Legalize / United Kingdom / Public General Act

Finance Act 2007

Type Public General Act

Publication 2007-07-19

Last updated 2025-04-24

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(61A) (1) This Chapter has effect with respect to the provision of services by a managed service company. (2) Nothing in this Chapter— (a) affects the operation of Chapter 7 of this Part (agency workers), or (b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax). (61B) (1) A company is a “managed service company” if— (a) its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons, (b) payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services, (c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and (d) a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals (“an MSC provider”) is involved with the company. (2) An MSC provider is “involved with the company” if the MSC provider or an associate of the MSC provider— (a) benefits financially on an ongoing basis from the provision of the services of the individual, (b) influences or controls the provision of those services, (c) influences or controls the way in which payments to the individual (or associates of the individual) are made, (d) influences or controls the company's finances or any of its activities, or (e) gives or promotes an undertaking to make good any tax loss. (3) A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity. (4) A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services). (5) Subsection (4) does not apply if the person or an associate of the person— (a) does anything within subsection (2)(c) or (e), or (b) does anything within subsection (2)(d) other than influencing the company's finances or activities by doing anything within subsection (2)(b). (61C) (1) The Treasury may by order provide that persons of a prescribed description do not fall within section 61B(1)(d). (2) An order under subsection (1) may be made so as to have effect in relation to the whole of the tax year in which it is made. (3) In section 61B and this section, “company” means a body corporate or partnership. (4) References in section 61B to an associate of a person (“P”) include a person who, for the purpose of securing that the individual's services are provided by a company, acts in concert with P (or with P and other persons). (5) In section 61B(2)(e), “undertaking to make good any tax loss” means an undertaking (in any terms) to make good (in whole or in part, and by any means) any cost to the individual or an associate of the individual resulting from a relevant provision, or a particular kind of relevant provision, applying in relation to payments made to the individual or associate. (6) In subsection (5) “relevant provision” means— (a) a provision of the Tax Acts, (b) an enactment relating to national insurance, or (c) a provision of subordinate legislation made under any such provision or enactment. (61D) (1) This section applies if— (a) the services of an individual (“the worker”) are provided (directly or indirectly) by a managed service company (“the MSC”), (b) the worker, or an associate of the worker, receives (from any person) a payment or benefit which can reasonably be taken to be in respect of the services, and (c) the payment or benefit is not earnings (within Chapter 1 of Part 3) received by the worker directly from the MSC. (2) The MSC is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed employment payment”). (3) The deemed employment payment is treated as made at the time the payment or benefit mentioned in subsection (1)(b) is received. (4) In this Chapter— - “the worker” has the meaning given by subsection (1), - “the relevant services” means the services mentioned in that subsection, and - “the client” means the person to whom the relevant services are provided. (5) Section 61F supplements this section. (61E) (1) The amount of the deemed employment payment is the amount resulting from the following steps— Step 1 Find (applying section 61F) the amount of the payment or benefit mentioned in section 61D(1)(b). Step 2 Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met by the worker that would have been deductible from the taxable earnings from the employment if— (a) the worker had been employed by the client to provide the relevant services, and (b) the expenses had been met by the worker out of those earnings. If the result at this point is nil or a negative amount, there is no deemed employment payment. Step 3 Assume that the result of step 2 represents an amount together with employer's national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions. The result is the deemed employment payment. (2) In step 2 of subsection (1), the reference to expenses met by the worker includes, where the MSC is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership. (3) In step 2 of subsection (1), the expenses deductible include the amount of any mileage allowance relief which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (4) if— (a) the worker had been employed by the client to provide the relevant services, and (b) the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4). (4) A vehicle falls within this subsection if— (a) it is provided by the MSC for the worker, or (b) where the MSC is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership. (5) For the purposes of subsection (1) any necessary apportionment of payments or benefits that are referable partly to the provision of the relevant services and partly to other matters is to be made on a just and reasonable basis. (61F) (1) The following provisions apply for the purposes of sections 61D and 61E. (2) A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be general earnings from the employment. (3) The amount of a payment or benefit is taken to be— (a) in the case of a payment or cash benefit, the amount received, and (b) in the case of a non-cash benefit, the cash equivalent of the benefit. (4) The cash equivalent of a non-cash benefit is taken to be— (a) the amount that would be general earnings if the benefit were general earnings from an employment, or (b) in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2). (5) A payment or benefit is treated as received— (a) in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit; (b) in the case of a non-cash benefit, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if— (i) the worker had been an employee, and (ii) the benefit had been provided by reason of the employment. (61G) (1) The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows. (2) They apply as if— (a) the worker were employed by the MSC to provide the relevant services, and (b) the deemed employment payment were a payment by the MSC of earnings from that employment; but this is subject to subsection (3). (3) No deduction under Part 5 (deductions allowed from employment income) or section 232 (mileage allowance relief) may be made from the deemed employment payment. (4) The worker is not chargeable to tax in respect of the deemed employment payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if— (a) the worker were employed by the client to perform the relevant services, and (b) the deemed employment payment were a payment by the client of earnings from that employment. (5) The factors are— (a) the worker being resident, ordinarily resident or domiciled outside the United Kingdom, (b) the client being resident or ordinarily resident outside the United Kingdom, and (c) the relevant services being provided outside the United Kingdom. (6) Where the MSC is a partnership and the worker is a member of the partnership, the deemed employment payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership. (7) Where— (a) the worker is resident in the United Kingdom, and (b) the relevant services are provided in the United Kingdom, the MSC is treated as having a place of business in the United Kingdom, whether or not it in fact does so. (61H) (1) A claim for relief may be made under this section where the MSC— (a) is a body corporate, (b) is treated as making a deemed employment payment in any tax year, and (c) either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”). (2) A claim for relief under this section must be made— (a) by the MSC by notice to an officer of Revenue and Customs, and (b) within 5 years after 31st January following the tax year in which the distribution is made. (3) If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate. (4) Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution. (5) In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment— (a) against relevant distributions of the same tax year before those of other years, (b) against relevant distributions received by the worker before those received by another person, and (c) against relevant distributions of earlier years before those of later years. (6) Where the amount of a relevant distribution is reduced under this section, the amount of any associated tax credit is reduced accordingly. (61I) (1) Subsections (2) to (4) apply for the purposes of this Chapter. (2) “Associate”, in relation to an individual, means— (a) a member of the individual's family or household, (b) a relative of the individual, (c) a partner of the individual, or (d) the trustee of any settlement in relation to which the individual, or a relative of the individual or member of the individual's family (living or dead), is or was a settlor. (3) “Associate”, in relation to a company, means a person connected with the company. (4) “Associate”, in relation to a partnership, means any associate of a member of the partnership. (5) If— (a) a managed service company (“the MSC”) is a partnership, and (b) a person is an associate of another person by virtue only of being a member of the partnership, the person is to be treated, for the purposes of this Chapter as it applies in relation to the MSC, as if the person were not an associate of that other person. (6) In subsection (2), “relative” means ancestor, lineal descendant, brother or sister. (7) For the purposes of subsection (2)— (a) a man and woman living together as husband and wife are treated as if they were married to each other, and (b) two persons of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other. (61J) (1) In this Chapter— - “associate” has the meaning given by section 61I, - “business” means any trade, profession or vocation, - “the client” has the meaning given by section 61D(4), - “employer's national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions, - “managed service company” has the meaning given by section 61B, - “national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992, - “PAYE provisions” means the provisions of Part 11 or PAYE regulations, - “the relevant services” has the meaning given by section 61D(4), and - “the worker” has the meaning given by section 61D(4). (2) Nothing in section 995 of ITA 2007 (meaning of control) applies for the purposes of this Chapter.

