Finance Act 1995 (c. 4)

(The document as of February, 2008)

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(2) The Board may make provision by regulations as to the amount of investment return to be treated as accruing in each accounting period during which the reinsurance arrangement is in force.

(3) The regulations may, in particular, provide that the investment return to be treated as accruing to the company in respect of a policy or contract in any accounting period shall be calculated by reference to--

(a) the aggregate of the sums paid by the company to the reinsurer during that accounting period and any earlier accounting periods by way of premium or otherwise;

(b) the aggregate of the sums paid by the reinsurer to the company during that accounting period and any earlier accounting periods by way of commission or otherwise;

(c) the aggregate amount of the net investment return treated as accruing to the company in any earlier accounting periods, that is to say, net of tax at such rate as may be prescribed; and

(d) such percentage rate of return as may be prescribed.

(4) The regulations shall provide that the amount of investment return to be treated as accruing to the company in respect of a policy or contract in the final accounting period during which the policy or contract is in force is the amount, ascertained in accordance with regulations, by which the profit over the whole period during which the policy or contract, and the reinsurance arrangement, were in force exceeds the aggregate of the amounts treated as accruing in earlier accounting periods.

If that profit is less than the aggregate of the amounts treated as accruing in earlier accounting periods, the difference shall go to reduce the amounts treated by virtue of this section as arising in that accounting period from other policies or contracts, and if not fully so relieved may be carried forward and set against any such amounts in subsequent accounting periods.

(5) Regulations under this section--

(a) may exclude from the operation of this section such descriptions of insurance company, such descriptions of policies or contracts and such descriptions of reinsurance arrangements as may be prescribed;

(b) may make such supplementary provision as to the ascertainment of the investment return to be treated as accruing to the company as appears to the Board to be appropriate, including provision requiring payments made during an accounting period to be treated as made on such date or dates as may be prescribed; and

(6) In this section "prescribed" means prescribed by regulations under this section. " .

Part II Application of provisions to overseas life insurance companies

35 (1) After paragraph 5 of Schedule 19AC to the Taxes Act 1988 insert--

" 5A (1) Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and the distribution (or part of the distribution)--

(a) would fall within paragraph (a), (aa) or (ab) of section 11(2) but for the exclusion contained in that paragraph, and

(b) is referable to life assurance business, but not to overseas life assurance business,

then the recipient shall be treated for the purposes of the Corporation Tax Acts as entitled to such a tax credit in respect of the distribution (or part of the distribution) as it would be entitled to under section 231 if it were resident in the United Kingdom.

(2) Where part only of a qualifying distribution would fall within paragraph (ab) of section 11(2) but for the exclusion contained in that paragraph, the tax credit to which the recipient shall be treated as entitled by virtue of sub-paragraph (1) above is the proportionate part of the tax credit to which the recipient would be so treated as entitled in respect of the whole of the distribution.

5B (1) An overseas life insurance company may, on making a claim for the purpose, require that any UK distribution income for an accounting period shall for all or any of the purposes mentioned in sub-paragraph (2) below be treated as if it were a like amount of profits chargeable to corporation tax; and where it does so--

(a) the provisions mentioned in that sub-paragraph shall apply to reduce the amount of the UK distribution income, and

(b) the company shall be entitled to have paid to it the amount of the tax credits comprised in the amount of UK distribution income which is so reduced.

(2) The purposes for which a claim may be made under this paragraph are those of--

(a) the setting of trading losses against total profits under section 393A(1);

(b) the deduction of charges on income under section 338 or paragraph 5 of Schedule 4;

(d) the setting of certain capital allowances against total profits under section 145(3) of the 1990 Act.

(3) Subsections (3), (4) and (8) of section 242 shall apply for the purposes of a claim under this paragraph as they apply for the purposes of a claim under that section.

(4) In this paragraph "UK distribution income" means income of an overseas life insurance company which consists of a distribution (or part of a distribution) in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution (or part) and the amount of that credit).

