Finance Act 2012

• (1) Section 337 (transfers of loans on insurance business transfers) is amended as follows.

• (2) After subsection (3) insert—

(3A) In subsection (3)(b) “qualifying overseas transfer” means so much of a transfer of the whole or any part of the business of an overseas life insurance company carried on through a permanent establishment in the United Kingdom as takes place in accordance with an authorisation granted outside the United Kingdom for the purposes of Article 14 of the Council Directive of 5 November 2002 concerning life assurance (2002/83/EC).

• (3) In subsection (4)(a), for “the categories set out in section 440(4) of ICTA” substitute “ the applicable categories ”.

• (4) After subsection (4) insert—

(4A) For the purposes of subsection (4)(a) “the applicable categories” means— (a) in the case of a UK life insurance company, the long-term business categories or a category of assets which are not held for the purposes of its long-term business, and (b) in the case of an overseas life insurance company, the UK long-term business categories, a category of UK assets which are not held for the purposes of its long-term business or a category of assets which are held by it but which are not UK assets. (4B) For the purposes of subsection (4A)— (a) “the long-term business categories” has the same meaning as in section 116 of FA 2012, (b) “the UK long-term business categories” and “UK assets” have the same meanings as in section 117 of that Act, and (c) section 122 of that Act applies as it applies for the purposes of Chapter 8 of Part 2 of that Act.

150

• (1) Section 386 (overview of Chapter 10 of Part 5 (insurance companies)) is amended as follows.

• (2) In subsection (2)—

• (a) in paragraph (a), after “apply” insert “ for the purposes of the I - E rules ” and at the end insert “ and ”, and

• (b) omit paragraph (c) (together with the “and” before it).

• (3) In subsection (3)—

• (a) in paragraph (a), omit “or of BLAGAB”,

• (b) in paragraph (a), after “trade)” insert “ and section 88 of FA 2012 (equivalent rule for activities carried on in the course of BLAGAB) ”, and

• (c) in paragraph (f), for “as expenses of insurance companies at Step 1 of section 76(7) of ICTA” substitute “ as ordinary BLAGAB management expenses ”.

151

In section 387(1) (treatment of deficit on BLAGAB: introduction), after “apply” insert “ for the purposes of the I - E rules ”.

152

In section 388(3) (basic rule: deficit set off against income and gains of deficit period), for “before any expenses deduction under section 76 of ICTA (expenses of insurance companies)” substitute “ in accordance with step 4 in section 73 of FA 2012 (that is to say, before any deduction for the adjusted BLAGAB management expenses of the company for the deficit period) ”.

153

In section 389 (claim to carry back deficit), after subsection (2) insert—

(2A) If any of the claim amount is carried back in accordance with this section to an accounting period, the amount which is so carried back is to be left out of account for the purpose of applying section 93 of FA 2012 in the case of that period.

154

• (1) Section 390 (meaning of “available profits”) is amended as follows.

• (2) In subsection (4), for the words from “which is” to the end substitute “ of the BLAGAB credits in respect of the company's loan relationships that count as income for the purposes of the I - E rules for that period (as determined by section 88(3) and (4) of FA 2012) ”.

• (3) In subsection (5)—

• (a) in step 1(a), for “so much of the expenses deduction for the period given by Step 8 in section 76(7) of ICTA (expenses of insurance companies) as is referable to BLAGAB” substitute “ the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period ”,

• (b) in step 1(b), for “so referable” substitute “ referable to BLAGAB ”,

• (c) in step 2, for paragraph (a) (together with the “and” at the end of it) substitute—

(a) so much of the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period as, on the assumption that the company had no BLAGAB non-trading loan relationships profits for the period, could be subtracted at step 6 under that section without producing a negative amount, and

, and

• (d) in step 2(b), for “so referable” substitute “ referable to BLAGAB ”.

• (4) For subsection (6) substitute—

(6) In the case of any claim under section 389, references in subsection (5) to the amount for the purposes of section 73 of FA 2012 of the adjusted BLAGAB management expenses of the company for the period are references to that amount as determined on the assumptions in subsections (7) and (8).

155

In section 391 (carry forward of surplus deficit to next accounting period), for subsection (3) substitute—

(3) Any deficit so carried forward is treated for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the next period.

156

Omit sections 393 and 394 (insurance companies: determination of questions requiring apportionments) and the italic heading before those sections.

157

In section 399 (index-linked gilt-edged securities), at the end insert—

(6) In the case of insurance companies, the application of sections 400 to 400C is subject to section 112 of FA 2012.

158

In section 464(3) (list of exceptions to general rule that Part 5 (loan relationships) has priority for corporation tax purposes), omit paragraph (h) (but not the “and” at the end of that paragraph).

159

In section 471(3) (connections between persons: creditors who are insurance companies carrying on BLAGAB), for “is linked for that period to that business” substitute “ is matched for that period to a BLAGAB liability ”.

160

In section 472(4)(b) (meaning of “control”), for “of an insurance company's long-term insurance fund” substitute “ held by an insurance company for the purposes of its long-term business ”.

161

In section 473(3)(b) (meaning of “major interest”), for “of an insurance company's long-term insurance fund” substitute “ held by an insurance company for the purposes of its long-term business ”.

162

In section 486(4) (exclusion of exchange gains and losses in respect of tax debts etc), for paragraph (c) substitute—

(c) as ordinary BLAGAB management expenses within the meaning of section 77 of FA 2012 (insurance companies carrying on basic life assurance and general annuity business).

163

In section 502(1) (meaning of “financial institution”)—

• (a) in paragraph (g), for “section 431(2) of ICTA” substitute “ section 65 of FA 2012 ”, and

• (b) in paragraph (h), for “section 431(2) of ICTA” substitute “ section 139(1) of FA 2012 ”.

164

In section 560(4) (investment life insurance contracts: introduction)—

• (a) in paragraph (a), for “section 431(2) of ICTA” substitute “ section 65 of FA 2012 ” and for “that section” substitute “ section 63 of that Act ”, and

• (b) in paragraph (b), for the words from “but” to the end substitute “ if subsection (3)(a) were omitted from section 65 of that Act. ”

165

In section 561(2) (meaning of “investment life insurance contract”), in the definition of “capital redemption policy”, for “section 431(2ZF) of ICTA” substitute “ section 56(3) of FA 2012 ”.

166

In section 563(6)(a) (increased non-trading credits for BLAGAB and EEA taxed contracts), for “section 88(1) of FA 1989” substitute “ section 102(3) of FA 2012 ”.

167

• (1) Section 591 (conditions A to E mentioned in section 589(5)) is amended as follows.

• (2) In subsection (2)(a), for “life assurance business” substitute “ long-term business ”.

• (3) In subsection (2)(b), after “Sourcebook” insert “ (within the meaning given by section 139(4) of FA 2012) ”.

168

• (1) Section 634 (insurance companies) is amended as follows.

• (2) The existing text becomes subsection (1) of that section.

• (3) In that subsection, omit paragraph (b) (together with the “or” before it).

• (4) After that subsection insert—

(2) In the case of activities carried on by a company in the course of any basic life assurance and general annuity business, provision corresponding to that made by subsection (1) is made by section 88 of FA 2012 for the purpose of applying the I - E rules.

169

• (1) Section 635 (creditor relationships of insurance companies: embedded derivatives which are options) is amended as follows.

• (2) In subsection (1)(a), for “life assurance business” substitute “ basic life assurance and general annuity business ”.

• (3) In subsection (2), for “This Part” substitute “ For the purpose of applying the I - E rules, this Part ”.

170

• (1) Section 636 (insurance companies: modifications of Chapter 5 (continuity of treatment on transfers within groups)) is amended as follows.

• (2) In subsection (3), after the subsection (2B) which is treated as if it were inserted in section 626 insert—

(2C) In subsection (2B) “qualifying overseas transfer” means so much of a transfer of the whole or any part of the business of an overseas life insurance company carried on through a permanent establishment in the United Kingdom as takes place in accordance with an authorisation granted outside the United Kingdom for the purposes of Article 14 of the Council Directive of 5 November 2002 concerning life assurance (No. 2002/83/EC).

• (3) In subsection (4), for the words from “the asset was within one of the categories set out in section 440(4)(a), (d) and (e) of ICTA” to the end substitute “ , immediately before or after the transfer, the asset was held for the purposes of a company's long-term business (but, in the case of an overseas life insurance company, ignoring assets which are not UK assets (within the meaning of section 117 of FA 2012)). ”

• (4) In subsection (5)(a), for “the categories set out in section 440(4) of ICTA (transfers of assets etc)” substitute “ the applicable categories ”.

• (5) After subsection (5) insert—

(5A) For the purposes of subsection (5)(a) “the applicable categories” means— (a) in the case of a UK life insurance company, the long-term business categories or a category of assets which are not held for the purposes of its long-term business, and (b) in the case of an overseas life insurance company, the UK long-term business categories, a category of UK assets which are not held for the purposes of its long-term business or a category of assets which are held by it but which are not UK assets.

