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Finance Act 2012

Type Public General Act

Publication 2012-07-17

Last updated 2024-02-22

State In force

Department Statute Law Database

Source legislation.gov.uk

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the company is treated for the purposes of corporation tax on chargeable gains as if it had disposed of and immediately re-acquired the asset (or part) at that time for a consideration equal to the fair value of the asset (or part) at that time.

(2) The UK long-term business categories in question are—

(a) UK assets which are matched to BLAGAB liabilities of the company,

(b) UK assets which are matched to other long-term business liabilities of the company,

(c) UK assets which are held by the company for the purposes of any with-profits fund but which are not matched to its long-term business liabilities, and

(d) UK assets which are held for the purposes of the company's long-term business but which are not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds.

(3) If the company has more than one with-profits fund within subsection (2)(c), the UK assets which are held by it for the purposes of a particular fund but which are not matched to its long-term business liabilities are treated as assets within a separate UK long-term business category.

(4) Subsection (1) does not apply if all the income of the company's long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(5) If, at any time in a period of account of an overseas life insurance company, an asset (or a part of an asset) held by the company—

(a) ceases to be within a category set out in subsection (6), and

(b) comes within another category set out there,

the company is treated for the purposes of corporation tax as if it had disposed of and immediately re-acquired the asset (or part) for a consideration equal to the fair value of the asset (or part) at that time.

(6) The categories in question are—

(a) UK assets which are held for the purposes of the company's long-term business,

(b) other UK assets, and

(7) For the purposes of this section and section 118, assets (whether situated in the United Kingdom or elsewhere) are “UK assets” of an overseas life insurance company if, in accordance with the provision made by or under Chapter 4 of Part 2 of CTA 2009, they fall to be attributed to the permanent establishment in the United Kingdom through which the company carries on life assurance business.

Transfers of business and transfers within a group

118

(1) If—

(a) as a result of an insurance business transfer scheme transferring long-term business, a UK life insurance company or an overseas life insurance company acquires an asset, and

(b) the asset (or part of it) is within one of the applicable categories at the time immediately before the acquisition but is not within that category immediately after that time,

the transferor is treated for the purposes of corporation tax on chargeable gains as if it had disposed of and immediately re-acquired the asset (or part) at the time immediately before the acquisition.

(2) The consideration for this deemed disposal and re-acquisition is equal to the fair value of the asset (or part) at that time.

(3) If the transferor or the transferee is an overseas life insurance company, an asset (or part of an asset) is taken as being in the same category immediately before and after the acquisition if the asset (or part)—

(a) was within one category immediately before the acquisition, and

(b) was within a corresponding category immediately after the acquisition.

(4) Subsections (1) to (3) do not apply if all the income of the long-term business of either the transferor or the transferee is chargeable to corporation tax on income under section 35 of CTA 2009.

(5) For the purposes of subsections (1) to (3) “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) If—

(a) a UK life insurance company or an overseas life insurance company disposes of or acquires an asset (or part of an asset),

(b) immediately before or after doing so, the asset (or part) is within the applicable category, and

(c) section 171 or 173 of TCGA 1992 (transfers within a group) would, but for this subsection, apply to the disposal or acquisition,

that section does not apply to the disposal or acquisition.

(7) For the purposes of subsection (6) “the applicable category” means—

(a) in the case of a UK life insurance company, the category of assets which are held for the purposes of its long-term business, and

(b) in the case of an overseas life insurance company, the category of UK assets which are held for the purposes of its long-term business.

UK life insurance companies

119

(1) If the assets of a UK life insurance company include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities so far as matched to BLAGAB liabilities of the company are treated as a separate holding,

(b) so many of the securities so far as matched to other long-term business liabilities of the company are treated as a separate holding,

(c) so many of the securities as are held by the company for the purposes of any with-profits fund but are not matched to its long-term business liabilities are treated as a separate holding,

(d) so many of the securities as are held for the purposes of the company's long-term business but are not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds are treated as a separate holding, and

(e) any remaining securities are treated as a separate holding which is held otherwise than for the purposes of the company's long-term business.

(2) If the company has more than one with-profits fund within subsection (1)(c), so many of the securities as are held by it for the purposes of a particular fund but are not matched to its long-term business liabilities are treated as a separate holding for the purposes of corporation tax on chargeable gains.