5C (1) This paragraph applies to income from the investments of an overseas life insurance company attributable to the basic life assurance and general annuity business of the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2) Where, in computing the income to which this paragraph applies, any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so that it bears to the amount of relief which would be granted apart from this sub-paragraph the same proportion as the amount of that income excluding that interest bears to the amount of that income including that interest. " .

(2) In paragraph 2(1) of Schedule 19AC to the Taxes Act 1988, for "section 444D" substitute "paragraph 5B of Schedule 19AC".

(3) After paragraph 6(4) of that Schedule insert--

" (4A) In that subsection the following definition shall be inserted at the appropriate place--

"UK distribution income" has the meaning given by paragraph 5B(4) of Schedule 19AC; " .

(4) In section 475(6) of the Taxes Act 1988 for "section 444E(2)" (twice) substitute "paragraph 5C(2) of Schedule 19AC".

(5) In paragraph 2(2) of Schedule 8A to the Finance Act 1989 for "section 444D(4) of the Taxes Act 1988" substitute "paragraph 5B(4) of that Schedule".

36 In paragraph 5(1) of Schedule 19AC to the Taxes Act 1988, in the notionally inserted subsection (6B)--

(a) for "242" substitute "section 242", and

(b) for "444D" substitute "paragraph 5B of Schedule 19AC".

37 In paragraph 6 of Schedule 19AC to the Taxes Act 1988, omit sub-paragraphs (3) and (4).

38 After paragraph 6 of Schedule 19AC to the Taxes Act 1988 insert--

" 6A In section 431D(1), the words "carried on through a branch or agency in the United Kingdom by an overseas life insurance company" shall be treated as inserted after the words "means life assurance business". " .

39 For paragraph 7 of Schedule 19AC to the Taxes Act 1988 substitute--

" 7 (1) Section 432A has effect as if the references in subsections (3), (6) and (8) to assets were to such of the assets concerned as are--

(a) section 11(2)(b) assets,

(b) section 11(2)(c) assets, or

(c) assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business;

and as if the references in subsections (6) and (8) to liabilities were to such of the liabilities concerned as are attributable to the branch or agency.

Expressions used in this sub-paragraph to which a meaning is given by section 11A have that meaning.

(2) For the purposes of section 432A as it applies in relation to an overseas life insurance company, income which falls within section 11(2)(aa) or (ab), and chargeable gains or allowable losses which fall within section 11(2)(d) or (e)--

(a) shall not be referable to long term business other than life assurance business; and

(b) shall be apportioned under subsections (5) and (6) of that section separately from other income, gains and losses.

(3) For the purposes of the application of section 432A(6) in relation to such income, gains or losses as are mentioned in sub-paragraph (2) above--

(a) "liabilities" does not includes liabilities of the long term business other than life assurance business;

(b) the value of assets directly referable to any category of business does not include assets directly referable to long term business other than life assurance business; and

(c) the reference in section 432A(6)(b)(ii) to the investment reserve shall be construed as a reference to so much of the investment reserve as is not referable to long term business other than life assurance business. " .

40 (1) Paragraph 8 of Schedule 19AC to the Taxes Act 1988 is amended as follows.

(2) In sub-paragraph (1)--

(a) for "paragraph 1" substitute "paragraph 1C"; and

(b) for "the word "1982"" substitute "the words "brought into account, within the meaning of that section,"".

(3) In sub-paragraph (2) for "paragraph 1(6), (7) or (8)" substitute "any provision of paragraph 1C".

(4) For sub-paragraph (3) substitute--

" (3) Subsection (3) of section 432B shall have effect as if after the words "with which an account is concerned" there were inserted the words "or in respect of which items are treated as brought into account by virtue of paragraph 1C of Schedule 8A to the Finance Act 1989"; and that subsection and sections 432C to 432E shall have effect as if the reference to relevant business were to relevant business of the branch or agency in the United Kingdom through which the company carries on life assurance business. " .