5

In section 218(1) (exclusion of lower-paid employments from parts of benefits code: calculation of earnings rate), in Step 1, at the end of paragraph (d) insert

and (e) in the case of an employment within section 61G(2) (deemed employment payment by managed service company), the total amount of deemed employment payments for the year.

6

After section 688 insert—

(688A) (1) PAYE regulations may make provision authorising the recovery from a person within subsection (2) of any amount that an officer of Revenue and Customs considers should have been deducted by a managed service company (“the MSC”) from a payment of, or on account of, PAYE income of an individual. (2) The persons are— (a) a director or other office-holder, or an associate, of the MSC, (b) an MSC provider, (c) a person who (directly or indirectly) has encouraged or been actively involved in the provision by the MSC of the services of the individual, and (d) a director or other office-holder, or an associate, of a person (other than an individual) who is within paragraph (b) or (c). (3) A person does not fall within subsection (2)(c) merely by virtue of— (a) providing legal or accountancy advice in a professional capacity, or (b) placing the individual with persons who wish to obtain the services of the individual (including by contracting with the MSC for the provision of those services). (4) The supplementary provision that may be made by the regulations includes provision as to the liability of one person within subsection (2) to another such person. (5) In this section— - “associate” has the meaning given by section 61I, - “director” has the meaning given by section 67, - “managed service company” has the meaning given by section 61B, and - “MSC provider” means an MSC provider who is involved with the MSC (within the meaning of section 61B). (6) Section 61C(4) (extended meaning of “associate”) applies for the purposes of subsection (2)(d). (7) The Treasury may by order amend this section (but not this subsection or subsection (8)). (8) The Treasury must not make an order under subsection (7) unless a draft of it has been laid before and approved by a resolution of the House of Commons.

7

In section 717(4) (orders and regulations not subject to negative procedure), insert at the end “ or section 688A(7) (PAYE regulations: managed service companies) ”.

8

In Part 2 of Schedule 1 (index of defined expressions), insert at the appropriate places—

associate (in Chapter 9 of Part 2)	section 61I (but see section 61C(4))
business (in Chapter 9 of Part 2)	section 61J
---	---
the client (in Chapter 9 of Part 2)	section 61D(4)
---	---
employer's national insurance contributions (in Chapter 9 of Part 2)	section 61J
---	---
managed service company (in Chapter 9 of Part 2)	section 61B
---	---
national insurance contributions (in Chapter 9 of Part 2)	section 61J
---	---
PAYE provisions (in Chapter 9 of Part 2)	section 61J
---	---
the relevant services (in Chapter 9 of Part 2)	section 61D(4)
---	---
the worker (in Chapter 9 of Part 2)	section 61D(4)
---	---

Part 2 — Calculation of profits of MSCs: deduction for deemed employment payments

Deduction for deemed employment payments for income tax purposes

9

In ITTOIA 2005, after section 164 insert—

(164A) (1) This section applies for the purpose of calculating the profits of a trade, profession or vocation carried on by a managed service company (“the MSC”) which is treated as making a deemed employment payment in connection with the trade, profession or vocation. (2) A deduction is allowed for— (a) the amount of the deemed employment payment, and (b) the amount of any employer's national insurance contributions paid by the MSC in respect of it. (3) The deduction is allowed for the period of account in which the deemed employment payment is treated as made. (4) The amount of the deduction allowed under subsection (2) is limited to the amount that reduces the profits of the firm for the tax year to nil. (5) No deduction in respect of— (a) the deemed employment payment, or (b) any employer's national insurance contributions paid by the MSC in respect of it, may be made except in accordance with this section. (6) In this section “deemed employment payment”, “employer's national insurance contributions” and “managed service company” have the same meaning as in Chapter 9 of Part 2 of ITEPA 2003.

Deduction for deemed employment payments for corporation tax purposes

10

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SCHEDULE 4

Limit on amount of sideways relief and capital gains relief available in any tax year

1

(1) In ITA 2007, before section 104 (and the italic cross-heading before it) insert—

(103C) (1) This section applies if an individual carries on one or more trades— (a) as a non-active partner in a firm during a tax year, or (b) as a limited partner in a firm at a time in that tax year, and the individual makes a loss in any of those trades (an “affected loss”) in that tax year. (2) There is a restriction on the amount of sideways relief and capital gains relief which (after applying the restrictions under the other provisions of this Chapter) may be given to the individual for any affected loss (but see subsections (6) and (7)). (3) The restriction is that the total amount of the sideways relief and capital gains relief given to the individual for all the affected losses must not exceed the cap for that tax year. (4) The cap for any tax year is £25,000. (5) The Treasury may by order amend the sum for the time being specified in subsection (4). (6) The restriction under this section does not apply to so much of any affected loss as derives from qualifying film expenditure (see section 103D). (7) The restriction under this section does not affect the giving of sideways relief for a loss made in a trade against the profits of that trade. (8) In this section “trade” does not include a trade which consists of the underwriting business of a member of Lloyd's (within the meaning of section 184 of FA 1993).

(2) The amendment made by sub-paragraph (1) has effect in relation to any loss made by an individual in a trade in the tax year 2007-08 or any subsequent tax year.

(3) But, in the case of a loss made by an individual in a trade in a tax year the basis period for which begins before 2nd March 2007 (a “straddling basis period”), the amount of that loss for the purposes of section 103C of ITA 2007 is—

(a) the amount of sideways relief and capital gains relief which (after applying the restrictions under the other provisions of Chapter 3 of Part 4 of that Act) may be given to the individual for that loss, less

(b) the amount (if any) of the pre-announcement loss.

(4) “The pre-announcement loss” is determined as follows.

(5) Calculate the profits or losses of the straddling basis period, but without regard to capital allowances and qualifying film expenditure (within the meaning of section 103D of ITA 2007).

