so far as it applies for the purposes of corporation tax, shall have effect as if the following paragraph were substituted for paragraph (a)--

" (a) any Schedule A business consisting in the commercial letting of furnished holiday accommodation in the United Kingdom shall be treated as a trade; and " .

32 In section 67(3) of that Act of 1990 (manner of making allowance in certain cases in respect of expenditure on thermal insulation), for "shall (notwithstanding section 73(2)), be available" there shall be substituted "shall be made to any person for the purposes of income tax in accordance with section 32(1B) and (1C) of the principal Act and, for the purposes of corporation tax, shall be available (notwithstanding section 73(2))".

33 In section 73 of that Act of 1990 (manner of making allowances and charges in respect of machinery and plant), after subsection (3) there shall be inserted the following subsection--

" (4) Subsections (2) and (3) above apply subject to the provisions of section 32(1B) of the principal Act. "

34 (1) In section 92 of that Act of 1990 (manner of making assured tenancy allowances and related charges), at the beginning there shall be inserted the following subsection-- " (A1) For the purposes of income tax any allowance or charge made to or on any person under this Part shall be made to or on him in taxing his trade--

(a) as if any Schedule A business carried on by that person were the trade in the taxing of which the allowance or charge were to be made; or

(b) where that person is not carrying on such a business, as if he were carrying on such a business and that business were the trade in the taxing of which the allowance or charge is to be made;

(2) In subsections (1) and (2) of that section, at the beginning there shall be inserted, in each case, the words "For the purposes of corporation tax"; and in subsection (2), paragraph (a) and, in paragraph (b), the words "if it is a charge to corporation tax" shall be omitted.

35 (1) After subsection (2) of section 132 of that Act of 1990 (manner of making agricultural buildings allowances and related charges), there shall be inserted the following subsection--

" (2A) In the case of an allowance or charge which falls to be made to a person for a chargeable period in which he is not carrying on a trade, subsection (2) above shall have effect for the purposes of income tax--

(a) as if any Schedule A business carried on by that person at that time were the trade in the taxing of which the allowance or charge were to be made; or

(b) where that person is not carrying on such a business at that time, as if he were carrying on such a business and the business were the trade in the taxing of which the allowance or charge is to be made;

(2) In subsections (3) and (4) of that section, at the beginning there shall be inserted, in each case, the words "For the purposes of corporation tax"; and in subsection (4), paragraph (a) and, in paragraph (b), the words "if it is a charge to corporation tax" shall be omitted.

The Taxation of Chargeable Gains Act 1992 (c. 12)

36 Section 241(3) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (commercial letting of furnished holiday accommodation to be treated as trade for certain purposes), except so far as it applies for the purposes of corporation tax, shall have effect as if the following paragraph were substituted for paragraph (a)--

" (a) any Schedule A business (within the meaning of the Taxes Act) which consists in the commercial letting of furnished holiday accommodation in the United Kingdom shall be treated as a trade; and " .

37 (1) Schedule 8 to that Act of 1992 (which includes provision excluding from the charge to capital gains tax premiums taxed under Schedule A), except so far as it applies in accordance with section 8 of that Act for the purposes of corporation tax, shall have effect as follows.

(2) In paragraph 5--

(a) in sub-paragraphs (1) and (2), for the words "income tax has become chargeable under section 34 of the Taxes Act on any amount" there shall, in each case, be deemed to be substituted "any amount is brought into account by virtue of section 34 of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act)"; and

(b) in sub-paragraph (3), for "income tax has become chargeable under section 36 of the Taxes Act (sale of land with right of re-conveyance) on any amount" there shall be deemed to be substituted "any amount is brought into account by virtue of section 36 of the Taxes Act (sale of land with right of re-conveyance) as a receipt of a Schedule A business (within the meaning of that Act)".