(3) Subsection (1) does not apply if all the income of the company's long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(4) In that case, if the company's assets include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities as are held for the purposes of its long-term business are treated as a separate holding, and

(b) any remaining securities are treated as a separate holding which is held otherwise than for the purposes of its long-term business.

Overseas life insurance companies: rule corresponding to s.119

120

(1) If the assets of an overseas life insurance company include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities so far as UK securities matched to BLAGAB liabilities of the company are treated as a separate holding,

(b) so many of the securities so far as UK securities matched to other long-term business liabilities of the company are treated as a separate holding,

(c) so many of the securities as are UK securities held by the company for the purposes of any with-profits fund but not matched to its long-term business liabilities are treated as a separate holding,

(d) so many of the securities as are UK securities held for the purposes of the company's long-term business but not matched to its long-term business liabilities or held by it for the purposes of any with-profits funds are treated as a separate holding,

(e) any remaining UK securities are treated as a separate holding which is held otherwise than for the purposes of the company's long-term business, and

(f) any securities which are held by the company but which are not UK securities are treated as a separate holding.

(2) If the company has more than one with-profits fund within subsection (1)(c), so many of the securities as are UK securities held by it for the purposes of a particular fund but are not matched to its long-term business liabilities are treated as a separate holding for the purposes of corporation tax on chargeable gains.

(3) Subsection (1) does not apply if all the income of the company's long-term business is chargeable to corporation tax on income under section 35 of CTA 2009.

(4) In that case, if the company's assets include securities of a class all of which would, but for this section, be regarded as one holding for the purposes of corporation tax on chargeable gains, the following pooling rules apply instead for those purposes—

(a) so many of the securities as are UK securities held for the purposes of its long-term business are treated as a separate holding,

(b) any remaining UK securities are treated as a separate holding which is held otherwise than for the purposes of its long-term business, and

(5) For the purposes of this section, securities (whether situated in the United Kingdom or elsewhere) are “UK securities” of an overseas life insurance company if, in accordance with the provision made by or under Chapter 4 of Part 2 of CTA 2009, they fall to be attributed to the permanent establishment in the United Kingdom through which the company carries on life assurance business.

Sections 119 and 120: supplementary

121

(1) The applicable pooling rules also apply if the assets of the company in question include securities of a class and but for this section—

(a) some of them would be regarded as a 1982 holding for the purposes of corporation tax on chargeable gains, and

(b) the rest of them would be regarded as a section 104 holding for those purposes.

(2) “The applicable pooling rules” means—

(a) the pooling rules set out in section 119(1)(a) to (e) and (4)(a) and (b), or

(b) the pooling rules set out in section 120(1)(a) to (f) and (4)(a) to (c).

(3) In applying the applicable pooling rules in a case within subsection (1)—

(a) the reference in any of the paragraphs in section 119(1) or (4) or 120(1) or (4) to a separate holding is to be read, where necessary, as a reference to a separate 1982 holding and a separate section 104 holding, and

(b) the questions whether that reading is necessary for a paragraph and, if it is, how many securities falling within the paragraph constitute each of the two holdings are determined in accordance with paragraph 12 of Schedule 6 to FA 1990 and the identification rules applying on any subsequent acquisitions and disposals.

(4) If the applicable pooling rules apply, section 105 of TCGA 1992 has effect as if securities regarded as included in different holdings as a result of those rules were securities of different classes.

(5) In this section—

“1982 holding” has the same meaning as in section 109 of TCGA 1992, and

“section 104 holding” has the same meaning as in section 104(3) of TCGA 1992.

(6) In this section and sections 119 and 120 “securities” means—

(a) shares,

(b) securities of a company, and

(c) any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

Long-term business fixed capital

Assets forming part of long-term business fixed capital

122

For the purposes of this Chapter assets that form part of the long-term business fixed capital of an insurance company are to be regarded as assets held by the company otherwise than for the purposes of its long-term business.

CHAPTER 9 — Relief for BLAGAB trade losses etc

The reliefs

Relief for BLAGAB trade losses against total profits

123

(1) Section 37 of CTA 2010 (relief for trade losses against total profits) is to apply in relation to a BLAGAB trade loss for an accounting period as it applies in relation to any other loss made in a trade for an accounting period.

(2) Subsection (1) applies despite the fact that, had there been a BLAGAB trade profit for the accounting period, that profit would not have been charged to tax under section 35 of CTA 2009 and the I - E rules would have been applicable instead.