(6) If that calculation produces a loss and the individual has made a contribution of an amount as capital to the firm or LLP in question—

(a) on or before the start of the straddling basis period, or

(b) after the start of that period but before 2nd March 2007,

apportion the loss produced by that calculation to the part of the straddling basis period which begins with the relevant date and falls before 2nd March 2007 in proportion to the number of days in that part.

(7) Calculate so much of the loss of the straddling basis period as derives from relevant pre-announcement capital expenditure.

(8) The pre-announcement loss is the sum of—

(a) the amount of the loss apportioned under sub-paragraph (6) (if any), and

(b) so much of the loss of the straddling basis period (if any) as derives from relevant pre-announcement capital expenditure.

(9) In sub-paragraph (6) “the relevant date” means—

(a) in any case where a contribution was made on or before the start of the straddling basis period, the start of that period, and

(b) in any other case, the date on which the contribution was made or, if more than one contribution was made, the date on which the first contribution was made.

(10) For the purposes of this paragraph the amount of the loss of the straddling basis period that derives from relevant pre-announcement capital expenditure is determined on a just and reasonable basis.

(11) In this paragraph “relevant pre-announcement capital expenditure” means—

(a) any capital allowance in respect of expenditure paid before 2nd March 2007, and

(b) any capital allowance in respect of expenditure paid on or after that date pursuant to an unconditional obligation in a contract made before that date,

and for this purpose “an unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of any right conferred on the firm or LLP in question (whether or not under the contract).

(12) For the purposes of this paragraph—

(a) an amount of money is not to be taken as contributed as capital to a firm or LLP until the money is paid to the firm or LLP, and

(b) a right or other asset is not to be taken as contributed as capital to a firm or LLP until it is transferred to the firm or LLP.

(13) Section 62 of ITA 2007 (partners: losses of a tax year etc) applies for the purposes of this paragraph as it applies for the purposes of Chapter 3 of Part 4 of that Act.

Disregard of contributions made for purpose of accessing sideways relief and capital gains relief

2

(1) In ITA 2007, before section 114 insert—

(113A) (1) An amount which an individual contributes to a firm as capital is to be excluded in calculating the individual's contribution to the firm for the purposes of section 104 or 110 if the contribution was made for a prohibited purpose (but see subsection (4)). (2) If— (a) an individual carries on a trade as a member of an LLP at a time in a tax year, (b) the individual does not devote a significant amount of time to the trade in the relevant period for that year, and (c) the individual contributes an amount to the LLP as capital at any time in that year, that amount is to be excluded in calculating the individual's contribution to the LLP for the purposes of section 107 if the contribution was made for a prohibited purpose (but see subsection (4)). (3) For the purposes of this section a contribution is made for a prohibited purpose if the main purpose, or one of the main purposes, of making the contribution is the obtaining of a reduction in tax liability by means of sideways relief or capital gains relief. (4) This section has no effect in relation to the application of any restriction under section 104, 107 or 110 to any loss that derives wholly from qualifying film expenditure.

(2) The amendment made by sub-paragraph (1) has effect in relation to any amount contributed to a firm or LLP as capital on or after 2nd March 2007 (but see sub-paragraph (4)).

(3) For this purpose—

(a) an amount of money is not to be taken as contributed as capital to a firm or LLP until the money is paid to the firm or LLP, and

(b) a right or other asset is not to be taken as contributed as capital to a firm or LLP until it is transferred to the firm or LLP.

(4) The amendment made by sub-paragraph (1) has no effect in relation to any amount contributed by an individual on or after 2nd March 2007 if—

(a) the amount is contributed pursuant to an obligation in a contract made before that date, and

(b) the obligation may not be varied or extinguished by the exercise of any right conferred on the individual (whether or not under the contract).

Provision corresponding to paragraphs 1 and 2 for tax year 2006-07

3

(1) ICTA has effect, in relation to any loss made by an individual in a trade in the tax year 2006-07 the basis period for which ends on or after 2nd March 2007, as if provision corresponding to section 103C of ITA 2007 were included in Chapter 7 of Part 4 of ICTA.

(2) Sub-paragraphs (3) to (13) of paragraph 1 apply for the purposes of sub-paragraph (1) above.

(3) ICTA has effect for the tax year 2006-07 as if provision corresponding to section 113A of ITA 2007 were included in that Chapter.

(4) Sub-paragraphs (2) to (4) of paragraph 2 apply for the purposes of sub-paragraph (3) above.

(5) The provisions which are treated by this paragraph as included in Chapter 7 of Part 4 of ICTA have effect as if—

(a) any reference in section 103C of ITA 2007 to sideways relief were to relief under section 380 or 381 of ICTA,

(b) any reference in section 103C of ITA 2007 to capital gains relief in relation to a loss were to the treatment of the loss as an allowable loss by virtue of section 72 of FA 1991,

(c) any reference in section 103C or 113A of ITA 2007 to any provision of Chapter 3 of Part 4 of ITA 2007 were to the corresponding provision of Chapter 7 of Part 4 of ICTA, and

(d) any reference in section 113A of ITA 2007 to a contribution to a firm or an LLP were to a contribution to a trade carried on by the firm or LLP,

and references in paragraphs 1(3) to (13) and 2(2) to (4) to any of those expressions are to be read accordingly.

Consequential amendments

4

ITA 2007 is amended as follows.

5

In section 32 (liability not dealt with in the calculation), for “section 112(5)” substitute “ section 103B(5) ”.

6

In section 82(a) (exploitation of films), for “sections 115 and 116” substitute “ section 115 ”.

7

(1) Section 102 (overview of Chapter 3 of Part 4) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a), for “104 to 106 and section 114)” substitute “ 103A, 103C to 105, 113A and 114) ”,

(b) in paragraph (b), for “107 to 109 and section 114)” substitute “ 103C, 103D, 107 to 109, 113A and 114) ”, and

(c) in paragraph (c), for “in an early tax year (see sections 110 to 114)” substitute “ (see sections 103B to 103D and 110 to 114) ”.

(3) In subsection (2), for “sections 115 and 116” substitute “ section 115 ”.