41 In paragraph 9(1) of Schedule 19AC to the Taxes Act 1988 in the notionally inserted section 434(1A)--

(a) after "UK distribution income of" insert ", or foreign income dividends arising to,"; and

(b) for the words from "as part of the profit" to the end substitute-- " --

(a) in any computation of profits for the purposes of section 89(7) of the Finance Act 1989, or

(b) in any computation for the purposes of section 76(2) of the tax that would have been paid if the company had been charged to tax under Case I of Schedule D in respect of its life assurance business. " .

42 After paragraph 9 of Schedule 19AC to the Taxes Act 1988 insert--

" 9A In section 434A(1)--

(a) the words "UK distribution income" shall be treated as substituted for "franked investment income", and

(b) the words "an overseas life insurance company" shall be treated as substituted for "a company resident in the United Kingdom".

9B In section 434B the following subsection shall be treated as inserted after subsection (2)--

" (3) An overseas life insurance company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to its life assurance business. " .

9C In its application to an overseas life insurance company section 434D(4) shall have effect as if the references to liabilities were only to such liabilities as are attributable to the branch or agency in the United Kingdom through which the company carries on the business concerned. " .

43 (1) In paragraph 10(1) of Schedule 19AC to the Taxes Act 1988, in the notionally inserted section 438(3A)--

(a) for "subsection (6)" substitute "subsections (6) and (6B)";

(b) after "UK distribution income of " insert ", or foreign income dividends arising to,";

(d) after "pension business" insert-- " , or

(b) where the company is charged to tax in respect of its life assurance business under Case I of Schedule D, in computing the profits of that business. " .

(2) In paragraph 10(2) for "subsections (6) and (6A)" substitute "subsections (6), (6A), (6D) and (6E)".

44 After paragraph 10 of Schedule 19AC to the Taxes Act 1988 insert--

" 10A In section 439B the following subsection shall be treated as inserted after subsection (7) of that section--

" (7A) In ascertaining whether or to what extent the company has incurred a loss on its life reinsurance business, UK distribution income of an overseas life insurance company shall be taken into account (notwithstanding anything in paragraph (a), (aa) or (ab) of section 11(2)) as part of the profits of that business. " .

10B (1) Where the company mentioned in section 440(1) is an overseas life insurance company, section 440 has effect with the following modifications.

(2) Subsection (4) shall be treated as if--

(a) in paragraphs (a), (b), (d), (e) and (f) the words "UK assets" were substituted for the words "assets"; and

(b) at the end there were inserted--

" (g) section 11C assets;

(h) non-UK assets. " .

(3) The following subsection shall be treated as inserted at the end of the section--

" (7) For the purposes of this section--

(a) UK assets are--

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business;

(b) section 11C assets are assets--

(i) (in a case where section 11C (other than subsection (9)) applies) of the relevant fund, other than UK assets; or

(ii) (in a case where that section including that subsection applies) of the relevant funds, other than UK assets;

and any expression used in this subsection to which a meaning is given by section 11A has that meaning. " .

(4) Where one of the companies mentioned in section 440(2) is an overseas life insurance company, section 440(2)(b) shall have effect as if for the words "is within another of those categories" there were substituted "is not within the corresponding category".

(5) Where the transferor company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately before the acquisition, with the modifications in sub-paragraphs (2) and (3) above.

(6) Where the acquiring company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately after the acquisition, with the modifications in sub-paragraphs (2) and (3) above.

10C (1) In section 440B the following subsection shall be treated as substituted for subsection (3)--

" (3) Section 440(1) and (2) have effect as if the only categories specified in subsection (4) of that section were--

(a) UK assets of the long term business fund,

(b) other UK assets,

(d) non-UK assets,

(those expressions having the meanings given by section 440(7)). " .

(2) The following subsection shall be treated as substituted for subsection (4) of that section--

" (4) Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted--

" (a) so many of the UK 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 long term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business,

(b) any remaining UK securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph,

(c) the section 11C securities shall be treated for those purposes as a separate holding which is not of any of the descriptions mentioned in the preceding paragraphs, and

(d) the non-UK securities shall be treated for those purposes as a separate holding which is not of any of the descriptions mentioned in the preceding paragraphs. " . " . " .

45 (1) Paragraph 11 of Schedule 19AC to the Taxes Act 1988 is amended as follows.