Carry forward of BLAGAB trade losses against subsequent profits

124

(1) This section applies if an insurance company carrying on basic life assurance and general annuity business makes a BLAGAB trade loss for an accounting period beginning before 1 April 2017.

(2) Relief is available under this section for that part of the BLAGAB trade loss (“the unrelieved loss”) for which no relief is given under section 37 of CTA 2010 (as applied by section 123).

(3) The relief for the unrelieved loss is to be given as follows.

(4) The unrelieved loss is to be carried forward to subsequent accounting periods (so long as the company continues to carry on basic life assurance and general annuity business).

(5) For the purposes of—

(a) section 93 (minimum profits charge), and

(b) section 104 (policyholders' rate of tax),

the BLAGAB trade profit of any such period is reduced by the unrelieved loss so far as that loss cannot be used under this subsection to reduce the BLAGAB trade profit of an earlier period ....

(6) Relief under this section is subject to restriction or modification in accordance with section 137(7) of CTA 2010 and other applicable provisions of the Corporation Tax Acts.

Group relief

125

(1) Part 5 of CTA 2010 (group relief) is to apply in relation to a BLAGAB trade loss for an accounting period as it applies in relation to any other loss made in a trade for an accounting period.

(2) Subsection (1) applies despite the fact that, had there been a BLAGAB trade profit for the accounting period, that profit would not have been charged to tax under section 35 of CTA 2009 and the I - E rules would have been applicable instead.

(3) If for an accounting period an insurance company has—

(a) an I - E profit, and

(b) losses or other amounts within section 99(1)(d) to (g) of CTA 2010,

the company's gross profits of the accounting period for the purposes of section 105 of that Act (restriction on surrender of those amounts) are not to include the policyholders' share of the I - E profit (as determined for the purposes of section 102).

(4) For provision about the application of Part 5A of CTA 2010 (group relief for carried-forward losses) in relation to BLAGAB trade losses see subsections (3) to (5) of section 188BB of that Act.

Restrictions

Restrictions in respect of non-trading deficit

126

(1) The amount of a BLAGAB trade loss for an accounting period of an insurance company that is available for relief under—

(a) section 37 of CTA 2010 (as applied by section 123), or

(b) Part 5 of CTA 2010 (group relief) (as applied by section 125),

is to be reduced by the amount of any relevant non-trading deficit which the company has for the accounting period.

(1A) A loss falls within subsection (1B) so far as it—

(a) would (apart from that subsection) be available for relief under section 124B (excess carried forward post-1 April 2017 losses: relief against total profits), and

(b) arose in an accounting period for which the insurance company has a relevant non-trading deficit.

(1B) A loss (or amount of a loss) falling within this subsection is available for relief under section 124B only so far as it exceeds the amount of that relevant non-trading deficit.

(1C) A loss falls within subsection (1D) so far as it—

(a) is an amount which a company (“the surrendering company“) may surrender by virtue of section 188BB(4) (surrender of carried-forward BLAGAB trade losses), and

(b) arose in an accounting period for which the surrendering company has a relevant non-trading deficit.

(1D) A loss (or amount of a loss) falling within this subsection is available for relief under Chapter 3 of Part 5A of CTA 2010 (claims for group relief) only so far as it exceeds the amount of that relevant non-trading deficit.

(1E) For the purposes of subsections (1A) and (1C) it is to be assumed (where relevant) that in previous accounting periods losses which arose earlier have been utilised before losses which arose later.

(2) In this section references to a relevant non-trading deficit for an accounting period are to the non-trading deficit which the company has, calculated by reference only to credits and debits—

(a) arising in respect of such of the company's loan relationships as are debtor relationships (see section 302(6) of CTA 2009), and

(b) referable, in accordance with Chapter 4, to the company's basic life assurance and general annuity business.

127

(1) This section applies in the case of an insurance company carrying on basic life assurance and general annuity business.

(2) None of the following reliefs are to be given against the policyholders' share of any I - E profit of the company for any accounting period (as determined for the purposes of section 102).