8

After section 103 insert—

(103A) (1) In this Chapter “limited partner” means an individual who carries on a trade— (a) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907, (b) as a partner in a firm who in substance acts as a limited partner in relation to the trade (see subsection (2)), or (c) while the condition mentioned in subsection (3) is met in relation to the individual. (2) An individual in substance acts as a limited partner in relation to a trade if the individual— (a) is not entitled to take part in the management of the trade, and (b) is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person. (3) The condition referred to in subsection (1)(c) is that— (a) the individual carries on the trade jointly with other persons, (b) under the law of a territory outside the United Kingdom, the individual is not entitled to take part in the management of the trade, and (c) under that law, the individual is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade. (4) In the case of an individual who is a limited partner as a result of subsection (1)(c), references in this Chapter to the individual's firm are to be read as references to the relationship between the individual and the other persons mentioned in subsection (3)(a). (103B) (1) For the purposes of this Chapter an individual carries on a trade as a non-active partner during a tax year if the individual— (a) carries on the trade as a partner in a firm at a time during the year, (b) does not carry on the trade as a limited partner at any time during the year, and (c) does not devote a significant amount of time to the trade in the relevant period for the year. (2) For the purposes of this Chapter an individual devotes a significant amount of time to a trade in the relevant period for a tax year if, in that period, the individual spends an average of at least 10 hours a week personally engaged in activities carried on for the purposes of the trade. (3) For this purpose “the relevant period” means the basis period for the tax year (unless the basis period is shorter than 6 months). (4) If the basis period for the tax year is shorter than 6 months, “the relevant period” means— (a) the period of 6 months beginning with the date on which the individual first started to carry on the trade (if the basis period begins with that date), or (b) the period of 6 months ending with the date on which the individual permanently ceased to carry on the trade (if the basis period ends with that date). (5) If— (a) any relief is given on the assumption that the individual devoted or will devote a significant amount of time to the trade in the relevant period for a tax year, but (b) the individual in fact failed or fails to do so, the relief is withdrawn by the making of an assessment to income tax under this section.

9

After section 103C (as inserted by paragraph 1(1) above) insert—

(103D) (1) For the purposes of this Chapter expenditure is qualifying film expenditure if— (a) it is deducted under a relevant film provision for the purposes of the calculation required by section 849 of ITTOIA 2005 (calculation of firm's profits or losses), or (b) it is incidental expenditure which (although not deducted under a relevant film provision) is incurred in connection with the production of a film, or the acquisition of the original master version of a film, in relation to which expenditure is so deducted. (2) Expenditure is incidental if it is on management, administration or obtaining finance. (3) The extent to which expenditure is within subsection (1)(b) is determined on a just and reasonable basis. (4) For the purposes of this Chapter the amount of any loss that derives from qualifying film expenditure is determined on a just and reasonable basis. (5) In this section— - “the acquisition of the original master version of a film” has the same meaning as in Chapter 9 of Part 2 of ITTOIA 2005 (see sections 130 and 132 of that Act), - “film” is to be read in accordance with paragraph 1 of Schedule 1 to the Films Act 1985, and - “a relevant film provision” means any one of sections 137 to 140 of ITTOIA 2005 (relief for certified master versions of films).

10

In—

(a) section 104(5) (restriction on reliefs for limited partners),

(b) section 107(2) (restriction on reliefs for members of LLPs),

(d) section 115(1)(d) (restrictions on relief for firms exploiting films),

omit “(see section 112)”.

11

In—

(a) section 105(11) (meaning of “contribution to the firm” for purposes of section 104),

(b) section 108(9) (meaning of “contribution to the LLP” for purposes of section 107), and

for the words from “any regulations” to “excluded” substitute “ section 113A and any regulations made under section 114 (exclusion of amounts ”.

12

Omit section 106 (meaning of “limited partner”).

13

In section 112 (meaning of “non-active partner” and “early tax year” etc)—

(a) omit subsections (1) to (5), and

(b) the heading accordingly becomes “ Meaning of “early tax year” ”.

14

Omit the italic-cross heading before section 114 (regulations: exclusion of amounts in calculating contribution to the firm or LLP) and for the heading of that section substitute “ Power to exclude other amounts ”.

15

In section 115 (restrictions on reliefs for firms exploiting films), for subsection (4) substitute—

(4) The restrictions under this section do not apply to so much of the loss (if any) as derives from qualifying film expenditure.

16

Omit section 116 (exclusion from restrictions under section 115: certain film expenditure).

17

In section 792 (partners claiming excess sideways or capital gains relief)—

(a) in subsection (7), for “106” substitute “ 103A ”, and

(b) in subsection (8), for “106(3)(a)” substitute “ 103A(3)(a) ”.

18

In section 809 (individuals in partnership claiming relief for licence-related trading losses: other definitions)—

(a) in subsection (1), for “112” substitute “ 103B ”, and

(b) in subsection (2), for “112(1)(b)” substitute “ 103B(1)(b) ”.

19

In paragraph 148(3)(b) of Schedule 2 (transitionals and savings: tax avoidance)—

(a) for “106” substitute “ 103A ”, and

(b) for “112” substitute “ 103B ”.

20

In Schedule 4 (index of defined expressions)—

(a) in the definition of “limited partner”, for “106” substitute “ 103A ”,

(b) in the definition of “non-active partner”, for “112” substitute “ 103B ”, and

qualifying film expenditure (in Chapter 3 of Part 4)	section 103D

21

The amendments made by paragraphs 5 to 20 are deemed always to have had effect.

SCHEDULE 5

Amounts not forming part of a company’s income

1

(1) ICTA is amended as follows.

(2) In section 347A(1) (annual payments: general rule), as it had effect before ITA 2007, omit paragraph (b) together with the “and” before it (payment to which section applies not income of any company for corporation tax purposes).

(3) The amendment made by sub-paragraph (2) has effect in relation to payments made on or after 6th December 2006 but before 6th April 2007.

(4) Omit section 347A (as amended by ITA 2007).

(5) The amendment made by sub-paragraph (4) has effect in relation to payments made on or after 6th April 2007.

2

(1) In section 660C of ICTA, omit subsection (4) (income which is income of settlor alone for income tax purposes by virtue of section 624 or 629 of ITTOIA 2005 not income of any company for corporation tax purposes).

(2) The amendment made by sub-paragraph (1) has effect in relation to accounting periods ending on or after 6th March 2007.

(3) But income which arises in an accounting period beginning before that date is to be chargeable to corporation tax as a result of that amendment only if it arises on or after that date.

Structured finance arrangements

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

(1) Section 263E of TCGA 1992 (structured finance arrangements) is amended as follows.

(2) In subsection (2) (condition A: person making disposal of asset subsequently acquires it), for the words from “subsequently” to the end substitute “ (and no-one else) has the right or obligation under the arrangement to acquire the asset disposed of by that disposal at any subsequent time (whether or not the right or obligation is subject to any conditions). ”

(3) In subsection (3) (condition B: asset ceases to exist)—

(a) in paragraph (a), for “subsequently ceases” substitute “ will subsequently cease ”, and

(b) in paragraph (b), for “that asset was held” substitute “ it is intended that that asset will be held ”.

(4) After subsection (4) insert—

(4A) If, at any time after that disposal, it becomes apparent that— (a) the person making the disposal will not subsequently acquire under the arrangement the asset disposed of by that disposal, or (b) that asset will not be held as mentioned in subsection (3)(b), that person is to be treated for the purposes of this Act as disposing of that asset at that time for a consideration equal to its market value at that time.

(5) In subsection (5) (disregard of subsequent acquisitions), for “Any” substitute “ Except in a case falling within subsection (4A), any ”.