(3) In paragraph 6(2), for the words from "on which tax is paid" onwards there shall be deemed to be substituted "brought into account by virtue of section 35 of the Taxes Act (charge on assignment of a lease granted at an undervalue) as a receipt of a Schedule A business (within the meaning of that Act)".

(4) In paragraph 7, for the words from "income tax" to "so chargeable" there shall be deemed to be substituted "any amount is brought into account by virtue of section 34(2) and (3) of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act) which is or is treated as carried on by any person, that person".

The Finance (No. 2) Act 1992 (c. 48)

38 In paragraph 2(1) of Schedule 10 to the [1992 c. 48.] Finance (No. 2) Act 1992 (furnished accommodation), for "under Case I or Case VI of Schedule D (or both those Cases)" there shall be substituted "under Schedule A or Case I of Schedule D (or under both together)".

Section 42.

SCHEDULE 7 Commercially let property: Corporation Tax

1 In subsection (6) of section 338 of the Taxes Act 1988 (charges on income), for paragraph (d) and the words after that paragraph (allowance of interest as a charge on income in a case where it would be eligible for relief in the case of an individual) there shall be substituted the following paragraph--

" (d) the interest qualifies under section 338A for treatment in accordance with this paragraph as a charge on income. "

2 After section 338 of that Act there shall be inserted the following section--

" 338A Charges on income: loans to buy land.

(1) Subject to the following provisions of this section, interest shall qualify for treatment in accordance with section 338(6)(d) as a charge on income if--

(a) at the time when the interest is paid the company in question owns an estate or interest in land, or the property in a caravan or house-boat, in the United Kingdom or the Republic of Ireland;

(b) the interest is paid on a loan to defray money applied--

(i) in purchasing that estate, interest or property, or another estate, interest or property absorbed into, or given up to obtain, that estate, interest or property;

(ii) in improving or developing the land, or buildings on the land; or

(iii) in paying off another loan in a case in which interest on that other loan would have qualified under this section for treatment as a charge on income had the loan not been paid off (and on the assumption, if the loan was free of interest, that it carried interest);

(i) is occupied by the company and used as the only or main residence of an individual;

(ii) is occupied by the company and used otherwise than as a residence; or

(iii) is, in any period of 52 weeks comprising the time at which the interest is payable, let at a commercial rent for more than 26 weeks and, when not so let, either available for letting at such a rent or occupied and used as mentioned in sub-paragraph (i) or (ii) above;

and

(d) the interest is not interest incurred by overdrawing an account or by debiting the account of any person as the holder of a credit card or under similar arrangements.

(2) Subsections (2) and (7) of section 354 shall have effect in relation to subsection (1) above as they have effect in relation to subsection (1) of that section.

(3) Interest shall qualify under this section for treatment as a charge on income by reference to any land, caravan or house-boat which is being used as the only or main residence of an individual to the extent only that the amount on which it is payable does not exceed the following limit, that is to say, the qualifying maximum for the year of assessment in which the payment is made reduced by the amount on which interest is payable by the company under any earlier loans so far as they--

(a) are loans the interest on which qualifies under this section for treatment as a charge on income; and

(b) fall within subsection (1)(b) above in respect of the same land, caravan or house-boat.

(4) Accordingly--

(a) if the amount on which interest is payable under any loan exceeds the limit specified in subsection (3) above, so much only of the interest that would otherwise qualify under this section shall so qualify as bears to the whole of that interest the same proportion as that part of that amount that does not exceed the limit bears to the whole of that amount; and

(b) if the amount on which interest is payable under the earlier loans mentioned in that subsection is equal to or exceeds the qualifying maximum for the year of assessment in which the interest is paid, none of the interest on the later loan shall qualify under this section for treatment as a charge on income.

(5) Subsections (1A) and (2) of section 355 shall have effect for the purposes of this section in relation to the condition in paragraph (c) of subsection (1) above as they have effect in relation to the condition referred to in section 355(1A)(a).