(3) The reliefs in question are—

(za) relief under section 124B (relief of excess carried-forward BLAGAB trade losses against total profits),

(a) relief under section 37 of CTA 2010 (including as applied by section 123),

(b) relief under Chapter 2 or 4 of Part 4 of CTA 2010 (loss relief),

(ca) relief under Chapter 3 of Part 5A of CTA 2010 (group relief for carried-forward losses),

(d) relief in respect of any qualifying charitable donation,

(e) relief in respect of any amount representing a non-trading deficit on the company's loan relationships calculated otherwise than by reference to debits and credits referable, in accordance with Chapter 4, to its basic life assurance and general annuity business.

(4) If the company's basic life assurance and general annuity business is mutual business, subsection (3)(d) does not apply.

CHAPTER 10 — Transfers of long-term business

Transfers of BLAGAB

Relief for transferee in respect of transferor’s BLAGAB expenses

128

(1) This section applies if, under an insurance business transfer scheme, there is a transfer of basic life assurance and general annuity business (or any part of that business) from one insurance company to another.

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

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

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

(5) Relief at step 5 in section 76 is to be given to the transferee for any excess BLAGAB expenses for which, on the assumptions set out below, that relief would have been given to the transferor for an accounting period starting after the date of the transfer.

(6) For the purposes of this section it is to be assumed that—

(a) the transferor had continued to carry on the transferred business after the transfer, and

(b) the transferor had an accounting date ending with the date of the transfer (if that would not otherwise be the case).

(7) If the transfer is a transfer of part of the business, references in this section to any expenses are to be read as references to the appropriate part of the expenses.

(8) Any relief given to the transferee as a result of this section is instead of any relief that would otherwise have been given to the transferor.

Intra-group transfers and demutualisation

129

(1) This section applies if—

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

(b) the transfer is a relevant intra-group transfer or is in connection with a demutualisation.

(2) A transfer is a “relevant intra-group transfer” if—

(a) the transferor and transferee are members of the same group of companies when the transfer occurs, and

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

(3) A transfer is “in connection with a demutualisation” if—

(a) it is for the purposes of the conversion of a company (under the law of any territory) from one without share capital to one with share capital (without any change of legal personality), or

(b) it is a transfer by a mutual life insurance company of all, or substantially all, of its basic life assurance and general annuity business to an insurance company which is not a mutual life insurance company,

and for the purposes of paragraph (b) a “mutual life insurance company” means an insurance company which carries on mutual life assurance business.

(4) For the purpose of calculating the BLAGAB trade profit or loss of the transferor for any accounting period, any amount in respect of the transfer that is debited or credited in accounts drawn up by the transferor in accordance with generally accepted accounting practice is to be ignored.

(5) For the purpose of calculating the BLAGAB trade profit or loss of the transferee for any accounting period, any amount in respect of the transfer that is debited or credited in accounts drawn up by the transferee in accordance with generally accepted accounting practice is to be ignored.

(6) But if there is a difference between—

(a) the net amount recognised by the transferee in respect of the transfer of contracts of long-term insurance or contracts made in the course of capital redemption business, and

(b) the net amount recognised by the transferor in respect of the transfer of those contracts,

the amount of the difference is to be taken into account for the purpose of calculating the BLAGAB trade profit or loss of the transferee for the accounting period in which those contracts are transferred.

(7) The difference is to be taken into account—

(a) as a receipt (if, when added to the net amount in subsection (6)(b), the result is the net amount in subsection (6)(a)), and

(b) as an expense (if, when subtracted from the net amount in subsection (6)(b), the result is the net amount in subsection (6)(a)).

(8) The net amount recognised by an insurance company in respect of the transfer of the contracts is determined by subtracting—

(a) the total amount in respect of relevant liabilities relating to the contracts that is or would be recognised for the purposes of a balance sheet drawn up at the relevant time by the company in accordance with generally accepted accounting practice, from

(b) the total amount in respect of relevant assets relating to the contracts that is or would be recognised for those purposes,

In this paragraph, “relevant liabilities” and “relevant assets” means those liabilities and assets which give rise to amounts that are taken into account as part of the calculation under Chapter 6 of Part 2, and “relevant time” means the time immediately before the transfer (in the case of the transferor) and the time immediately after it (in the case of the transferee).

(9) The Treasury may by order amend any of subsections (6) to (8).

(10) This section does not apply to any amount that arises in respect of a transfer so far as the transfer consists of a with-profits fund transfer.