(6) The amendments made by this paragraph have effect in relation to disposals made on or after 6th March 2007.

(7) The amendments made by this paragraph also have effect in relation to any disposal made by a person before that date if the person makes a claim to that effect under this sub-paragraph.

Manufactured payments under arrangements having an unallowable purpose

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options and groups of companies

10

(1) In section 171(2) of TCGA 1992 (exceptions to rule that disposals within the same group of companies produce neither a gain nor a loss), after paragraph (da) insert

or (db) a disposal by company A in fulfilment of its obligations under an option granted to company B at a time when those companies were not members of the same group;

(2) The amendment made by sub-paragraph (1) has effect in relation to cases where the option is exercised on or after 6th March 2007 (whenever the option was granted).

Loan relationships: amounts not fully recognised for accounting purposes

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares treated as loan relationships

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exchange gains and losses where loan not on arm’s length terms

15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loan relationships and collective investment schemes

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Plant or machinery subject to a lease and finance leaseback

17

(1) Chapter 17 of Part 2 of CAA 2001 (plant and machinery allowances: anti-avoidance) is amended as follows.

(2) In section 228A(2) (application of sections 228B to 228D in case of a lease and finance leaseback), for “Sections 228B to 228D” substitute “ Sections 228B and 228C ”.

(3) In section 228F (lease and finance leaseback)—

(a) in subsection (1), for “Sections 228B, 228C and 228D” substitute “ Sections 228B and 228C ”,

(b) omit subsection (4), and

(c) in subsection (8), for “sections 228B to 228D” substitute “ sections 228B and 228C ” and omit paragraph (b) (together with the “and” before it).

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The amendments made by this paragraph have effect in relation to post-commencement rentals that fall to be taken into account in calculating for tax purposes the income or profits for any post-commencement period of account.

(6) In this paragraph—

“post-commencement period of account” means any period of account ending on or after 6th December 2006, and

“post-commencement rental” means—any amount receivable on or after 6th December 2006 in respect of any period beginning on or after that date, orthe appropriate fraction of any amount receivable on or after that date in respect of any period beginning before, and ending on or after, that date,but does not include any amount received before that date.

(7) For this purpose the “appropriate fraction”, in relation to any amount received in respect of any period, means the fraction—

$$PCPWP$where—“PCP” means the number of days in the part of the period falling on or after 6th December 2006, and“WP” means the number of days in the whole of the period.$

(8) Sub-paragraph (9) applies if the amounts that, in accordance with section 228D of CAA 2001 as applied by section 228F of that Act, fall to be taken into account in calculating for tax purposes the income or profits for any post-commencement period of account comprise both post-commencement rentals and other amounts.

(9) For the purposes of section 228D of CAA 2001 as applied by section 228F of that Act, the amount of the gross earnings is taken to be so much of the gross earnings as, on a just and reasonable basis, relates to those other amounts.

Derivative contracts: contracts treated for accounting purposes as financial asset or liability

18

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative contracts: transfers of value to connected companies

19

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 6

Company reconstructions without change of ownership

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale etc of lessor companies etc

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 7

Part 1 — Amendments

Taxes Management Act 1970 (c. 9)

1

In section 98 of TMA 1970 (special returns etc), in the Table, omit the entries relating to section 333B of ICTA.

Income and Corporation Taxes Act 1988 (c. 1)

2

ICTA is amended as follows.

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Omit section 333B (involvement of insurance companies with plans and accounts).

5

In section 403E (relief for overseas losses of UK resident companies), omit subsection (3).

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

In section 431A(3)(a) (power to amend), omit “and Schedule 19AA”.

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

In section 432AB (losses from Schedule A business or overseas property business), omit subsection (6).

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

Omit section 432D (section 432B apportionment: value of non-participating funds).

19

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20

In section 432F(2) (section 432B apportionment: supplementary provisions)—

(a) omit “For each category of business in relation to which section 432E falls to be applied”, and

(b) omit “, after making any reduction required by section 432E(5),”.

21

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24

Omit section 436 (pension business: separate charge on profits).

25

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27

Omit section 438B (income or gains arising from property investment LLP).

28

Omit section 438C (determination of policy holders' share for purposes of s.438B).

29

Omit section 439 (restricted government securities).

30

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

31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

Omit section 441 (overseas life assurance business).

35

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

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

40

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

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

42

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

43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

Omit Schedule 19AA (overseas life assurance fund).

56

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Act 1989 (c. 26)

57

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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— $$A×BC$where—A is the amount of the allowance or charge,B is the mean of the opening and closing liabilities of that category of business, andC is the mean of the opening and closing liabilities of all the categories of business mentioned in subsection (1) which are carried on by the company.$ (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

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Act 2002 (c. 23)

73

FA 2002 is amended as follows.

74

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carry forward of unused pension business losses

81

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carry forward of unused non-pension business losses

82

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“Section 432F(2) excesses”

84

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 8

Part 1 — Amendments

Income and Corporation Taxes Act 1988 (c. 1)

1

ICTA is amended as follows.

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

Omit section 439A (taxation of pure reinsurance business).

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

In section 755A(2) and (6)(a) (controlled foreign companies: apportionments to companies carrying on life assurance business), for “not charged to tax under Case I of Schedule D in respect of its profits from” substitute “ charged to tax under the I minus E basis in respect of ”.

Finance Act 1989 (c. 26)

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Act 1991 (c. 31)

17

In paragraph 16(1) of Schedule 7 to FA 1991 (transitional relief for old general annuity contracts), for “, otherwise than in accordance with the provisions applicable to Case I of Schedule D,” substitute “ under the I minus E basis ”.

Taxation of Chargeable Gains Act 1992 (c. 12)

18

In section 212 of TCGA 1992 (annual deemed disposal of holdings of unit trusts etc), omit subsection (7A) (which applies section 440B(5) of ICTA).

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

19

In F(No.2)A 1992, omit section 65 (life assurance business: I minus E basis).

Finance Act 1996 (c. 8)

20

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Act 1998 (c. 36)

21

In paragraph 84 of Schedule 18 to FA 1998 (company tax returns, assessments and related matters), for sub-paragraphs (1) to (3) substitute—

(1) This paragraph applies where amounts may be brought into charge to tax either— (a) in computing profits chargeable to tax under Case I of Schedule D, or (b) as amounts within Case III or V of that Schedule.

; and the italic heading before that paragraph accordingly becomes “ Choice between Case I and Case III or V of Schedule D ”.

Capital Allowances Act 2001 (c. 2)

22

CAA 2001 is amended as follows.

23

In section 256(1) (different giving effect rules for different categories of business), for paragraph (b) substitute—

(b) is charged to tax under the I minus E basis in respect of its life assurance business.

24

In section 257(2) (life assurance: supplementary), for paragraphs (a) and (b) substitute—

(a) section 85A(3) of the Finance Act 1989 (excess adjusted Case I profits), or (b) section 89 of that Act (policy holders' share of profits).