• (6) After subsection (7) insert—

(8) For the purposes of this section— (a) “the long-term business categories” has the same meaning as in section 116 of FA 2012, and “the UK long-term business categories” and “UK assets” have the same meanings as in section 117 of FA 2012, and (b) section 122 of FA 2012 applies as it applies for the purposes of Chapter 8 of Part 2 of that Act.

171

In section 699(3) (list of exceptions to general rule that Part 7 (derivative contracts) has priority for corporation tax purposes)—

• (a) at the end of paragraph (a) insert “ and ”, and

• (b) omit paragraph (c) (together with the “and” before it).

172

In section 710 (derivative contracts: other definitions)—

• (a) in the definition of “capital redemption policy”, for “section 431(2ZF) of ICTA” substitute “ section 56(3) of FA 2012 ”,

• (b) in the definition of “contract of insurance”, for “section 431(2) of ICTA” substitute “ section 64 of FA 2012 ”, and

• (c) in the definition of “contract of long-term insurance”, for “section 431(2) of ICTA” substitute “ section 64 of FA 2012 ”.

173

In section 746(2)(c) (“non-trading credits” and “non-trading debits”), for “section 901(3)” substitute “ section 901 ”.

174

In section 800(3) (excluded assets: introduction), omit paragraph (b) (together with the “and” before it).

175

In section 806(3) (assets excluded from Part 8 (intangible fixed assets): financial assets), after paragraph (c) (but before the “and” at the end of that paragraph) insert—

(ca) assets so far as they are derived from, or are referable to, contracts or policies of insurance or capital redemption policies,

.

176

In section 810 (mutual trade or business), omit subsection (2).

177

In section 815 (election to exclude capital expenditure on software), omit subsection (8).

178

In section 855(4) (further provision about regulations under section 854), omit “or section 902”.

179

For section 901 substitute—

(901) In the application of the I - E rules in relation to a company's basic life assurance and general annuity business, the provisions of this Part need to be read with section 88 of FA 2012 (which provides for the activities carried on by the company in the course of that business not to constitute the whole or any part of a trade or of a property business).

180

Omit sections 902 (excluded assets) and 903 (elections to exclude capital expenditure on computer software) and the italic heading before those sections.

181

Omit section 904 (transfers of life assurance business: transfers of assets treated as tax-neutral).

182

In section 906(3) (list of exceptions to general rule that Part 8 has priority for corporation tax purposes), omit paragraph (b) (but not the “and” at the end of that paragraph).

183

In section 931S(3) (company distributions: meaning of “small company”), in the definition of “insurance company”, for “section 431 of ICTA” substitute “ section 65 of FA 2012 ”.

184

In section 931W (provisions which must be given priority over Part 9A), omit subsection (3).

185

In section 985 (references to a deduction being allowed to a company), for subsection (4) substitute—

(4) If— (a) the company is a company in relation to which the I - E rules apply, and (b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business, the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.

186

In section 999 (deduction for costs of setting up SAYE option scheme or CSOP scheme), for subsection (5) substitute—

(5) If— (a) the company is a company in relation to which the I - E rules apply, and (b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business, the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.

187

• (1) Section 1000 (deduction for costs of setting up employee share ownership trust) is amended as follows.

• (2) In subsection (2), for “subsections (3) and (4)” substitute “ subsection (3) ”.

• (3) Omit subsection (4).

188

In section 1013 (relief if shares acquired by employee or other person: how relief is given), for subsection (4) substitute—

(4) If— (a) the employing company is a company in relation to which the I - E rules apply, and (b) the relief is referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the employing company's basic life assurance and general annuity business, the amount of relief is treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company referable to the accounting period.

189

In section 1021 (relief if employee or other person obtains option to acquire shares: how relief is given), for subsection (4) substitute—

(4) If— (a) the employing company is a company in relation to which the I - E rules apply, and (b) the relief is referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the employing company's basic life assurance and general annuity business, the amount of relief is treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company referable to the accounting period.

190

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

191

In section 1083 (refunds of expenditure treated as income chargeable to tax), omit subsections (4) and (5).

192

In section 1143(4) (overview of Part 14)—

• (a) in paragraph (a), for “life assurance business” substitute “ basic life assurance and general annuity business ”, and

• (b) in paragraph (b), for “ “life assurance company tax credits”” substitute “ “BLAGAB tax credits” ”.

193

• (1) Section 1153 (land remediation tax credit: amount of a loss which is “unrelieved”) is amended as follows.

• (2) In subsection (3), for the words from “, as a result of section 432AB(3) of ICTA,” to the end substitute “ , as a result of section 87(3) of FA 2012, the loss is treated for the purposes of section 76 of that Act as a deemed BLAGAB management expense for the relevant accounting period. ”

• (3) In subsections (4) to (6), for “section 76(12) of ICTA” substitute “ section 73 of FA 2012 ”.

• (4) In subsection (7), for paragraph (b) substitute—

(b) taken into account in calculating for the purposes of section 73 of FA 2012 the amount of adjusted BLAGAB management expenses of the company for the relevant accounting period as a result of— (i) the previous application of section 73 or 93 of FA 2012, or (ii) the carry forward to the relevant accounting period of an amount under section 391 of this Act (surplus deficit).

• (5) In subsection (8)—

• (a) in paragraph (b), for “section 432AA of ICTA” substitute “ section 86 of FA 2012 ”, and

• (b) in the words after that paragraph, for “section 432AB(4) of ICTA” substitute “ section 87(4) of FA 2012 ”.

194

• (1) Section 1158 (restriction on losses carried forward where tax credit claimed) is amended as follows.

• (2) In subsection (3)—

• (a) for paragraph (a) substitute—

(a) as a result of section 87(3) of FA 2012, a company's UK property business loss is treated for the purposes of section 76 of that Act as a deemed BLAGAB management expense for the accounting period,

and

• (b) in paragraph (b), for “section 76(12) of ICTA” substitute “ section 73 of FA 2012 ”.

• (3) In subsection (4), for “section 76(12) of ICTA” substitute “ section 73 of FA 2012 ”.

195

In the heading for Chapter 4 of Part 14, for “LIFE ASSURANCE BUSINESS” substitute “ BLAGAB ”.

196

Omit section 1159 (limitation on relief under Chapter 2 of Part 14: insurance companies) and the italic heading before that section.

197

In section 1160 (provision in respect of I minus E basis)—

• (a) for “The remaining provisions of this Chapter apply” substitute “ This Chapter applies ”, and

• (b) for “under the I minus E basis in respect of its life assurance business” substitute “ in respect of its basic life assurance and general annuity business in accordance with the I - E rules ”.

198

• (1) Section 1161 (relief in respect of I minus E basis: expenses payable) is amended as follows.

• (2) In subsection (6), for “section 76(7) of ICTA” substitute “ section 76 of FA 2012 ”.

• (3) In subsection (7)(a), for “life assurance business” substitute “ basic life assurance and general annuity business ”.

199

• (1) Section 1162 (additional relief) is amended as follows.

• (2) In subsection (3), for the words from “as expenses payable” to the end substitute “ for the purposes of section 76 of FA 2012 as deemed BLAGAB management expenses for the accounting period ”.

• (3) In subsection (4)(b), for the words from “which” to the end substitute “ of the expenditure which, for the purposes of section 76 of FA 2012, is not an ordinary BLAGAB management expense of the company referable to the accounting period as a result of the application of section 77(2)(b) of that Act ”.

200

In the italic heading before section 1164, for “Life assurance” substitute “ BLAGAB ”.

201

• (1) Section 1164 (entitlement to tax credit) is amended as follows.

• (2) In subsections (1) and (2)—

• (a) for “a life assurance company tax credit” substitute “ a BLAGAB tax credit ”, and

• (b) for “qualifying life assurance business loss” substitute “ qualifying BLAGAB loss ”.

• (3) In subsections (3) and (4), for “a life assurance company tax credit” substitute “ a BLAGAB tax credit ”.

202

• (1) Section 1165 (meaning of “qualifying life assurance business loss”) is amended as follows.

• (2) In subsection (1)—

• (a) in the opening words, for “ “qualifying life assurance business loss”” substitute “ “qualifying BLAGAB loss” ”, and

• (b) in paragraph (b), for “section 76(12) of ICTA (unrelieved expenses carried forward)” substitute “ section 73 of FA 2012 as excess BLAGAB expenses ”.

• (3) In subsection (2), for “section 76(12) of ICTA” substitute “ section 73 of FA 2012 as excess BLAGAB expenses ”.

• (4) In subsection (3), for paragraph (b) substitute—

(b) taken into account in calculating for the purposes of section 73 of FA 2012 the amount of adjusted BLAGAB management expenses of the company for the relevant accounting period as a result of— (i) the previous application of section 73 or 93 of FA 2012, or (ii) the carry forward to the relevant accounting period of an amount under section 391 of this Act (surplus deficit).

• (5) In subsection (4), for “qualifying life assurance business loss” substitute “ qualifying BLAGAB loss ”.