The reference here to a with-profits fund transfer is a reference to—

(a) a transfer of business from a with-profits fund to a fund that is not a with-profits fund, or

(b) a transfer of business from a fund that is not a with-profits fund to a with-profits fund.

(11) If this section applies, the provisions of Part 4 of TIOPA 2010 (transfer pricing) do not apply.

Transfers between non-group companies: present value of in-force business

130

(1) This section applies if—

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

(b) either the transferor and transferee are not members of the same group of companies when the transfer occurs or, if they are, the transfer consists of or includes a with-profits fund transfer within the meaning of section 129(10),

(c) the accounts of the transferee drawn up in accordance with generally accepted accounting practice include an asset that represents, as at the time of the transfer, the value of future profits arising from the relevant transferred business, and

(d) the asset is not one to which Part 8 of CTA 2009 (intangible fixed assets) applies.

(2) Amounts in respect of the asset that are debited or credited in accounts drawn up by the transferee in accordance with generally accepted accounting practice are to be taken into account in calculating the BLAGAB trade profit or loss of the transferee.

(3) In subsection (1)(c) “the relevant transferred business” means—

(a) if the transferor and transferee are not members of the same group of companies when the transfer occurs, the business (or part of the business) transferred under the insurance business transfer scheme, and

(b) if the transfer consists of or includes a with-profits fund transfer, the business transferred by the with-profits fund transfer.

(4) For the purposes of subsection (1)(c) no account is to be taken of an asset so far as it is regarded for accounting purposes as internally-generated.

(5) This section does not apply so far as section 129(5) applies in relation to the transfer.

(6) Nothing in this section is to apply in relation to transfers taking place before 1 January 2013.

Transfers of non-BLAGAB long-term business

Application of ss. 129 and 130 to transfers of non-BLAGAB long-term business

131

(1) This section applies if, under an insurance business transfer scheme, there is a transfer of non-BLAGAB long-term business (or any part of that business) from one insurance company to another.

(2) If, for the purposes of section 129, the transfer—

(a) is a relevant intra-group transfer, or

(b) is in connection with a demutualisation,

section 129 applies for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business of the transferor or transferee for any accounting period.

(3) If the conditions in section 130(1)(b) to (d) are met in the case of the transfer, section 130 applies for the purpose of calculating for corporation tax purposes the profits of the non-BLAGAB long-term business of the transferee for any accounting period.

Transfers of long-term business: anti-avoidance

Anti-avoidance

132

(1) This section applies if—

(a) under an insurance business transfer scheme, there is a transfer on or after 1 January 2013 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), and

(b) the main purpose, or one of the main purposes, of a company (“C”) in entering into one or more of the arrangements included in the insurance business transfer arrangements is an unallowable purpose.

(2) The “insurance business transfer arrangements” consist of—

(a) the insurance business transfer scheme under which the transfer is made, and

(b) any arrangement entered into on or after 1 January 2013 with a connection (direct or indirect) to that scheme.

(3) A purpose is an “unallowable purpose” if—

(a) it consists of securing a tax advantage for C or any other company, or

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

(4) There are to be made such adjustments of any income or gains chargeable to corporation tax as are required to negate any tax advantage arising to C or any other company so far as referable to the unallowable purpose on a just and reasonable apportionment.

(5) For the purposes of this section—

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

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

(6) 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 section do not include the purposes of that part of its activities.

Clearance procedure

133

(1) Section 132 does not apply if, on an application by C, HMRC Commissioners give a notice under this section stating that they are satisfied—

(a) that C's main purpose in entering into the arrangements included in the insurance business transfer arrangements is not an unallowable purpose or none of C's main purposes in entering into those arrangements is an unallowable purpose, or

(b) that the transferor and the transferee are members of the same group of companies when the transfer occurs and that the transfer produces no tax advantage for the group.

(2) For this purpose the transfer produces no tax advantage for the group if—

(a) as a result of the insurance business transfer arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group, and

(b) the amount (or total amount) of that increase is at least equal to the amount (or total amount) of the reduction in the liability to corporation tax of the transferor or the transferee that arises as a result of those arrangements.

Section 133: supplementary

134

(1) An application under section 133 must—

(a) be in writing, and

(b) contain particulars of the insurance business transfer arrangements.

(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 subsection (2) within 30 days of the receipt of the application or of any further particulars required under that subsection.

(4) If a notice under that subsection 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 section 133—

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

(b) if they give a notice under subsection (2), within 30 days of that notice being complied with.