Finance Act 2002 (c. 23)

25

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2 — Transitional provisions

Unused pre-commencement section 76(12) etc excesses

28

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shifts in basis of taxation at first post-commencement accounting period

29

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 9

Definition of “insurance business transfer scheme”

1

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In consequence of sub-paragraph (1), omit—

(a) the definition of “insurance business transfer scheme” in section 12(7B) of ICTA,

(b) section 444AB(11) of that Act (as originally enacted),

(d) section 460(10B) of that Act,

(e) the definition of “insurance business transfer scheme” in paragraph 12(9) of Schedule 9 to FA 1996,

(f) section 560(5)(b) of CAA 2001,

(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In section 66 of FA 2002 (election to continue postponement of mark to market)—

(a) in subsection (4)(a), for “a transfer” substitute “ an insurance business transfer ”,

(b) in subsection (5), omit the definition of “transfer scheme”, and

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer schemes: expenses, losses etc

2

(1) Section 444A of ICTA (transfers of business: expenses, losses and section 432F(2) excesses) is amended as follows.

(2) In subsection (1), omit “Subject to subsection (7) below,”.

(3) Omit—

(a) subsection (7) (section not to apply if transfer is not for bona fide commercial reasons or forms part of avoidance scheme), and

(b) subsection (8) (clearance procedure as to non-application of subsection (7)).

Transfer schemes: deemed periodical returns

3

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In section 213(10) of TCGA 1992, for “before the transfer” substitute “ before the relevant transfer date (within the meaning of that section) ”.

Transfer schemes: taxing the transferor

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transferor’s period of account including transfer

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer schemes: taxing the transferee

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repeal of section 444AD

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer schemes: anti-avoidance

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repeal of FA s.82C

9

In FA 1989, omit section 82C (relevant financial reinsurance contracts).

Transfers: receipts to be taken into account

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers and demutualisations: losses where assets added to long-term insurance fund

11

(1) FA 1989 is amended as follows.

(2) Omit—

(a) in section 83, subsections (3) to (7) and, in subsection (8), the definitions of “add”, “demutualisation” and “total reinsurance” (which relate to losses where assets added to long-term insurance fund),

(b) section 83AA (amounts added to long-term insurance fund in excess of loss), and

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer schemes: old annuity contracts

13

(1) Paragraph 16 of Schedule 7 to FA 1991 (transitional relief for old general annuity contracts) is amended as follows.

(2) In sub-paragraph (7), in the definition of “old annuity contract”, insert at the end “ (including one forming part of the business transferred to another insurance company by an insurance business transfer scheme) ”.

(3) After that sub-paragraph insert—

(8) Where— (a) business is transferred to an insurance company by an insurance business transfer scheme during an accounting period of the company, and (b) the business transferred consists of or includes old annuity contracts (“the transferred contracts”), the reference in the definition of R1 in sub-paragraph (2) above to the company's opening liabilities for the accounting period is, in relation to the transferred contracts, a reference to the company's liabilities in respect of the transferred contracts immediately after the transfer.

Transfer schemes: no gain/no loss

14

(1) TCGA 1992 is amended as follows.

(2) In section 211 (application of section 139), for subsections (2) and (2A) substitute—

(2) Where this section applies the transferor and the transferee are treated for the purposes of corporation tax on chargeable gains as if any assets included in the transfer which— (a) immediately before they are acquired by the transferee, were assets of the transferor's long-term insurance fund, and (b) immediately after they are so acquired are assets of the transferee's long-term insurance fund, were acquired for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the transferor on the disposal. (3) Subsection (2) above is subject to section 212.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer schemes: old reinsurance business

15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to amend transfer provisions

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement

17

(1) The amendments made by paragraphs 1 to 3 and 13 to 15 have effect in relation to periods of account beginning on or after 1st January 2007.

(2) The amendments made by paragraphs 4, 6 to 10(5), 11 and 12 have effect in accordance with provision made by an order made by the Treasury.

(3) But the amendments made by paragraphs 11 and 12 also have effect

(a) in relation to periods of account beginning on or after 1st January 2007 where the transfer of business or demutualisation concerned took place before 21st March 2007 and

(b) in relation to periods of account ending after 30 June 2008 where the transfer of business or demutualisation concerned took place on or after 21 March 2007 and before 1 July 2008.

(4) The amendment made by paragraph 5 has effect in relation to transfers of business with a transfer date after 21st March 2007.

(4A) The amendment made by paragraph 9 has effect in relation to contracts entered into in a period of account beginning on or after 1 January 2008.

(5) The amendment made by paragraph 10(2) has effect in relation to transfers taking place on or after 6th December 2006.

(6) The amendments made by paragraph 10(3) and (4) have effect in relation to assets transferred on or after 1 January 2008.

SCHEDULE 10

Contingent loans

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“Structural” assets

2

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In ICTA, omit section 444ACA (transfers of business).

(3) In section 432E(2A) of that Act, omit “444ACA(2),” and paragraph (b).

(4) In section 211 of TCGA 1992 (transfers of business: application of section 139 of that Act), as amended by paragraph 14 of Schedule 9 to this Act, after subsection (2) insert—

(2A) The reference in subsection (2) above to assets included in the transfer does not include structural assets within the meaning of section 83XA of the Finance Act 1989.

(5) In paragraph 17 of Schedule 7AC to TCGA 1992 (substantial shareholdings exemption: special rules for assets of insurance company's long-term insurance fund), after sub-paragraph (4) insert—

(4A) The reference in sub-paragraph (2) to an asset of the investing company's long-term insurance fund, and the references in sub-paragraphs (3) and (4) to shares or an interest in shares held as assets of its long-term insurance fund, do not include a structural asset, or structural assets, within the meaning of section 83XA of the Finance Act 1989.

Losses on disposal of authorised investment fund assets to connected manager

3

In TCGA 1992, after section 210B insert—

(210C) (1) Section 18(3) does not apply in relation to a loss accruing on the disposal by an insurance company of authorised investment fund assets to the manager of the authorised investment fund. (2) In this section— - “authorised investment fund assets” means assets of the company's long-term insurance fund consisting of rights under an authorised unit trust or shares in an open-ended investment company, - “the manager of the authorised investment fund” means— 1. in the case of an authorised unit trust, the person who is the manager of the unit trust scheme for the purposes of Chapter 3 of Part 17 of the Financial Services and Markets Act 2000, and 2. in the case of an open-ended investment company, a director or other person having responsibility for the management of its scheme property, and - “open-ended investment company” means a company incorporated in the United Kingdom to which section 236 of the Financial Services and Markets Act 2000 applies.

Priority of section 83(2) of FA 1989 etc

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tidying up of TCGA 1992

5

(1) TCGA 1992 is amended as follows.