(2) For sub-paragraph (1) substitute--

" (1) In section 440A(2), in paragraph (a) the words "UK securities" shall be treated as substituted for the word "securities" in the first place where it occurs. " .

(3) Omit sub-paragraph (2).

(4) In sub-paragraph (5) renumber the notionally inserted subsection as (6A).

46 After paragraph 11 of Schedule 19AC to the Taxes Act 1988 insert--

" 11A (1) In section 441A, the following subsection shall be treated as inserted after subsection (1)--

" (1A) The exclusion from section 11(2)(a), (aa) and (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to a distribution in respect of any asset of the overseas life assurance fund of an overseas life insurance company. " .

(2) The following subsection shall be treated as substituted for subsections (2) and (3) of that section--

" (3) An overseas life insurance company shall be entitled to a tax credit in respect of a distribution which--

(a) is a distribution in respect of an asset of the company's overseas life assurance fund, and

(b) is received from a company resident in the United Kingdom,

if and to the extent that regulations made by the Board so provide. " .

11B In section 442A the following subsection shall be treated as inserted after subsection (6)--

" (7) In the case of an overseas life insurance company, the investment return treated as accruing under this section in any accounting period in relation to a policy or contract shall be treated as chargeable profits within section 11(2) of the Taxes Act 1988 where the policy or contract is one which in that accounting period gives rise, or but for the reinsurance arrangement would give rise, to such profits. " . "

47 In paragraph 12(1) of Schedule 19AC to the Taxes Act 1988, for "section 444D" substitute "paragraph 5B of Schedule 19AC".

48 After paragraph 14 of Schedule 19AC to the Taxes Act 1988 insert--

" 14A (1) In Schedule 19AA, paragraph 5(5)(c) (and the reference to it in paragraph 2(3) of that Schedule) shall be treated as omitted.

(2) The following paragraph shall be treated as inserted at the end of that Schedule--

" 6 In its application to an overseas life insurance company this Schedule shall have effect as if--

(a) the references in paragraphs 2 and 3 to assets of the long term business fund were to such of the assets as are--

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business; and

(b) the references in paragraphs 2 and 4 to the liabilities of the company's long term business were to such of those liabilities as are attributable to the branch or agency;

and any expression used in this paragraph to which a meaning is given by section 11A has that meaning. " . " .

49 (1) Schedule 8A to the [1989 c. 26.] Finance Act 1989 is amended as follows.

(2) For paragraph 1 substitute--

" 1 (1) In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs 1A to 1C below.

(2) In those paragraphs--

(a) any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and

(b) any expression to which a meaning is given by section 11A of that Act has that meaning.

1A (1) The reference in section 83(2)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2) The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) shall be construed as a reference to such of the assets concerned--

(a) as are--

(i) section 11(2)(b) assets;

(ii) section 11(2)(c) assets; or

(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets--

(i) (in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii) (in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(3) In determining for the purposes of section 83(2) (as it applies apart from subsection (3) of that section) whether there has been any increase or reduction in the value (whether realised or not) of assets--

(a) no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (2) above; and

(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

For the purposes of paragraph (b) above the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section 11C of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset.

(4) For the reference in section 83(3) to any amount being transferred into the company's long term business fund from other assets of the company, or otherwise added to that fund, there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company's United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes.

The amount of the increase in value under section 83(2)(b), as it applies in relation to such a transfer, shall be taken to be an amount equal to the value of the assets transferred.

1B The references in section 83A to the company's long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required.

1C (1) Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period.

(2) Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(3) Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(4) Where in any period of account any such transfer is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made. " .

(3) In paragraph 2(7) for the words following paragraph (b) substitute-- " and in paragraph (b) above "the specified portion" has the same meaning as in paragraph 1A(3)(b) above. " .

(4) After paragraph 2(7) insert--

" (7A) For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning. " .

Part III Supplementary provisions

Penalties

50 In the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to comply with notice or to furnish information etc.), the entry "regulations under section 431E(1) or 441A(3);" shall be inserted--

(a) in the first column after the entry relating to regulations under section 333 of the Taxes Act 1988, and

(b) in the second column after the entry relating to section 375(5) of that Act.