(6) Interest shall not qualify under this section for treatment as a charge on income by reference to any case in which--

(a) the land, caravan or house-boat is used as the only or main residence of an individual, and

(b) the interest is paid on a home improvement loan,

unless the loan was made before 6th April 1988; and subsections (2B) and (2C) of section 355 shall apply for the purposes of this subsection as they apply for the purposes of subsection (2A) of that section.

(7) Interest shall not qualify by virtue of subsection (1)(b)(i) above for treatment as a charge on income--

(a) where the purchaser has, since 15th April 1969, disposed of an estate or interest in the land, or the property in the caravan or house-boat, in question and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan or to allow interest on the loan to be treated as a charge on income; or

(b) where the purchaser is directly or indirectly purchasing from a person who is connected with him and the price substantially exceeds the value of what is acquired;

and interest shall not qualify by virtue of subsection (1)(b)(ii) above for such treatment where the money spent is received directly or indirectly by a person connected with the person spending it and substantially exceeds the value of the work done.

(8) For the purposes of subsection (7) above one person is connected with another if he is so connected within the terms of section 839.

(9) In this section--

"caravan" and "house-boat" have the same meanings as are given to them for the purposes of sections 354 to 366 by subsection (1) of section 367; and
"the qualifying maximum" has the same meaning as is given to it for the purposes of sections 356A to 357 by subsection (5) of that section;

and subsections (2) to (4) of section 367 shall apply with the necessary modifications for the determination of any question whether interest qualifies under this section for treatment as a charge on income as they apply for the determination of any question whether interest is eligible for relief under section 353 by virtue of section 354.

(10) References in this section to an estate or interest do not include references--

(a) to a rentcharge or, in Scotland, a superiority or the interest of a creditor in a contract of ground annual; or

(b) to the interest of a chargee or mortgagee or, in Scotland, the interest of a creditor in a charge or security of any kind over land. "

Section 51.

SCHEDULE 8 Life assurance business

Part I General amendments

Classes of life assurance business

1 In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to insurance companies), insert the following at the appropriate places in alphabetical order--

"pension business" has the meaning given by section 431B;
"life reinsurance business" has the meaning given by section 431C;
"overseas life assurance business" has the meaning given by section 431D;
"basic life assurance and general annuity business" has the meaning given by section 431F;
"reinsurance business" includes retrocession business.

2 After section 431A of the Taxes Act 1988 insert--

" Classes of life assurance business

431B Meaning of "pension business".

(1) In this Chapter "pension business" means so much of a company's life assurance business as is referable to contracts of the following descriptions or to the reinsurance of liabilities under such contracts.

(2) The descriptions of contracts are--

(a) any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to income tax in respect of relevant earnings (as defined in section 623(1) and (2)) from a trade, profession, vocation, office or employment carried on or held by him, being a contract approved by the Board under section 620 or a substituted contract within the meaning of section 622(3);

(b) any contract (including a contract of insurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme as defined in Chapter I of Part XIV, being a contract so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

(d) any annuity contract entered into for the purposes of--

(i) a scheme which is approved or is being considered for approval under Chapter I of Part XIV;

(ii) a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV; or

(iii) a fund to which section 608 applies,

being a contract which is made with the persons having the management of the scheme or fund, or those persons and a member of or contributor to the scheme or fund, and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(e) any annuity contract which is entered into in substitution for a contract within paragraph (d) above and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(f) any contract with the trustees or other persons having the management of a scheme approved under section 620 or, subject to subsection (5) below, of a superannuation fund which was approved under section 208 of the 1970 Act, being a contract which--

(i) was entered into for the purposes only of that scheme or fund or, in the case of a fund part only of which was approved under section 208, for the purposes only of that part of that fund, and

(ii) (in the case of a contract entered into or varied after 1st August 1956) is so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme or fund (or the relevant part of the fund).