• (6) In the heading, for ““qualifying life assurance business loss”” substitute “ “qualifying BLAGAB loss” ”.

203

In section 1166(1) (amount of tax credit)—

• (a) for “life assurance company tax credit” substitute “ BLAGAB tax credit ”, and

• (b) for “qualifying life assurance business loss” substitute “ qualifying BLAGAB loss ”.

204

In section 1167(1) and (3)(a) (payment of tax credit etc), for “a life assurance company tax credit” substitute “ a BLAGAB tax credit ”.

205

• (1) Section 1168 (restriction on carrying forward expenses payable where tax credit claimed) is amended as follows.

• (2) In subsection (1), for “a life assurance company tax credit” substitute “ a BLAGAB tax credit ”.

• (3) In subsection (2)—

• (a) for “section 76 of ICTA” substitute “ section 73 of FA 2012 ”,

• (b) for “subsection (12) of that section” substitute “ that section as excess BLAGAB expenses ”, and

• (c) for “Step 7 in subsection (7) of that section” substitute “ step 5 in section 76 of FA 2012 ”.

• (4) In subsection (3), for “qualifying life assurance business loss” substitute “ qualifying BLAGAB loss ”.

206

In section 1169(2) (artificially inflated claims for relief or tax credit)—

• (a) in paragraph (c), for “life assurance business” substitute “ basic life assurance and general annuity business ”, and

• (b) in paragraph (d), for “life assurance company tax credits” substitute “ BLAGAB tax credits ”.

207

After section 1223 insert—

(1223A) (1) Sections 1219 to 1223 do not apply in relation to an accounting period of an insurance company with investment business so far as the business consists of basic life assurance and general annuity business. (2) See instead the rules set out in Chapter 3 of Part 2 of FA 2012.

208

• (1) Section 1251 (car hire) is amended as follows.

• (2) In subsection (3), after “subsection (2)” insert “ (including as applied by section 82(4) of FA 2012) ”.

• (3) In subsection (5)—

• (a) at the end of paragraph (a) insert “ or ”, and

• (b) omit paragraph (c) (together with the “or” before that paragraph).

209

In section 1288(4) (unpaid remuneration)—

• (a) in paragraph (a), after “business),” insert “ including as applied by section 82 of FA 2012 ”, and

• (b) omit paragraph (b) (together with the “and” before it).

210

• (1) Section 1297 (life assurance business) is amended as follows.

• (2) In subsection (1), for “section 76 of ICTA applies (expenses of companies carrying on life assurance business)” substitute “ the I - E rules apply ”.

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

• (4) In subsection (4)—

• (a) for “purposes of section 86 of FA 1989” substitute “ purpose of calculating the adjusted BLAGAB management expenses of the company for the purposes of section 73 of FA 2012 ”, and

• (b) for “payable for that period which fall to be included at Step 1 in section 76(7) of ICTA” substitute “ debited, in accordance with generally accepted accounting practice, in the accounts drawn up by the company for that period ”.

• (5) In subsection (5)(a), for “an amount being brought into account under section 76 of ICTA as expenses payable” substitute “ an amount constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012 ”.

• (6) For the heading substitute “ Basic life assurance and general annuity business ”.

211

In section 1298(2) (business entertainment and gifts), for paragraph (c) substitute—

(c) expenses to which this section applies are not to be regarded as constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012.

212

In section 1304 (crime-related payments), for subsection (3) substitute—

(3) Expenses to which subsection (4) or (5) applies are not to be regarded as constituting ordinary BLAGAB management expenses of a company for the purposes of section 76 of FA 2012.

213

• (1) Schedule 2 (transitionals and savings) is amended as follows.

• (2) In paragraph 139—

• (a) in sub-paragraph (3), for the words from “Section 76ZE” to “section 75)” substitute “ Section 81(4) of FA 2012 (which, in the case of companies carrying on basic life assurance and general annuity business, applies section 75(2) to (4)) ”,

• (b) in that sub-paragraph, for “condition in subsection (1) of that section” substitute “ conditions in paragraphs (a) and (b) of that subsection ”, and

• (c) in sub-paragraph (4), for “and section 76ZE of ICTA” substitute “ (including as applied by section 81(4) of FA 2012) ”.

• (3) In paragraph 140(1)(b), for “section 76ZL of ICTA” substitute “ the application by section 82 of FA 2012 of section 1249(1) to (3) of this Act ”.

214

In Schedule 4 (index of defined expressions)—

• (a) in the entry for “basic life assurance and general annuity business”, for “section 431F of ICTA (as applied by section 431(2) of that Act)” substitute “ sections 57 and 67(5) of FA 2012 (as applied by section 141(2) of that Act) ”,

• (b) omit the entry for “deposit back arrangements”,

• (c) omit the entry for “gross roll-up business”,

• (d) in the entry for “the I minus E basis”, for “I minus E basis” substitute “ I - E rules ” and for “section 431(2) of ICTA” substitute “ section 70(1) and (2) of FA 2012 (as applied by section 141(2) of that Act) ”,

• (e) in the entry for “insurance business transfer scheme”, for “section 431(2) of ICTA” substitute “ section 139(1) of FA 2012 (as applied by section 141(2) of that Act) ”,

• (f) in the entry for “insurance company”, for “section 431(2) of ICTA” substitute “ section 65 of FA 2012 (as applied by section 141(2) of that Act) ”,

• (g) omit the entry for “the Insurance Prudential Sourcebook”,

• (h) in the entry for “life assurance business”, for “section 431(2) of ICTA” substitute “ section 56 of FA 2012 (as applied by section 141(2) of that Act) ”,

• (i) omit the entry for “linked assets”,

• (j) in the entry for “long-term business”, for “section 431(2) of ICTA” substitute “ section 63 of FA 2012 (as applied by section 141(2) of that Act) ”,

• (k) omit the entry for “long-term insurance fund”,

• (l) in the entry for “overseas life insurance company”, for “section 431(2) of ICTA” substitute “ section 139(1) of FA 2012 (as applied by section 141(2) of that Act) ”, and

• (m) omit the entry for “qualifying overseas transfer”.

Corporation Tax Act 2010

215

CTA 2010 is amended as follows.

216

In section 17(3) (interpretation of Chapter: meaning of “carried-forward amount”)—

• (a) in paragraph (f), for “section 76(12) or (13) of ICTA (certain expenses of insurance companies)” substitute “ section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies) ”, and

• (b) omit paragraph (g).

217

In section 54(2) (non-UK resident company: receipts of interest, dividends or royalties), for the words from “any of these provisions—” to the end substitute “ section 37 or 45 ”.

218

In Chapter 4 of Part 4 (property losses), after section 67A insert—

(67B) (1) This Chapter does not apply for the purpose of applying the I - E rules in relation to a loss made by an insurance company in any of its separate UK property businesses or overseas property businesses within section 86(4) of FA 2012. (2) But in the case of a loss which is referable, in accordance with Chapter 4 of Part 2 of that Act, to the company's basic life assurance and general annuity business, see section 87(3) and (4) of that Act.

219

In section 606(5) (groups), in the definition of “insurance company”, for “section 431(2) of ICTA” substitute “ section 65 of FA 2012 ”.

220

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221

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222

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223

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224

In section 835(2) (transferor or associate becomes liable for payment of rent), for paragraph (c) substitute—

(c) a deduction is allowed for the payment by taking it into account in the calculation at step 1 of section 76 of FA 2012 (management expenses of insurance companies carrying on basic life assurance and general annuity business).

225

In section 836(2) (transferor or associate becomes liable for payment other than rent), for paragraph (c) substitute—

(c) a deduction is allowed for the payment by taking it into account in the calculation at step 1 of section 76 of FA 2012 (management expenses of insurance companies carrying on basic life assurance and general annuity business).

226

• (1) Section 839 (deduction under section 76 of ICTA not to exceed commercial rent) is amended as follows.

• (2) In subsection (1), for “the deduction under section 76 of ICTA allowed for” substitute “ the amount to be taken into account as mentioned in section 835(2)(c) or 836(2)(c) in respect of ”.

• (3) In subsection (3), for “The deduction” substitute “ The amount of the payment to be taken into account ”.

• (4) In the heading, omit “under section 76 of ICTA”.

227

• (1) Section 840 (carrying forward parts of payments) is amended as follows.

• (2) In subsection (2), for “allowed as a deduction under section 76 of ICTA is not allowed” substitute “ taken into account as mentioned in section 835(2)(c) or 836(2)(c) is not taken into account ”.

• (3) In subsection (4), for “a deduction under section 76 of ICTA” substitute “ the calculation at step 1 of section 76 of FA 2012 ”.

• (4) In subsection (5), for “allowed as a deduction under section 76 of ICTA” substitute “ taken into account in the calculation at step 1 of section 76 of FA 2012 ”.

228

In section 860 (relevant corporation tax relief), for paragraph (d) (but not the “and” at the end of that paragraph) substitute—

(d) a deduction of an amount which for the purposes of section 73 of FA 2012 is an amount of adjusted BLAGAB management expenses of an insurance company for an accounting period,

.