(2) In section 210B(6)(a) (disposal and acquisition of section 440A securities), for the words after “are” substitute “ assets within section 212(1). ”

(3) Omit—

(a) section 212(2A) (disapplication of section 212(1) to assets treated as representing rights under a creditor relationship),

(b) section 214 (rights under authorised unit trusts etc: transitional provisions), and

Tidying up of Chapter 2 of Part 4 of FA 1996

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Correction of erroneous repeal

7

The repeals made by Schedule 3 to ITA 2007 in paragraph 11 of Schedule 6 to FA 1990 are deemed never to have had effect; but Schedule 3 to ITA 2007 is deemed to have included the repeal of the words before the paragraphs in sub-paragraph (1) of that paragraph.

Non-profit companies, non-profit funds and with-profits funds

8

(1) In section 431(2) of ICTA (interpretative provisions relating to insurance companies) insert at the appropriate place—

“non-profit company”, in relation to a period of account, means a company carrying on long-term business where, at the end of the period— (a) none of the liabilities of that business, or (b) none but an insignificant proportion of those liabilities, are with-profits liabilities;

“non-profit fund” means a fund that is not a with-profits fund;

, and

“with-profits fund” has the meaning given by the Prudential Sourcebook (Insurers);

(2) Omit—

(a) in section 432YA(5) of ICTA, the definitions of “non-profit company” and “non-profit fund”,

(b) section 82D(5) of FA 1989,

(d) in section 83A of that Act, in subsections (2)(b) and (3D)(b) “(see subsection (6))” and subsection (6).

Internal linked funds and net value

9

(1) In section 431(2) of ICTA (interpretative provisions relating to insurance companies) insert at the appropriate place—

“internal linked fund”, in relation to an insurance company, means an account— (a) to which linked assets are appropriated by the company, and (b) which may be divided into units the value of which is determined by the company by reference to the value of those assets;

, and

“net value”, in relation to any assets, means the excess of the value of the assets over 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 liabilities;

(2) Omit—

(a) in section 432ZA(6) of ICTA, the definition of “internal linked fund”,

(b) section 432A(9A) of that Act,

(d) paragraph 3A(6) of Schedule 11 to FA 1996.

Fair value

10

(1) In section 431(2) of ICTA (interpretative provisions relating to insurance companies) insert at the appropriate place—

“fair value”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount;

(2) In section 440 of ICTA (transfer of assets etc)—

(a) in subsections (1) and (2), for “market” substitute “ fair ”, and

(b) omit subsection (5).

(3) Omit—

(a) section 444AB(6) of ICTA (as originally enacted),

(b) in section 444AC(11) of that Act (as originally enacted), the words from the beginning to the end of the definition of “fair value”,

(d) in section 83(8) of FA 1989, in the definition of “fair value”, paragraph (a), and

(e) section 83YB(5) of that Act.

Generalisation of definitions

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

(1) Omit the following provisions.

(2) In ICTA—

(a) in section 12(7B), the words from the beginning to the end of the definition of “contracts of long-term insurance”,

(b) in section 76(15), “and other expressions have the same meaning as in Chapter 1 of Part 12”,

(c) in section 587B(9), “ “life assurance business” and related expressions have the same meaning as Chapter 1 of Part 12;”,

(d) in section 755A(12), the definition of “long-term insurance fund”,

(e) section 804F, and

(f) in paragraph 14(1) of Schedule 28AA, the definition of “insurance company”.

(3) In FA 1989—

(a) in section 85(2A), the second sentence,

(b) in section 89(6), the words from the beginning to “; and”, and

(4) In paragraph 16(7) of Schedule 7 to FA 1991, the words from “and, subject to that,” to the end.

(5) In TCGA 1992—

(a) section 214BA, and

(b) paragraph 17(5) of Schedule 7AC.

(6) In FA 1996—

(a) in section 87A(2), “, within the meaning of Chapter 1 of Part 12 of the Taxes Act 1988,” and “(see section 431(2) of that Act)”,

(b) section 88(7),

(c) in paragraph 12(9) of Schedule 9, the definitions of “contracts of long-term insurance” and “overseas life insurance company”,

(d) in paragraph 20(3)(b) of that Schedule, “, within the meaning of Chapter 1 of Part 12 of the Taxes Act 1988,” and “(see section 431(2) of that Act)”, and

(e) in Schedule 11, paragraph 6.

(7) In paragraph 13(3) of Schedule 18 to FA 1998, the words after “1988”.

(8) In CAA 2001—

(a) section 257(3),

(b) section 544(5), and

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) In FA 2002—

(a) in section 66(5), the words from the beginning to the end of the definition of “long-term insurance fund”,

(b) in paragraph 19(1) of Schedule 12, the definition of “life assurance business”,

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) in Schedule 29, in paragraph 89(3), the definition of “contracts of long-term insurance” and paragraph 138(1).

(11) In Schedule 23 to FA 2003—

(a) in paragraph 30, the definitions of “insurance company” and “life assurance business”, and

(b) in paragraph 31, the entries relating to those definitions.

(12) Section 134(4)(c) of FA 2006.

Minor changes

15

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In paragraph 17 of Schedule 7 to FA 1991 (transitional provisions for chargeable gains and unrelieved general annuity business)—

(a) in sub-paragraph (4), for the words after “in an accounting period” substitute “ is so much of the chargeable gains arising to the company in the accounting period as are referable to its basic life assurance and general annuity business. ”, and

(b) omit sub-paragraphs (4A) and (5).

Obsolete etc provisions

16

(1) Omit the following provisions (which are obsolete or of limited value).

(2) In the Table in section 98 of TMA 1970, the words “or 441A(3)” in both columns.

(3) In ICTA—

(a) in section 76(7), in Step 3, the entries relating to section 587B(8)(b)(i) of ICTA and paragraph 23(2) of Schedule 13 to FA 2002,

(b) section 440(2A) and (2B) (transfer of assets: loan relationships and derivative contracts),

(d) section 443 (life policies carrying rights not in money),

(e) section 444 (life policies issued before 5th August 1965),

(f) section 587B(8) (gifts to charities etc: modifications for insurance companies), and

(g) in section 807A (disposals and acquisitions of company loan relationships with or without interest), subsections (4) and (5)(b) and, in subsection (6)(a), “or an insurance credit”.

(4) In FA 1989—

(a) section 84(2), (3), (5) and (6) (transitional provisions etc),

(b) in section 85(3) (commencement of provisions for charge of certain BLAGAB receipts), “(including the 1990 component period)”,

(c) in section 86 (spreading of relief for acquisition expenses), subsections (3) and (3A) and, in subsection (10), “(including the 1990 component period)”, and

(d) section 87 (management expenses).