(3) For the purposes of subsection (2)(d) and (e) above "relevant benefits" means relevant benefits as defined by section 612(1) which correspond--

(a) where subsection (2)(d)(i) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(i), with benefits that could be provided by a scheme approved under Chapter I of Part XIV;

(b) where subsection (2)(d)(ii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(ii), with benefits that could be provided by a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV;

(c) where subsection (2)(d)(iii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a fund falling within subsection (2)(d)(iii), with benefits that could be provided by a fund to which section 608 applies.

(4) For the purposes of subsection (3)(a), (b) or (c) above a hypothetical scheme or fund (rather than any particular scheme or fund), and benefits provided by a scheme or fund directly (rather than by means of an annuity contract), shall be taken.

(5) Subsection (2)(f) above shall not apply to a contract where the fund in question was approved under section 208 of the 1970 Act unless--

(a) immediately before 6th April 1980 premiums paid under the contract with the trustees or other persons having the management of the fund fell within section 323(4) of that Act (premiums referable to pension business); and

(b) the terms on which benefits are payable from the fund have not been altered since that time; and

(6) In subsection (5) above "premium" includes any consideration for an annuity.

431C Meaning of "life reinsurance business".

(1) In this Chapter "life reinsurance business" means reinsurance of life assurance business other than pension business or business of any description excluded from this section by regulations made by the Board.

(2) Regulations under subsection (1) above may describe the excluded business by reference to any circumstances appearing to the Board to be relevant.

431D Meaning of "overseas life assurance business".

(1) In this Chapter "overseas life assurance business" means life assurance business, other than pension business or life reinsurance business, which--

(a) in the case of life assurance business other than reinsurance business, is business with a policy holder or annuitant not residing in the United Kingdom, and

(b) in the case of reinsurance business, is--

(i) reinsurance of life assurance business with a policy holder or annuitant not residing in the United Kingdom, or

(ii) reinsurance of business within sub-paragraph (i) above or this sub-paragraph.

(2) Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is an individual if--

(a) the policy holder or annuitant is not beneficially entitled to the rights conferred by the policy or contract for the business, or

(b) any benefits under the policy or contract for the business are or will be payable to a person other than the policy holder or annuitant (or his personal representatives) or to a number of persons not including him (or them).

(3) For the purposes of subsection (2) above any nomination by a policy holder or annuitant of an individual or individuals as the recipient or recipients of benefits payable on death shall be disregarded.

(4) Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is not an individual.

(5) Subsections (2) and (4) above do not apply if--

(a) the rights conferred by the policy or contract for the business are held subject to a trust,

(b) the settlor does not reside in the United Kingdom, and

(6) In subsection (5) above--

(a) "settlor" means the person, or (where more than one) each of the persons, by whom the trust was directly or indirectly created (and for this purpose a person shall, in particular, be regarded as having created the trust if he provided or undertook to provide funds directly or indirectly for the purposes of the trust or made with any other person a reciprocal arrangement for that other person to create the trust),

(b) "beneficiary" means any person who is, or will or may become, entitled to any benefit under the trust (including any person who may become so entitled on the exercise of a discretion by the trustees of the trust), and

and for the purpose of that subsection an individual who is a trustee (of any trust) shall not be regarded as an individual.

(7) Subsections (2) and (4) above do not apply if the policy or contract for the business was effected solely to provide benefits for or in respect of--

(a) persons all, or all but an insignificant number, of whom are relevant overseas employees, or

(b) spouses, widows, widowers, children or dependants of such persons.

(8) In subsection (7) above "relevant overseas employees" means persons who are not residing in the United Kingdom and are--

(a) employees of the policy holder or annuitant,

(b) employees of a person connected with the policy holder or annuitant, or

and section 839 applies for the purposes of this subsection.

431E Overseas life assurance business: regulations.

(1) The Board may by regulations make provision for giving effect to section 431D.