229

In section 886 (relevant tax relief), for paragraph (c) substitute—

(c) a deduction of an amount which for the purposes of section 73 of FA 2012 is an amount of adjusted BLAGAB management expenses of an insurance company for an accounting period,

.

230

In section 1171(2) (powers under orders and regulations excluded from general provision)—

• (a) omit the “and” before paragraph (g), and

• (b) after that paragraph insert

, and (h) Parts 2 and 3 of FA 2012.

231

In section 1173(2) (miscellaneous charges), in Part 3 of the table, omit—

• (a) the entry relating to section 436A(1) of ICTA,

• (b) the entry relating to section 442A(1) of ICTA,

• (c) the entry relating to section 85(1) of FA 1989, and

• (d) the entry relating to section 85A(1) of FA 1989.

Taxation (International and Other Provisions) Act 2010

232

TIOPA 2010 is amended as follows.

233

In section 43(7) (profits attributable to permanent establishments for purposes of section 42(2)), omit “(within the meaning given by section 431(2) of ICTA)”.

234

In section 72(2) (application of section 73(1)), omit paragraph (b) (together with the “or” before it).

235

In section 96(1) (companies with overseas branches: restriction of credit)—

• (a) omit “or section 436A of ICTA”,

• (b) omit “, calculated in accordance with the provisions applicable for the purposes of section 35 of CTA 2009,” and

• (c) for “life assurance business or gross roll-up business” substitute “ non-BLAGAB long-term business ”.

236

For section 97 substitute—

(97) (1) This section applies if— (a) an insurance company carries on more than one category of long-term business in an accounting period, and (b) there arises to the company in that period any income or gain (“the relevant income”) in respect of which credit for foreign tax is to be allowed under the arrangements. (2) The amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable, in accordance with Part 2 of FA 2012, to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with subsection (3), is attributable to that category of business. (3) The fraction of the foreign tax that is attributable to the category of business in question is the fraction given by— $$RPRI TRI$where—RPRI is the amount of the relevant income referable to the category of business in question in accordance with section 97A, andTRI is the total amount of the relevant income.$ (97A) (1) The amount of the relevant income that, for the purposes of section 97, is to be regarded as referable to a category of business is to be determined in accordance with an acceptable commercial method adopted by the company for the period of account in which the relevant income arises. (2) A method is an “acceptable commercial method” if, in all the circumstances, it can reasonably be regarded as providing a fair method for the purposes of section 97 for determining for a period of account the amount of any income or gain arising in the period that is referable to a particular category of long-term business carried on by the company. (3) The Treasury may make regulations for the purposes of this section— (a) prescribing cases in which a method is, or is not, to be regarded as an acceptable commercial method, and (b) prescribing cases in which the only acceptable commercial method is to be a method prescribed, or of a description prescribed, in the regulations. (4) Subject to any provision made by regulations under subsection (3), the method adopted for the purposes of this section for a period of account must be consistent with the method adopted for the purposes of section 98 or 115 of FA 2012 for that period.

237

Omit section 98 (attribution for section 97 purposes if category is gross roll-up business).

238

In section 99(7) (allocation of expense etc in calculations under section 35 of CTA 2009), for “98” substitute “ 97A ”.

239

Omit section 102 (interpreting sections 99 to 101 for life assurance or gross roll-up business).

240

• (1) Section 103 (interpreting sections 99 to 101 for other insurance business) is amended as follows.

• (2) In subsection (1), omit the words from “if” to the end.

• (3) In the heading, omit “for other insurance business”.

241

In section 104(3) (interpreting sections 100 and 101: amounts referable to category of business), for “98” substitute “ 97A ”.

242

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

243

In section 310(2) (meaning of “carried-forward amount”)—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) omit paragraph (b).

244

In Part 1 of Schedule 11 (index of defined expressions used in Parts 2 and 3 of Act), insert the following entries at the appropriate places—

insurance company	section 65 of FA 2012 (as applied by section 141(2) of that Act)
long-term business	section 63 of FA 2012 (as applied by section 141(2) of that Act)
---	---

Finance Act 2011

245

FA 2011 is amended as follows.

246

In paragraph 73(2) of Schedule 19 (bank levy: meaning of “excluded entity”), for “meaning given by section 431(2) of ICTA” substitute “ meanings given by sections 65 and 139 of FA 2012 respectively ”.

PART 4 — Consequential repeals

247

In consequence of the amendments made by Parts 1 to 3 of this Schedule (or previous amendments made by other enactments), omit the following provisions—

• (a) in FA 1989—

• (i) section 84(4), and

• (ii) Schedule 8,

• (b) in FA 1990—

• (i) sections 41 and 42,

• (ii) section 45(1) to (7) and (9) to (11),

• (iii) section 48,

• (iv) paragraphs 1, 4 and 8 of Schedule 6,

• (v) Schedule 7, and

• (vi) paragraphs 4 and 7 of Schedule 9,

• (c) in FA 1991—

• (i) paragraphs 5 and 12 of Schedule 7, and

• (ii) paragraph 15 of Schedule 15,

• (d) in TCGA 1992, paragraph 14(22) to (24) of Schedule 10,

• (e) in FA 1993, section 103(1) and (3),

• (f) in FA 1995—

• (i) section 51,

• (ii) Schedule 8, and

• (iii) paragraph 1 of Schedule 9,

• (g) in FA 1996—

• (i) section 163,

• (ii) section 167(3) and (10),

• (iii) section 168(2),

• (iv) paragraph 23 of Schedule 14,

• (v) Schedule 31, and

• (vi) Schedule 33,

• (h) in FA 1997, section 67,

• (i) in FA 1998—

• (i) section 123(5)(a), and

• (ii) paragraph 39 of Schedule 5,

• (j) in FA 2000, sections 108 and 109,

• (k) in FA 2003, paragraphs 1, 2, 5, 8, 10, 12, 20, 22 to 24 and 29 of Schedule 33,

• (l) in FA 2004—

• (i) sections 40 and 41,

• (ii) section 44,

• (iii) Schedule 6,

• (iv) paragraphs 5, 8 and 9(2) of Schedule 7, and

• (v) paragraph 20 of Schedule 35,

• (m) in F(No.2)A 2005, paragraphs 1 to 3, 5, 10, 12 to 15, 17 and 18 of Schedule 9,

• (n) in ITTOIA 2005, paragraphs 176 and 178 of Schedule 1,

• (o) in FA 2006—

• (i) section 86, and

• (ii) Schedule 11,

• (p) in FA 2007—

• (i) paragraphs 3, 6, 8 to 14, 16, 17, 19, 21 to 23, 25, 26, 31 to 33, 35 to 38, 57 to 59 and 80 to 84 of Schedule 7,

• (ii) paragraphs 2 to 6, 8, 9, 11 to 16, 28 and 29 of Schedule 8,

• (iii) paragraphs 1(1) and (3), 3(1) and (3), 4 to 8, 10, 11(3), 12, 15 and 16 of Schedule 9, and

• (iv) paragraphs 2(1), 4, 11 to 13 and 15(1) to (3) of Schedule 10,

• (q) in FA 2008—

• (i) paragraph 2 of Schedule 14, and

• (ii) paragraphs 1, 2, 4 to 6, 8, 9(2) and (3), 10, 11, 17, 18, 20 to 22, 26, 28(3) and (4), 31 to 34 and 37 of Schedule 17,

• (r) in CTA 2009, paragraphs 30 to 44, 126 to 154, 282, 307(3)(a) and 341 to 351 of Schedule 1,

• (s) in FA 2009—

• (i) section 46,

• (ii) paragraph 24 of Schedule 7,

• (iii) paragraph 60 of Schedule 11, and

• (iv) paragraphs 1 to 7 of Schedule 23,

• (t) in CTA 2010, paragraphs 9, 10, 42 to 51, 213 and 214 of Schedule 1,

• (u) in FA 2010, section 47,

• (v) in F(No.2)A 2010, section 9,

• (w) in F(No.3)A 2010, section 15,

• (x) in TIOPA 2010, paragraph 34 of Schedule 8, and

• (y) in FA 2011, section 56.

SCHEDULE 17

PART 1 — Deemed receipts or expenses

General outline of the provision of this Part of this Schedule

1

• (1) This Part of this Schedule makes provision, by reference to the 2012 balance sheet and the 2012 periodical return of an insurance company (see paragraphs 2 to 4), for deeming amounts to be receipts or expenses of basic life assurance and general annuity business, or non-BLAGAB long-term business, carried on by the company (see paragraphs 9(1) and (2) and 10(1) and (2)).

• (2) Those amounts are determined in accordance with provision made by or under paragraphs 5 to 8.

• (3) The deeming is to have effect for the purpose of calculating the BLAGAB trade profit or loss or (as the case may be) for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business (see paragraphs 9(3) and 10(3)).

• (4) The general rule is that, subject to exceptions, the receipts or expenses are treated as arising over a 10-year period (see paragraphs 11 to 15).