Miscellaneous

51 (1) The Taxes Act 1988 is amended as follows.

(2) Before section 432 insert the heading "Separation of different categories of business".

(3) In the sidenote to section 432 for "classes" substitute "categories".

(4) Before section 434 insert the heading "Miscellaneous provisions relating to life assurance business".

(5) In the sidenote to section 436 for "Annuity business and pension business" substitute "Pension business".

Commencement

52 The amendment made by paragraph 43(2) above shall be deemed always to have had effect.

53 (1) The amendments made by paragraph 17 above have effect in relation to accounting periods ending on or after 1st January 1994.

(2) In the first accounting period of a company ending on or after 1st January 1994 in which the subsection (3) figure for any category of business exceeds the subsection (2) figure, the subsection (2) figure shall be treated as increased by an amount not exceeding the amount or aggregate amount of any subsection (2) excesses in relation to that category of business for accounting periods beginning on or after 1st January 1990 and ending before 1st January 1994, but not so as to produce a subsection (2) excess for that period.

For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.

Expressions used in this sub-paragraph have the same meaning as in section 432F of the Taxes Act 1988.

(3) Where a transfer mentioned in section 444A of the Taxes Act 1988 took place at the end of an accounting period of the transferor beginning on or after 1st January 1990 and ending before 1st January 1994, section 444A(3A) shall have effect in relation to the transfer as if it read--

" (3A) Any subsection (2) excess (within the meaning of section 432F(2)) of the transferor for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to increase the subsection (2) figure (within the meaning of section 432F(1)) of the transferor in the first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeded the subsection (2) figure--

(a) shall, instead, be treated as a subsection (2) excess of the transferee, and

(b) shall be taken into account to increase the subsection (2) figure of the transferee in its first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeds the subsection (2) figure, but not so as to produce a subsection (2) excess for that period,

in relation to the revenue account of the transferee dealing with or including the business transferred.

54 The amendment made by paragraph 22 above applies in relation to distributions made by an insurance company in any accounting period ending after 30th September 1993.

55 (1) Subject to sub-paragraphs (2) and (3) below, the amendments made by the following provisions of this Schedule have effect in relation to accounting periods beginning on or after 1st November 1994--

paragraph 1 so far as relating to the definition of "overseas life assurance business",
paragraph 2 so far as relating to sections 431D and 431E of the Taxes Act 1988,
paragraphs 3, 25, 30 to 33, 37, 38 and 45(1) and (3),
paragraph 46 so far as relating to paragraph 11A of Schedule 19AC to the Taxes Act 1988, and
paragraphs 48 and 50.

(2) Where the policy or contract for any life assurance business was made before 1st November 1994, the amendments made by this Schedule (and the repeals consequential on those amendments) shall not have effect for determining whether the business is overseas life assurance business.

(3) Where the policy or contract for any life assurance business effected by a company resident in the United Kingdom at or through a branch or agency outside the United Kingdom was made before 29th November 1994, subsections (2) to (8) of section 431D of the Taxes Act 1988 shall not have effect for determining whether the business is overseas life assurance business.

56 The amendments made by paragraphs 41(a) and 43(1) above have effect in relation to foreign income dividends paid after 29th November 1994.

57 (1) Except as provided by paragraphs 52 to 56 above, and subject to sub-paragraph (2) below, the amendments made by provisions of this Schedule have effect in relation to accounting periods beginning on or after 1st January 1995.

(2) Section 442A of the Taxes Act 1988 does not apply in relation to the reinsurance of a policy or contract where the policy or contract was made, and the reinsurance arrangement effected, before 29th November 1994.

58 Any power to make regulations exercisable by virtue of an amendment made by any provision of this Schedule may be exercised so as to make provision having effect in relation to any accounting period in relation to which that provision has effect in accordance with paragraph 55 or 57 above.

Section 53.