(2) Such regulations may, in particular--

(a) provide that, in such circumstances as may be prescribed, any prescribed issue as to whether business is or is not overseas life assurance business (or overseas life assurance business of a particular kind) shall be determined by reference to such matters (including the giving of certificates or undertakings, the giving or possession of information or the making of declarations) as may be prescribed,

(b) require companies to obtain certificates, undertakings, information or declarations from policy holders or annuitants, or from trustees or other companies, for the purposes of the regulations,

(c) make provision for dealing with cases where any issue such as is mentioned in paragraph (a) above is (for any reason) wrongly determined, including provision allowing for the imposition of charges to tax (with or without limits on time) on the insurance company concerned or on the policy holders or annuitants concerned,

(d) require companies to supply information and make available books, documents and other records for inspection on behalf of the Board, and

(e) make provision (including provision imposing penalties) for contravention of, or non-compliance with, the regulations.

(3) The regulations may--

(a) make different provision for different cases, and

(b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

431F Meaning of "basic life assurance and general annuity business".

In this Chapter "basic life assurance and general annuity business" means life assurance business (including reinsurance business) other than pension business, life reinsurance business or overseas life assurance business. " .

3 In section 432C(2) of the Taxes Act 1988 after "assets of the overseas life assurance fund" insert "or land in the United Kingdom linked to overseas life assurance business".

4 (1) Section 438 of the Taxes Act 1988 is amended as follows.

(2) In subsection (1) for "life assurance fund and separate annuity fund, if any" substitute "long term business fund".

(3) In subsection (8) for "431(4)(c)" substitute "431B(2)(c)".

5 (1) Section 440 of the Taxes Act 1988 is amended as follows.

(2) In subsection (3) for "paragraphs (a) to (d)" substitute "paragraphs (a) to (e)".

(3) For subsection (4) substitute--

" (4) The categories referred to in subsections (1) to (3) above are--

(a) assets linked solely to pension business;

(b) assets linked solely to life reinsurance business;

(d) assets linked solely to basic life assurance and general annuity business;

(e) assets of the long term business fund not within any of the preceding paragraphs;

(f) other assets. " .

6 In section 440A of the Taxes Act 1988, in subsection (2) for paragraphs (a) and (b) substitute--

" (a) so many of the securities as are identified in the company's records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of--

(i) pension business, or

(ii) life reinsurance business, or

(iii) basic life assurance and general annuity business,

shall be treated for the purposes of corporation tax as a separate holding linked solely to that business, " .

7 In section 76(1)(d) of the Taxes Act 1988 after "pension business" insert ", life reinsurance business".

8 In Schedule 19AA to the Taxes Act 1988, in the closing words of paragraph 5(5) for "pension business or basic life assurance business" substitute "pension business, life reinsurance business or basic life assurance and general annuity business".

9 (1) The [1992 c. 12.] Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) In section 212(2) after "pension business" insert "or life reinsurance business".

(3) In section 214A(11)(a) for "any pension business or" substitute "any pension business or life reinsurance business of that company or to".

10 (1) Schedule 18 to the Finance Act 1994 is amended as follows.

(2) In paragraph 1(5) for "life assurance fund and separate annuity fund, if any," substitute "long term business fund".

(3) In paragraph 1(6) after "pension business" insert ", life reinsurance business".

(4) In paragraph 4 omit the definition of "life assurance business" and after the definition of "non-life mutual business" insert-- " and other expressions have the same meaning as in Chapter I of Part XII of the Taxes Act 1988. " .

Linked assets

11 (1) In section 431(2) of the Taxes Act 1988, for the definition of "linked assets" substitute--

" "linked assets", and related expressions, shall be construed in accordance with section 432ZA; " .

(2) After section 432 of the Taxes Act 1988 insert--

" 432ZA Linked assets.

(1) In this Chapter "linked assets" means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined.

(2) Linked assets shall be taken--

(a) to be linked to long term business of a particular category if the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category; and

(b) to be linked solely to long term business of a particular category if all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.