• (5) Special provision is made in relation to the operation of sections 83YC to 83YF of FA 1989 (see paragraph 16).

• (6) Anti-avoidance provision is made by paragraphs 17 to 19.

• (7) Provision in relation to overseas life insurance companies is made by paragraph 20.

Basic concepts

2

In this Part of this Schedule—

• “the 2012 balance sheet”, in relation to an insurance company, means—an actual balance sheet of the company drawn up as at the end of 31 December 2012 in accordance with generally accepted accounting practice, ora deemed balance sheet of the company under paragraph 3, and

• “the 2012 periodical return”, in relation to an insurance company, means—an actual periodical return of the company covering a period ending immediately before 1 January 2013, ora deemed periodical return of the company under paragraph 4.

3

• (1) This paragraph applies if an insurance company does not have a balance sheet drawn up as at the end of 31 December 2012 in accordance with generally accepted accounting practice.

• (2) For the purposes of this Part of this Schedule the company is deemed to have drawn up a balance sheet as at the end of 31 December 2012 in accordance with generally accepted accounting practice.

• (3) For the purposes of this Part of this Schedule the entries shown in this deemed balance sheet are deemed to be those entries which would have been shown in an actual balance sheet of the company drawn up as mentioned in sub-paragraph (1).

• (4) The generally accepted accounting practice that is to be applicable for the purposes of sub-paragraphs (2) and (3) is the practice that is actually adopted for the accounts of the company drawn up for the period in which 31 December 2012 falls.

4

• (1) This paragraph applies if an insurance company does not have a periodical return covering a period ending immediately before 1 January 2013.

• (2) For corporation tax purposes the company is deemed to have a periodical return covering the period—

• (a) beginning immediately after the last period ending before 1 January 2013 that is covered by a periodical return of the company, and

• (b) ending immediately before 1 January 2013.

• (3) This deemed periodical return is deemed to contain such entries as would be included in an actual periodical return of the company covering the period beginning and ending as mentioned in sub-paragraph (2)(a) and (b).

• (4) For corporation tax purposes the period beginning and ending as mentioned in sub-paragraph (2)(a) and (b) is deemed to be a period of account of the company.

The comparison etc

5

• (1) In the case of an insurance company, a comparison must be made between—

• (a) the amount attributed to shareholders as at 31 December 2012 (see sub-paragraphs (2) to (4)), and

• (b) the cumulative taxed surplus as at 31 December 2012 (see sub-paragraph (5) and (6)).

• (2) The amount attributed to shareholders as at 31 December 2012 is—

• (a) the amount shown in line 75 of Form 14 of the 2012 periodical return in respect of the whole of the company's long-term business, less

• (b) the amount (if any) shown in the 2012 balance sheet of the company in respect of the fund for future appropriations or unallocated divisible surplus.

• (3) In prescribed cases the amount attributed to shareholders as at 31 December 2012 is to be found by making prescribed adjustments to the amount found by sub-paragraph (2)(a) and (b).

• (4) In sub-paragraph (3) “prescribed” means prescribed, or of a description prescribed, by regulations made by the Treasury.

The regulations may be made so as to have effect in relation to any period beginning before but ending on or after the day on which the regulations are made (as well as in relation to periods no part of which falls before that day).

• (5) The cumulative taxed surplus as at 31 December 2012 is found by adding together the amounts (if any) found by the following paragraphs—

• (a) the amount shown in line 13 of Form 14 of the 2012 periodical return in respect of the whole of the company's long-term business but excluding the amount representing any undistributed demutualisation surplus of the company for the period of account ending immediately before 1 January 2013, and

• (b) the total amount brought into account for any period of account of the company as a result of section 83YA(3) of FA 1989 less the total amount brought into account for any period of account as a result of section 83YA(4) of FA 1989 (changes in value of assets brought into account: non-profit companies).

• (6) In sub-paragraph (5)(a) “undistributed demutualisation surplus” means the undistributed demutualisation surplus of the company for the period of account in question for the purposes of section 444AF of ICTA.

• (7) The difference between the amount attributed to shareholders as at 31 December 2012 and the cumulative taxed surplus as at 31 December 2012 is referred to in this Part of this Schedule as “the total transitional difference”.

• (8) If the amount attributed to shareholders as at 31 December 2012 exceeds the cumulative taxed surplus as at 31 December 2012, the total transitional difference is a positive figure.

• (9) If the cumulative taxed surplus as at 31 December 2012 exceeds the amount attributed to shareholders as at 31 December 2012, the total transitional difference is a negative figure.

6

• (1) The insurance company—

• (a) must, by comparing amounts shown in the 2012 periodical return with amounts shown in the 2012 balance sheet, determine the particular items that, when taken together, result in the total transitional difference, and

• (b) must allocate a positive or negative amount to each of those items.

• (2) The positive or negative amounts allocated to those items in accordance with this paragraph must, when added together, equal the total transitional difference.

• (3) The Treasury may make regulations prescribing—

• (a) the way in which the comparison or determination under sub-paragraph (1)(a) must be done, and

• (b) the method for making the allocation under sub-paragraph (1)(b).

• (4) The provision that may be made by regulations under sub-paragraph (3)(a) includes provision prescribing descriptions of amounts which are, or are not, to be compared with each other.

7

• (1) Each of the items determined in accordance with paragraph 6(1)(a) is a “relevant computational item” for the purposes of this Part of this Schedule except in so far as it consists of an excluded item.

• (2) An item is “an excluded item” in so far as it—

• (a) represents an amount forming part of the company's deferred acquisition costs which is included in its 2012 balance sheet and which has been taken into account in calculating its life assurance trade profits,

• (b) represents an amount which is included in the company's 2012 balance sheet as an asset in respect of the value of future profits arising from a business (or part of a business) transferred to the company (but excluding an asset so far as it is regarded for accounting purposes as internally-generated),

• (c) represents an outstanding contingent loan or an outstanding re-insurance amount,

• (d) represents an asset to which Part 8 of CTA 2009 (intangible fixed assets) applies for an accounting period of the company beginning on or after 1 January 2013, or

• (e) falls within a description of item excluded for the purposes of this paragraph by regulations made by the Treasury.

• (3) In sub-paragraph (2)(c) “outstanding contingent loan” means the total amount of the credits brought into account by the company as part of total income—

• (a) for the period of account ending immediately before 1 January 2013, or

• (b) for any earlier period of account,

in respect of money debts so far as those debts have not been repaid before that date.

• (4) In sub-paragraph (2)(c) “outstanding re-insurance amount” means the total of the amounts which would (but for section 83YF(2) of FA 1989) have been taken into account in calculating the company's life assurance trade profits—

• (a) for the period of account ending immediately before 1 January 2013, or

• (b) for any earlier period of account,

in respect of the re-insurance of relevant liabilities (within the meaning of section 83YC of FA 1989) to the extent that they have not ceased to be re-insured before that date.

• (5) In this paragraph “life assurance trade profits” means profits arising from life assurance business calculated in accordance with the provisions applicable for the purposes of the taxation of such profits under section 35 of CTA 2009 (charge on trade profits).

• (6) For any accounting period beginning on or after 1 January 2013, an amount is not to be taken into account—

• (a) in calculating the BLAGAB trade profit or loss of any basic life assurance and general annuity business, or

• (b) in calculating for corporation tax purposes the profits of non-BLAGAB long-term business,

in so far as the amount consists of an excluded item as a result of falling within sub-paragraph (2)(a) to (d) or, in a case where the regulations provide for the application of this sub-paragraph, within sub-paragraph (2)(e).

8

• (1) Each relevant computational item must be apportioned between—

• (a) any basic life assurance and general annuity business carried on by the company as at 31 December 2012,

• (b) any gross roll-up business carried on by the company as at that date, and

• (c) any PHI business carried on by the company as at that date.

• (2) The Treasury may make regulations for apportioning for the purposes of this Part of this Schedule relevant computational items between those businesses (including provision for the whole amount of a relevant computational item to be apportioned to one of those businesses).

• (3) A relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company's basic life assurance and general annuity business or gross roll-up business is dealt with in accordance with paragraph 9 or 10.

• (4) But a relevant computational item (or a part of a relevant computational item) allocated in accordance with this paragraph to the company's PHI business is ignored in the application of the remaining provisions of this Part of this Schedule.

Deemed receipts or expenses of BLAGAB or non-BLAGAB long-term business

9

• (1) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company's basic life assurance and general annuity business is a positive amount, the item (or part of the item) is to be treated as a receipt of that business.

• (2) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company's basic life assurance and general annuity business is a negative amount, the item (or part of the item) is to be treated as an expense of that business.

• (3) Receipts and expenses within this paragraph are to be taken into account, in accordance with the provisions of this Part of this Schedule, in calculating the BLAGAB trade profit or loss of that business for accounting periods beginning on or after 1 January 2013.

• (4) Receipts within this paragraph are to count as excluded receipts for the purposes of section 92.