SCHEDULE 9 Transfer of Life Insurance Business

Consequential amendment of references to sanctioned transfers

1 (1) In the enactments specified in sub-paragraph (2) below, for the words "section 49 of the [1982 c. 50.] Insurance Companies Act 1982", in each place where they occur, there shall be substituted "Part I of Schedule 2C to the Insurance Companies Act 1982".

(2) The enactments mentioned in sub-paragraph (1) above are--

(a) section 12(7A) of the Taxes Act 1988 (accounting periods);

(b) sections 440(2)(a) and 444A(1) of that Act (transfer of assets or business of insurance company);

(d) sections 211(1), 213(5), 214(11) and 214A(7) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (transfers of business).

(3) In section 444A(3)(b) of the Taxes Act 1988 (losses treated as losses of transferee)--

(a) after "where" there shall be inserted "the transfer relates to any overseas life assurance business or"; and

(b) for "overseas life assurance" there shall be substituted "such".

Modification of the Taxes Act 1988 in relation to overseas life insurance companies

2 (1) Schedule 19AC to the Taxes Act 1988 (modification of Act in relation to overseas life insurance company) shall be amended as follows.

(2) After paragraph 4 there shall be inserted the following paragraph--

" 4A (1) In section 12(7A), the reference to a transfer of the whole or part of a company's long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to a qualifying overseas transfer.

(2) In this paragraph "a qualifying overseas transfer" means so much of any transfer of the whole or any part of the business of an overseas life insurance company carried on through a branch or agency in the United Kingdom as takes place in accordance with any authorisation granted outside the United Kingdom for the purposes of Article 11 of the third long term insurance Directive.

(3) In sub-paragraph (2) above "the third long term insurance Directive" has the same meaning as in that Act of 1982. "

(3) After the paragraph 10A inserted by Schedule 8 to this Act there shall be inserted the following paragraph--

" 10AA In section 440(2)(a), the reference to a transfer of the whole or part of a company's long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to a qualifying overseas transfer (within the meaning of paragraph 4A above). "

(4) Before paragraph 12 there shall be inserted the following paragraph--

" 11C In sections 444A(1) and 460(10A), the references to a transfer of the whole or part of a company's long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including references to a qualifying overseas transfer (within the meaning of paragraph 4A above). "

Modification of the Capital Allowances Act 1990

3 For subsection (1) of section 152A of the [1990 c. 1.] Capital Allowances Act 1990 (transfer of insurance company business), there shall be substituted the following subsections--

" (1) Subject to subsection (1A) below, this section applies where assets are transferred as part of, or in connection with, the transfer ("a relevant transfer") of the whole or part of the business of an insurance company ("the transferor") to another company ("the transferee") if the relevant transfer is--

(a) a transfer, in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982, of the whole or part of any long term business of the transferor; or

(b) a qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the principal Act).

(1A) This section does not apply in relation to any asset transferred to a company resident outside the United Kingdom unless the asset would fall to be treated, immediately after the relevant transfer, as either--

(a) an asset held for use for the purposes of the management of the whole or any part of so much of any business carried on by that company as is carried on through a branch or agency in the United Kingdom; or

(b) an asset which is otherwise held for the purposes of the whole or any part of so much of any business carried on by that company as is carried on through such a branch or agency.

(1B) In subsection (1) above "insurance company" has the same meaning as in Chapter I of Part XII of the principal Act; and in subsection (1A) above, the reference to the purposes of the management of any business is to be taken as a reference to those purposes expenditure on which falls, in relation to that business, to be treated for the purposes of sections 75 and 76 of the principal Act as expenses of management. "

Modification of the Taxation of Chargeable Gains Act 1992

4 In subsection (5) of section 213 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (spreading of gains and losses under section 212 where there is a transfer of long term business), at the beginning there shall be inserted "Subject to subsections (5A) to (7) below"; and after that subsection there shall be inserted the following subsection--

" (5A) Subsection (5) above shall not apply where the transferee is resident outside the United Kingdom unless the business to which the transfer relates is carried on by the transferee, for a period beginning with the time when the transfer takes effect, through a branch or agency in the United Kingdom. "

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