(5) In FA 1996—

(a) paragraph 1(1) and (2) of Schedule 11 (loan relationships: I minus E basis),

(b) paragraph 4(6) of that Schedule (non-trading deficits: transitional provision),

(d) paragraph 1(3) of Schedule 15 (apportionment of loan relationship credits and debits: transitional provision).

(6) Paragraph 18 of Schedule 12 to FA 1997 (leasing arrangements: meaning of “accounting purposes” for insurance companies).

(7) Paragraph 86 of Schedule 18 to FA 1998 (non-annual actuarial investigations).

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) Section 87(3) and (4) of FA 2001 (tax credits etc).

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement

17

(1) The amendment made by paragraph 1 has effect on and after 10th May 2007.

(2) The amendments made by paragraphs 2, 4(2) and (4), 5, 6 and 8 to 15 have effect in relation to periods of account beginning on or after 1st January 2007.

(3) But the amendment made by paragraph 2(4) does not apply where the transfer of business concerned took place before 10th May 2007.

(4) The amendment made by paragraph 3 has effect in relation to losses accruing in a period of account beginning on or after 1st January 2007.

(5) The amendment made by paragraph 4(3) has effect in relation to periods of account beginning on or after 1st January 2005.

SCHEDULE 11

Restriction on amount of technical provisions made by general insurers

1

(1) This paragraph applies if a general insurer makes any technical provisions for a period of account.

(2) The amount of the technical provisions stated in the accounts for that period is to be taken into account in the calculation for tax purposes of the profits of the general insurer's trade for that period unless an officer of Revenue and Customs considers that that amount exceeds the appropriate amount.

(3) In that case—

(a) the excess is not to be taken into account in that calculation, and

(b) the profits of the general insurer's trade for the next period of account are to be adjusted accordingly for tax purposes.

(4) “The appropriate amount” means such amount as is determined in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs to be the appropriate amount to be taken into account in that calculation.

(5) Any such determination must be made by reference to the time at which the technical provisions are made.

Enforcement

2

(1) This paragraph applies if an officer of Revenue and Customs gives a notice of enquiry under paragraph 24(1) of Schedule 18 to FA 1998 to a general insurer.

(2) The officer may by notice require the general insurer (at the general insurer's own expense) to provide the officer with a report as to whether (and, if so, the extent to which) the amount of any technical provisions stated in the accounts for any period covered by the company tax return into which the enquiry is made exceeds the appropriate amount.

(3) The report must cover such matters, and be in such form, as the officer may reasonably require for the purposes of the enquiry.

(4) The report must be made by a person who is appointed by the general insurer unless the officer requires the report to be made instead by another person.

(5) As soon as the general insurer appoints a person to make the report, the general insurer must give a notice to the officer specifying that person.

(6) A notice under sub-paragraph (2) must specify the time (which must not be less than 30 days) within which the general insurer is to comply with it.

(7) The following provisions of Schedule 36 to FA 2008 (information and inspection powers) apply in relation to a notice under sub-paragraph (2) as they apply in relation to a taxpayer notice under that Schedule—

(a) paragraphs 29 and 32 (right to appeal), and

(b) Part 7 (penalties).

Supplementary

3

(1) In paragraph 1 “general insurer” means—

(a) a company within the charge to corporation tax which carries on general business,

(b) a CFC (within the meaning of Part 9A of the Taxation (International and Other Provisions) Act 2010) which carries on general business, or

(2) In paragraph 2 “general insurer” means—

(a) a company within the charge to corporation tax which carries on general business, or

(b) a company which for the purposes of Part 9A of the Taxation (International and Other Provisions) Act 2010 has an interest in a CFC (within the meaning of that Part) which carries on general business.

(3) For the purposes of sub-paragraphs (1) and (2) “general business” means business which consists of the effecting or carrying out of contracts that fall within Part 1 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).

(4) In the case of members of a Lloyd's syndicate, references in paragraph 1 to any accounts for a period are to the return of the syndicate's profits or loss for that period under regulation 4 of the Lloyd's Underwriters (Tax) Regulations 2005 (S.I. 2005/3338).

(5) In paragraph 1 “period of account”—

(a) except in the case of members of a Lloyd's syndicate, means a period of account for which an account is made up, and

(b) in the case of members of a Lloyd's syndicate, means an underwriting year in which profits or losses are declared for an earlier underwriting year.

(6) In paragraphs 1 and 2 “technical provisions”, except in the case of members of a Lloyd's syndicate, means any of the following—

(a) provisions for claims outstanding,

(b) provisions for unearned premiums, and

(7) In paragraphs 1 and 2 “technical provisions”, in the case of members of a Lloyd's syndicate (“the syndicate”), means—

(a) so much of the reinsurance to close amounts of the members, and

(b) so much of the provisions made by an open Lloyd's syndicate of which any member of the syndicate is a member for claims outstanding, unearned premiums and unexpired risks,

as may be determined by or under regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(8) For this purpose—

(a) the reference to reinsurance to close amounts of any member of a Lloyd's syndicate is to any consideration which, in accordance with the rules or practice of Lloyd's, is given (or any amount which, in accordance with those rules or practice, is treated as consideration given) by the member in respect of the liabilities arising from the member's underwriting business in an underwriting year for the purpose of closing the accounts of the business for that year, and

(b) a Lloyd's syndicate is an “open” Lloyd's syndicate at any time after the end of its closing year if, at that time, the accounts of its business for the underwriting year for which it was formed have not been closed,

and in paragraph (b) “closing year” has the same meaning as in Chapter 3 of Part 2 of FA 1993 or Chapter 5 of Part 4 of FA 1994.

(9) In this paragraph—

“Lloyd's syndicate” means a syndicate of underwriting members of Lloyd's formed for an underwriting year, and

“underwriting year” means the calendar year.

(10) In this paragraph references to provisions for claims outstanding, unearned premiums and unexpired risks have the same meaning as in Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

(11) The Commissioners for Her Majesty's Revenue and Customs may by regulations—

(a) provide in prescribed circumstances for paragraph 1 not to apply in relation to any member of a Lloyd's syndicate, or

(b) provide in prescribed circumstances for a reduction in relation to any member of a Lloyd's syndicate of the amount which (as a result of that paragraph) is not to be taken into account in the calculation mentioned in sub-paragraph (2) of that paragraph.

(12) The Treasury may by regulations amend sub-paragraphs (1) to (3) (definition of “general insurer”).

(13) In the event of any changes in the rules or practice of Lloyd's, the Commissioners for Her Majesty's Revenue and Customs may by regulations make such amendments of paragraph 1 and this paragraph as appear to the Commissioners to be expedient having regard to those changes.

(14) Regulations under section 182(1)(a) of FA 1993 or section 229(1)(a) of FA 1994 (assessment and collection of tax charged in case of Lloyd's underwriters) may, in particular, include provision applying paragraph 2 with modifications in the case of members of a Lloyd's syndicate.

(15) Regulations under paragraph 1 or this paragraph may—

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