10

• (1) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company's gross roll-up business is a positive amount, the item (or part of the item) is to be treated as a receipt of the company's non-BLAGAB long-term business.

• (2) If a relevant computational item (or a part of a relevant computational item) allocated in accordance with paragraph 8 to the company's gross roll-up business is a negative amount, the item (or part of the item) is to be treated as an expense of the company's non-BLAGAB long-term business.

• (3) Receipts and expenses within this paragraph are to be taken into account, in accordance with the provisions of this Part of this Schedule, in calculating for corporation tax purposes the profits of the company's non-BLAGAB long-term business for accounting periods beginning on or after 1 January 2013.

Period over which deemed receipts or expenses arise

11

• (1) A receipt or expense within paragraph 9 or 10 is to be treated as arising over the period of 10 years beginning with 1 January 2013.

• (2) The amount of the receipt or expense apportioned to (and treated as arising in) any accounting period falling wholly or partly in that 10-year period is to be determined in proportion to the number of days of the accounting period falling within that 10-year period.

• (3) This paragraph does not apply to a receipt which consists of a relevant court-protected item within the meaning of paragraph 12.

• (4) This paragraph is subject to paragraphs 13 to 15 (transfers and cessation of business etc).

12

• (1) For the purposes of this paragraph a “relevant court-protected item” means a relevant computational item that relates to an excess of assets over liabilities held in a non-profit fund in respect of which an order made by a court is in force preventing the distribution of the excess (in any circumstances whatever) before the end of a period specified in the order.

• (2) A receipt within paragraph 9 or 10 consisting of a relevant court-protected item is to be treated as arising over the period of 10 years beginning with the relevant day.

• (3) The relevant day is whichever of the following days occurs first—

• (a) the day on which the court order ceases to be in force, or

• (b) 1 January 2015.

• (4) The amount of the receipt apportioned to (and treated as arising in) any accounting period falling wholly or partly in that 10-year period is to be determined in proportion to the number of days of the accounting period falling within that 10-year period.

• (5) This paragraph is subject to paragraphs 13 to 15 (transfers and cessation of business etc).

13

• (1) This paragraph applies if—

• (a) under an insurance business transfer scheme, there is a transfer from one insurance company to another of basic life assurance and general annuity business (or any part of that business) or non-BLAGAB long-term business (or any part of that business),

• (b) the transfer is a relevant intra-group transfer, and

• (c) the transfer occurs at a time when the full amount of the receipts or expenses within paragraph 9 or 10 of the business the whole or part of which is transferred has not been treated as arising.

• (2) A transfer is a “relevant intra-group transfer” for the purposes of this paragraph if—

• (a) the transferor and the transferee are members of the same group of companies when the transfer occurs (as determined in accordance with section 170(2) to (11) of TCGA 1992), and

• (b) the transferee is within the charge to corporation tax in relation to the transfer.

• (3) The receipts or expenses are to continue to be dealt with in accordance with the provisions of this Schedule, but are treated as arising to the transferee over so much of the 10-year period in question as falls on or after the date on which the transfer takes place.

• (4) If only part of a business is transferred—

• (a) the appropriate amount of the receipts or expenses is treated as arising to the transferee over so much of the 10-year period in question as falls on or after the date on which the transfer takes place, and

• (b) the remainder of the receipts or expenses is treated as arising to the transferor over so much of that period.

• (5) In sub-paragraph (4)(a), “the appropriate amount” means the amount which fairly represents the value of the receipts or expenses attributable to the part of the business transferred immediately before the transfer.

• (6) For the purposes of this paragraph and paragraphs 11 and 12 the accounting periods of the transferor and the transferee in which the transfer takes place are deemed to end immediately before the transfer takes place.

14

• (1) This paragraph applies if—

• (a) under an insurance business transfer scheme, there is a transfer from one insurance company to another of basic life assurance and general annuity business (or any part of that business) or non-BLAGAB long-term business (or any part of that business),

• (b) the transfer is not a relevant intra-group transfer for the purposes of paragraph 13, and

• (c) the transfer occurs at a time when the full amount of the deemed receipts or expenses of the relevant business has not been treated as arising to the transferor.

• (2) The remaining amount of the deemed receipts or expenses of the relevant business is to be treated as arising to the transferor in the accounting period in which the transfer takes place.

• (3) In this paragraph references to the deemed receipts or expenses of the relevant business—

• (a) are references to the receipts or expenses within paragraph 9 or 10 of the business the whole or part of which is transferred, but

• (b) do not include references to so much of those receipts or expenses as fall (or have fallen) to be treated as arising to a company other than the company which is the transferor for the purposes of this paragraph.

15

• (1) This paragraph applies if—

• (a) an insurance company ceases at any time to carry on basic life assurance and general annuity business or non-BLAGAB long-term business otherwise than as a result of a transfer under an insurance business transfer scheme, and

• (b) at that time the full amount of the deemed receipts or expenses of the business concerned has not been treated as arising to the company.

• (2) The remaining amount of the deemed receipts or expenses of the business concerned is to be treated as arising to the company in the accounting period in which it ceases to carry on the business concerned.

• (3) For the purposes of this paragraph an insurance company is to be regarded as ceasing to carry on a business at any time if, at that time, it ceases to be within the charge to corporation tax in relation to the business.

• (4) In this paragraph references to the deemed receipts of the business concerned—

• (a) are references to the receipts or expenses within paragraph 9 or 10 of the business concerned, but

• (b) do not include references to so much of those receipts or expenses as fall (or have fallen) to be treated as arising to a company other than the company concerned.

Financing-arrangement-funded transfers to shareholders in relation to non-profit funds

16

• (1) This paragraph applies if, as at 1 January 2013, an insurance company has an unrelieved charge under subsection (3) of section 83YC of FA 1989 (FAFTS: charge in relevant period of account).

• (2) An insurance company has, as at that date, an unrelieved charge under that subsection if either—

• (a) that subsection has operated in the case of the company for the period of account ending immediately before that date (“the 2012 period of account”), or

• (b) that subsection has operated in the case of the company for one or more earlier periods of account, and the total of the amounts which are the relevant amount for the 2012 period of account or those earlier periods under section 83YD of FA 1989 does not exceed the amount which is the taxed amount under that section.

• (3) The appropriate amount of the unrelieved charge is to be treated for the purposes of this Part of this Schedule as if it were a relevant computational item of a negative amount.

• (4) The appropriate amount of the unrelieved charge is whichever is the smaller of—

• (a) in a case within sub-paragraph (2)(a), the amount brought into account under section 83YC(3) of FA 1989, or, in a case within sub-paragraph (2)(b), the amount by which the taxed amount mentioned there exceeds the relevant amount mentioned there, and

• (b) the sum of the outstanding debt amount and the outstanding re-insurance amount.

• (5) “The outstanding debt amount” means the total amount of the credits brought into account by the company in relation to a non-profit fund for the purposes of section 83YC of FA 1989 as part of total income—

• (a) for the 2012 period of account, or

• (b) for any earlier period of account,

in respect of relevant money debts to the extent that they have not been repaid before that date.

• (6) “The outstanding re-insurance amount” means the total of the amounts which would (but for section 83YF(2) of FA 1989) have been taken into account in calculating the profits of the company's life assurance business in accordance with the life assurance trade profits provisions—

• (a) for the 2012 period of account, or

• (b) for any earlier period of account,

in respect of the re-insurance of relevant liabilities to the extent that they have not ceased to be re-insured before that date.

• (7) Any expression which is used in this paragraph and in section 83YC of FA 1989 has the same meaning in this paragraph as in that section.

• (8) In this paragraph references to sections 83YC and 83YD of FA 1989 include references to those sections as they have effect in accordance with paragraph 4(2) to (6) of Schedule 17 to FA 2008.

Anti-avoidance

17

• (1) This paragraph applies if—

• (a) on or after 21 March 2012 an insurance company (“C”) enters into any arrangements or does any other thing directly or indirectly for the purposes of, or in connection with, the operation of the transitional rules, and

• (b) the main purpose, or one of the main purposes, of C in entering into the arrangements or doing the other thing is an unallowable purpose.

• (2) A purpose is an “unallowable purpose” if—

• (a) it consists of securing a tax advantage for C or any other company which is connected to the operation of the transitional rules, or

• (b) it is not amongst C's business or other commercial purposes.

• (3) If a tax advantage connected to the operation of the transitional rules arises to C, an officer of Revenue and Customs may make such adjustments as are required to negate the tax advantage so far as referable to the unallowable purpose on a just and reasonable apportionment.

• (4) If a tax advantage connected to the operation of the transitional rules arises to a company other than C, an officer of Revenue and Customs may make such adjustments as are required to negate the tax advantage.

• (5) The power to make adjustments under this paragraph includes power to make adjustments by any of the following means—

• (a) an amendment of the company's tax return under paragraph 34(2) or (2A) of Schedule 18 to FA 1998 (amendment after enquiry),

• (b) an assessment,

• (c) the nullifying of a right to repayment,

• (d) the requiring of the return of a repayment already made, and

• (e) the calculation or recalculation of profits or gains or liability to corporation tax.