(3) Where an asset is linked to more than one category of long term business, a part of the asset shall be taken to be linked to each category; and references in this Chapter to assets linked (but not solely linked) to any category of business shall be construed accordingly.

(4) Where subsection (3) above applies, the part of the asset linked to any category of business shall be a proportion determined as follows--

(a) where in the records of the company values are shown for the asset in funds referable to particular categories of business, the proportion shall be determined by reference to those values;

(b) in any other case the proportion shall be equal to the proportion which the total of the linked liabilities of the company referable to that category of business bears to the total of the linked liabilities of the company referable to all the categories of business to which the asset is linked.

(5) For the purposes of sections 432A to 432F--

(a) income arising in any period from assets linked but not solely linked to a category of business,

(b) gains arising in any period from the disposal of such assets, and

shall be treated as arising to that category of business in the proportion which is the mean of the proportions determined under subsection (4) above at the beginning and end of the period.

(6) In this section "linked liabilities" means liabilities in respect of benefits to be determined by reference to the value of linked assets.

(7) In the case of a policy or contract the effecting of which constitutes a class of life assurance business the fact that it also constitutes long term business other than life assurance business shall be disregarded for the purposes of this section unless the benefits to be provided which constitute long term business other than life assurance business are to be determined by reference to the value of assets. " .

12 (1) In the following provisions for "linked solely" substitute "linked"--

(a) section 432C(1), section 432D(1) (twice) and section 432E(3)(a) and (b) and (6)(a) of the Taxes Act 1988;

(b) paragraph 1(5)(b)(i) of Schedule 19AB to the Taxes Act 1988;

(2) The amendments made by paragraph 11 above do not affect the meaning of "linked assets", and related expressions, in sections 214 and 214A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (transitional provisions relating to changes made in 1990 and 1991).

(3) In section 432 of the Taxes Act 1988 for "class" in each place where it occurs substitute "category".

13 (1) Section 432A of the Taxes Act 1988 is amended as follows.

(2) For subsections (1) to (3) substitute--

" (1) This section has effect where in any period an insurance company carries on more than one category of business and it is necessary for the purposes of the Corporation Tax Acts to determine in relation to the period what parts of--

(a) income arising from the assets of the company's long term business fund, or

(b) gains or losses accruing on the disposal of such assets,

are referable to any category of business.

(2) The categories of business referred to in subsection (1) above are--

(a) pension business;

(b) life reinsurance business;

(d) basic life assurance and general annuity business which is ordinary life assurance business;

(e) basic life assurance and general annuity business which is industrial assurance business; and

(f) long term business other than life assurance business.

(3) Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business (apart from overseas life assurance business) shall be referable to that category of business. " .

(3) In subsections (5) and (6)(b)(i) for "any of the appropriate categories" substitute "any category".

(4) For subsection (7) substitute--

" (7) For the purposes of subsections (5) and (6) above--

(a) income, gains or losses are directly referable to a category of business if referable to that category by virtue of subsection (3) or (4) above, and

(b) assets are directly referable to a category of business if income arising from the assets is, and gains or losses accruing on the disposal of the assets are, so referable by virtue of subsection (3) above. " .

(5) For subsection (9) substitute--

" (9) Where a company carries on overseas life assurance business--

(a) references in this section to liabilities do not include liabilities of that business, and

(b) the appropriate part of the investment reserve as defined by paragraph 4(2)(a) of Schedule 19AA shall be left out of account in determining that reserve for the purposes of this section. " .

14 (1) Section 432C of the Taxes Act 1988 is amended as follows.

(2) In subsection (1) for the words from "life assurance business" to "general annuity business" substitute "pension business, life reinsurance business, basic life assurance and general annuity business or long term business other than life assurance business".

(3) In subsection (3) for "any of the appropriate categories of business" substitute "any category of business".

(4) In subsection (4)(b) for "any of the appropriate categories of business" substitute "any category of business".

(5) In subsection (5), omit paragraph (a).

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