• (6) Nothing in this paragraph authorises the making of an assessment later than 6 years after the accounting period to which the tax advantage relates.

• (7) For the purposes of this paragraph—

• (a) “arrangement” includes any agreement, scheme, transaction or understanding (whether or not legally enforceable),

• (b) the reference to the operation of the transitional rules is a reference to the operation of any provision made by or under this Part of this Schedule,

• (c) one example (among others) of entering into arrangements or otherwise doing something for the purposes of, or in connection with, the operation of those rules is entering into the arrangements or otherwise doing the thing to secure that an item is, or is not, taken into account in calculating the total transitional difference, and

• (d) section 1139 of CTA 2010 (meaning of “tax advantage”) applies, but reading references to tax as references to corporation tax.

• (8) If C is not within the charge to corporation tax in respect of a part of its activities, C's business or other commercial purposes for the purposes of this paragraph do not include the purposes of that part of its activities.

• (9) This paragraph does not apply in any case if section 132 applies in that case.

18

• (1) Paragraph 17 does not apply if, on an application by C, HMRC Commissioners give a notice under this paragraph stating that they are satisfied that the doing of the relevant things is or will be such that no action ought to be taken by an officer of Revenue and Customs under that paragraph.

• (2) The reference here to the doing of the relevant things is a reference to the entering into of any arrangements, or the doing of any other thing, directly or indirectly for the purposes of, or in connection with, the operation of the transitional rules (within the meaning of paragraph 17).

19

• (1) An application under paragraph 18 must—

• (a) be in writing, and

• (b) contain particulars of the arrangements or the thing done or proposed to be done.

• (2) HMRC Commissioners may by notice require C to provide further particulars in order to enable them to determine the application.

• (3) A requirement may be imposed under sub-paragraph (2) within 30 days of the receipt of the application or of any further particulars required under that sub-paragraph.

• (4) If a notice under that sub-paragraph is not complied with within 30 days or such longer period as HMRC Commissioners may allow, they need not proceed further on the application.

• (5) HMRC Commissioners must give notice to C of their decision on an application under paragraph 18—

• (a) within 30 days of receiving the application, or

• (b) if they give a notice under sub-paragraph (2), within 30 days of that notice being complied with or within such longer period as may be agreed with C.

• (6) If any particulars provided under this paragraph do not fully and accurately disclose all facts and considerations material for the decision of HMRC Commissioners, any resulting notice under paragraph 18 is void.

Overseas life insurance companies

20

Receipts or expenses are not to be treated as arising under this Part of this Schedule in a case where—

• (a) an overseas life insurance company has, in accordance with international accounting standards or the Council Directive of 19th December 1991 on the annual accounts and consolidated accounts of insurance undertakings (No 91/674/EEC), prepared accounts for a period which includes 31 December 2012, and

• (b) parts of the income statements or the technical accounts (or part of the technical accounts) included in those accounts are recognised for the purposes of sections 82A to 83ZA of FA 1989 as a result of provision made by regulation 24 of the Overseas Life Insurance Companies Regulations 2006.

PART 2 — Specific transitional provisions

Insurance company with BLAGAB consisting wholly of protection business

21

• (1) This paragraph applies if—

• (a) in its first accounting period to which this Part applies an insurance company carries on business which, under the old law, would have been basic life assurance and general annuity business,

• (b) the business in question consists wholly of the effecting or carrying out of contracts of long-term insurance in relation to which the condition in section 62(2)(a) is met, and

• (c) some or all of the contracts are made before 1 January 2013.

• (2) On or before the filing date for that accounting period, the company may make an election for the contracts made before that date to be treated for the purposes of section 62 as if they were made on or after that date.

• (3) Accordingly, no relief is available for any amount that, but for the election, would have constituted excess BLAGAB expenses for that accounting period.

• (4) The election has effect for the first accounting period of the company to which this Part applies and all subsequent accounting periods.

• (5) The election is irrevocable.

• (6) In this paragraph—

• “the filing date”, in relation to an accounting period of an insurance company, means the date which, for the purposes of paragraph 14 of Schedule 18 to FA 1998, is the filing date for the company's tax return for that period, and

• “the old law” means the law as it had effect immediately before the day on which this Act is passed.

Disregard of amounts previously taken into account for tax purposes

22

• (1) This paragraph applies if, for an accounting period ending before 1 January 2013, an amount is taken into account in calculating the profits of an insurance company arising from life assurance business in accordance with the provisions applicable for the purposes of the taxation of such profits under section 35 of CTA 2009 (charge on trade profits).

• (2) For any accounting period beginning on or after 1 January 2013—

• (a) the amount is not to be taken into account in calculating the BLAGAB trade profit or loss of any basic life assurance and general annuity business carried on by the company, and

• (b) the amount is not to be taken into account in calculating for corporation tax purposes the profits of any non-BLAGAB long-term business carried on by the company.

• (3) If the business mentioned in sub-paragraph (1) (or any part of that business) is transferred under an insurance business transfer scheme to another insurance company—

• (a) references in sub-paragraph (2) to the company include the transferee, and

• (b) references in sub-paragraph (2) to the amount include an amount that derives from the amount mentioned in sub-paragraph (1) and include so much of an amount as is taken into account in any calculation required under section 129(6)(a) or (b) and as is referable to the amount mentioned in sub-paragraph (1) (and, accordingly, section 129(7) is subject to the operation of this paragraph).

23

For the purposes of section 76 an expense is to be treated as deductible under another relevant rule so far as it was brought into account at Step 1 in section 76(7) of ICTA as an expense referable to an accounting period ending before 1 January 2013.

Intangible fixed assets

24

• (1) This paragraph applies to assets—

• (a) which, under the old law, were assets excluded from Part 8 of CTA 2009 (intangible fixed assets), and

• (b) which, as a result of provision made by this Part of this Act, become assets which are not excluded from Part 8 of that Act.

• (2) Any expenditure incurred before 1 January 2013 on an asset to which this paragraph applies is to be left out of account in determining any amount to be brought into account under Part 8 of CTA 2009.

• (3) Section 780 of CTA 2009 (company ceasing to be member of group: deemed realisation and re-acquisition at market value) is not to apply in relation to any asset to which this paragraph applies.

• (4) For the purposes of this paragraph references to an asset's exclusion from Part 8 of CTA 2009 includes its exclusion from that Part except as respects royalties.

• (5) In this paragraph “the old law” means the law as it had effect immediately before the day on which this Act is passed.

Assets held for purposes of long-term business

25

• (1) The rules in sections 116 to 118 apply in relation to anything occurring on or after 1 January 2013 (and the rules in section 440 of ICTA, including as modified, apply in relation to anything occurring before that date).

• (2) Accordingly, the replacement of the rules in section 440 of ICTA with the different rules in sections 116 to 118 is not by itself sufficient to give rise to a deemed disposal and re-acquisition for the purposes of corporation tax on chargeable gains.

26

• (1) The rules in sections 119 to 121 apply in relation to securities held on or after 1 January 2013 (and the rules in section 440A of ICTA, including as modified, apply in relation to securities held before that date).

• (2) The replacement of the separate holdings given by section 440A of ICTA (including as modified) with the separate holdings given by sections 119 to 121 is, for the purposes of corporation tax on chargeable gains, not to be treated as involving a disposal or acquisition that gives rise to a chargeable gain or allowable loss.

• (3) But see paragraph 27 for provision for carrying forward the base cost of the old holdings into the base cost of the new holdings.

27

• (1) This paragraph applies if—

• (a) immediately before 1 January 2013 securities are treated, as a result of section 440A of ICTA (including as modified), as separate holdings of a company for the purposes of corporation tax, and

• (b) the securities that are comprised in those separate holdings (the “old holdings”) are, as at 1 January 2013, comprised in separate holdings of the company as determined by the rules in sections 119 to 121 (the “new holdings”).

• (2) Each new holding is treated for the purposes of corporation tax on chargeable gains as if it were a holding of the company with a base cost and an indexation allowance as at 1 January 2013 equal to the total of the base costs and indexation allowances of the old holdings that are carried into the new holding.

• (3) In the case of securities (“new securities”) comprised in a new holding, the amount of the base cost or indexation allowance of an old holding that is carried into the new holding is equal to the proportion which the new securities derived from the old holding bear to all of the securities comprised in the old holding.

• (4) For the purpose of calculating the indexation allowance of a new holding in respect of any period falling on or after 1 January 2013, it is to be assumed that, on that date, there had been a disposal of the holding for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the company.

• (5) For the purposes of this paragraph—

• (a) references to a base cost are—

• (i) in the case of a section 104 holding, references to the amount of qualifying expenditure within the meaning of section 110 of TCGA 1992, and

• (ii) in the case of a 1982 holding, references to the amount of expenditure that would fall to be deducted if the holding were disposed of,

• (b) references to an indexation allowance are—

• (i) in the case of a section 104 holding, references to the indexation allowance as found in accordance with section 110 of TCGA 1992, and

• (ii) in the case of a 1982 holding, references to the indexation allowance within the meaning of Chapter 4 of Part 2 of that Act,

• (c) the base cost and the indexation allowance of an old holding are calculated on the assumption that the holding is disposed of immediately before 1 January 2013,

• (d) “section 104 holding” has the same meaning as in section 104(3) of TCGA 1992, and

• (e) “1982 holding” has the same meaning as in section 109 of that Act.

28

• (1) This paragraph applies in a case where—

• (a) section 210B(2) to (4) of TCGA 1992 would, but for this Part of this Act, have applied in relation to a disposal and acquisition of section 440A securities, and

• (b) the identification in accordance with those subsections of the section 440A securities disposed of with the section 440A securities acquired would have involved—

• (i) identifying securities disposed of before 1 January 2013 with securities acquired on or after that date, or

• (ii) identifying securities acquired before 1 January 2013 with securities disposed of on or after that date.

• (2) The securities disposed of are to be identified with the securities acquired (if necessary applying the rules in section 210B(3) and (4) of TCGA 1992 and subject to section 105(1) of that Act), and—

• (a) in a case within sub-paragraph (1)(b)(i), the securities acquired are not therefore to be comprised in a separate holding of securities within any of sections 119 to 121 of this Act, and

• (b) in a case within sub-paragraph (1)(b)(ii), the securities acquired are not therefore to be regarded as comprised in a separate holding of securities within section 440A of ICTA (including as applied).

• (3) In this paragraph “section 440A securities” has the same meaning as in section 210B of TCGA 1992.

Carry-forward of trading losses and excess management expenses

29

• (1) Any unused losses arising to an insurance company in an accounting period ending before 1 January 2013 from gross roll-up business may be relieved in subsequent accounting periods in accordance with section 45 of CTA 2010 (carry forward of trade loss against subsequent trade profits) as if they were losses that had arisen from non-BLAGAB long-term business.

• (2) For this purpose a loss is “unused” so far as no relief has been given for it under—

• (a) section 436A of ICTA (including as applied by any provision of Part 2 of Schedule 7 to FA 2007), or

• (b) any other provision of the Corporation Tax Acts.

30

• (1) Any unused losses arising to an insurance company in an accounting period ending before 1 January 2013 from PHI business may be relieved in subsequent accounting periods in accordance with section 45 of CTA 2010 as if they were losses that had arisen from non-BLAGAB long-term business.

• (2) For this purpose a loss is “unused” so far as, but for this Part of this Act, it would have been available for carry forward under section 45 of CTA 2010 for use in relation to profits of the PHI business for subsequent accounting periods.

31

• (1) The appropriate part of any unused life assurance trade losses arising to an insurance company in an accounting period ending before 1 January 2013 is to be treated for the purposes of section 124 as if it were the unrelieved loss available for relief in subsequent accounting periods in accordance with that section.

• (2) A “life assurance trade loss” means a loss arising to an insurance company from life assurance business which is calculated in accordance with the life assurance trade profits provisions.

• (3) A life assurance trade loss is “unused” so far as no relief is given for it under—

• (a) section 85A or 89 of FA 1989, or

• (b) any other provision of the Corporation Tax Acts.

• (4) The “appropriate” part of any unused life assurance trade losses is the amount (if any) by which—

• (a) the amount of the unused life assurance trade losses, exceeds

• (b) the amount of unused losses arising to an insurance company in an accounting period ending before 1 January 2013 from gross roll-up business (with the definition of “unused” in paragraph 29(2) applying here).

32

• (1) This paragraph applies if, but for this Part of this Act, an amount would have been carried forward to an accounting period of an insurance company under section 76(12) or (13) of ICTA (expenses of insurance companies).

• (2) The amount is to be treated for the purposes of step 5 of section 76 as an expense from a previous accounting period carried forward as a result of section 73 to the accounting period of the company beginning on 1 January 2013.

33

• (1) This paragraph applies if, but for this Part of this Act, any amount of expenses would, as a result of section 86(8) and (9) of FA 1989 (relief for fraction of acquisition expenses for earlier accounting periods), have been relieved in an accounting period of an insurance company beginning on or after 1 January 2013.

• (2) Relief is to continue to be given for the expenses in question as follows—

• (a) the amount of the relief for each accounting period is to be determined in accordance with section 86(8) and (9) of FA 1989 (despite their repeal by this Part of this Act), and

• (b) the relief is to be given by treating the amount of the expenses as deemed BLAGAB management expenses for the accounting periods in question for the purposes of section 76.

• (3) But relief is not to be given as a result of sub-paragraph (2) for any expenses for any accounting period (“the period concerned”) if the expenses are reversed in the period concerned or any preceding accounting period.

Relief for BLAGAB trade losses for accounting period beginning on or after 1 January 2013

34

• (1) This paragraph applies if—

• (a) an insurance company carries on basic life assurance and general annuity business in an accounting period beginning on or after 1 January 2013, and

• (b) the company has a BLAGAB trade loss for the accounting period.

• (2) For the purposes of section 37(6) of CTA 2010 (as applied by section 123) the company is to be treated as carrying on that business in a previous accounting period if the company carried on life assurance business in that period.

Assets of the shareholder fund

35

• (1) This paragraph applies in relation to assets of an insurance company carrying on life assurance business which were assets of the shareholder fund of the company for the period of account ending immediately before 1 January 2013.

• (2) Those assets are, in relation to times on or after that date, to be regarded for the purposes of this Part as assets forming part of the long-term business fixed capital of the company (whether or not they would otherwise be so regarded).

• (3) An asset is an “asset of the shareholder fund of an insurance company for the period of account ending immediately before 1 January 2013” if it is shown in any of lines 11 to 102 of Form 13 in the company's periodical return ending immediately before that date in respect of assets other than those of its long-term business.

• (4) But an asset is not to be regarded as an asset of the shareholder fund for that period of account if for any accounting period ending before 1 January 2013—

• (a) income arising from the asset was, or chargeable gains or allowable losses accruing on any part disposal of the asset for the purposes of TCGA 1992 were, taken into account for the purposes of the charge to corporation tax on the I minus E basis, or

• (b) income arising from the asset was taken into account in calculating the profits of the company in respect of its life assurance business in accordance with the provisions applicable for the purposes of the taxation of such profits under section 35 of CTA 2009 (charge on trade profits).

PART 3 — Supplementary

General transitional provision in relation to provisions re-enacted in Part 2 of this Act

36

• (1) This paragraph applies where any provision of this Part of this Act re-enacts (with or without modification) an enactment repealed by this Part of this Act.

• (2) The repeal and re-enactment does not affect the continuity of the law.

• (3) Any subordinate legislation or other thing which—

• (a) has been made or done, or has effect as if made or done, under or for the purposes of the repealed provision, and

• (b) is in force or effective in relation to accounting periods of insurance companies ending on 31 December 2012,

has effect in relation to subsequent accounting periods of insurance companies as if made or done under or for the purposes of the corresponding provision of this Part of this Act.

• (4) Any reference (express or implied) in any enactment, instrument or document to a provision of this Part of this Act is to be read as including, in relation to times, circumstances or purposes in relation to which the corresponding repealed provision had effect, a reference to that corresponding provision.

This sub-paragraph applies only so far as the context permits.

• (5) Any reference (express or implied) in any enactment, instrument or document to a repealed provision is to be read, in relation to times, circumstances or purposes in relation to which the corresponding provision of this Part of this Act has effect, as a reference or (as the context may require) as including a reference to that corresponding provision.

This sub-paragraph applies only so far as the context permits.

• (6) This paragraph is subject to any specific transitional, transitory or saving provision made by or under this Schedule.

• (7) The generality of this paragraph is not to be affected by specific transitional, transitory or saving provision made by or under this Schedule.

• (8) This paragraph has effect instead of section 17(2) of the Interpretation Act 1978.

Power to make supplementary transitional provision etc

37

• (1) The Treasury may by regulations make further transitional, transitory or saving provision in connection with the coming into force of any of the provisions of this Part of this Act.

• (2) The provision that may be made by the regulations includes provision (whether by way of textual amendment or otherwise) altering or supplementing the effect of any provision made by or under this Schedule.

• (3) The regulations may be made so as to have effect in relation to any period beginning before but ending on or after the day on which the regulations are made (as well as in relation to periods no part of which falls before that day).

38

Any regulations made by the Treasury under any provision of this Schedule may—

• (a) make different provision for different cases or circumstances, and

• (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

Interpretation

39

The following expressions have the same meaning in this Schedule as they have in Chapter 1 of Part 12 of ICTA—

• “brought into account” (except in paragraph 24),

• “gross roll-up business”,

• “the I minus E basis”,

• “the life assurance trade profits provisions”,

• “non-profit fund”,

• “period of account”,

• “periodical return”, and

• “PHI business”.

SCHEDULE 18

Income and Corporation Taxes Act 1988

1

ICTA is amended as follows.