(6) If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of HMRC Commissioners, any resulting notice under section 133 is void.

Interpretation

Meaning of “group” of companies

135

For the purposes of this Chapter whether or not at any time companies are members of the same group of companies is to be determined in accordance with section 170(2) to (11) of TCGA 1992.

CHAPTER 11 — Definitions

Meaning of “BLAGAB trade profit” and “BLAGAB trade loss”

136

(1) In relation to the carrying on by an insurance company of basic life assurance and general annuity business, this section explains for the purposes of this Part what is meant by—

(a) the “BLAGAB trade profit” of the company, and

(b) the “BLAGAB trade loss” of the company.

(2) The company has a “BLAGAB trade profit” for an accounting period if, calculated in accordance with the ordinary trading rules, there are profits of that business for the accounting period that, but for sections 68 and 69, would be chargeable to corporation tax on income under section 35 of CTA 2009 (charge to tax on trade profits).

(3) The amount of the BLAGAB trade profit is the amount of those profits that, but for those sections, would be so chargeable.

(4) The company has a “BLAGAB trade loss” for an accounting period if, calculated in accordance with the ordinary trading rules, the company makes a loss in that business for the accounting period in a case where, had there been profits, they would, but for those sections, have been so chargeable.

(5) The ordinary trading rules have effect for the purpose of calculating the company's BLAGAB trade profit or loss subject to the provision made by—

(a) sections 106 to 108 (policyholder tax),

(b) Chapter 6 (trade calculation rules applying to long-term business),

(d) sections 129 and 130 (transfers of BLAGAB).

(6) For the purposes of this section “the ordinary trading rules” means the rules for calculating the profits of a trade for the purposes of the charge to corporation tax on income under section 35 of CTA 2009.

Meaning of “the long-term business fixed capital”

137

(1) This section explains for the purposes of this Part what is meant by an asset forming part of “the long-term business fixed capital” of an insurance company.

(2) An asset forms part of “the long-term business fixed capital” of the company if—

(a) it is held for the purposes of its long-term business, and

(b) it is a structural asset of that business.

(3) The reference to a structural asset of a company's long-term business includes shares, debts and loans which—

(a) are held by the company in a fund that is not a with-profits fund, and

(b) are of a kind that, if they had been held on 31 December 2012, their value would have been required to be entered in lines 21 to 24 of Form 13 in the periodical return of the company for the period ending immediately before 1 January 2013 (UK insurance dependants and other insurance dependants).

(4) For the purposes of subsection (3)(b) “periodical return” has the same meaning as it has in Chapter 1 of Part 12 of ICTA.

(5) The Treasury may make regulations providing for assets of a company's long-term business which are of a description specified in the regulations to be regarded for the purposes of this section as being, or as not being, structural assets of that business.

Meaning of assets that are “matched to” liabilities

138

(1) This section—

(a) defines for the purposes of this Part what is meant by an asset that is matched to a BLAGAB liability or other long-term business liability and what is meant by the whole or a part of an asset being matched, and

(b) explains for those purposes how to work out the part of an asset that is matched to a BLAGAB liability or other long-term business liability.

(2) An asset is matched to a BLAGAB liability if, in accordance with the applicable method, some or all of the income or other return arising from that particular asset is specifically referable to the company's basic life assurance and general annuity business.

(3) An asset is matched to another long-term business liability if, in accordance with the applicable method, some or all of the income or other return arising from that particular asset is specifically referable to the company's non-BLAGAB long-term business.

(4) The whole of an asset is matched to a BLAGAB liability if, in accordance with the applicable method, the whole of the income or other return arising from that particular asset is specifically referable to the company's basic life assurance and general annuity business.

(5) A part of an asset is matched to a BLAGAB liability or other long-term business liability if, in accordance with the applicable method, part of the income or other return arising from that particular asset is specifically referable to the company's basic life assurance and general annuity business or (as the case may be) its non-BLAGAB long-term business.

(6) A part of an asset is matched to a BLAGAB liability or other long-term business liability in proportion to the income or other return arising from that particular asset that, in accordance with the applicable method, is specifically referable to the company's basic life assurance and general annuity business or (as the case may be) its non-BLAGAB long-term business.

(7) For the purposes of this section “the applicable method”—

(a) in relation to the company's basic life assurance and general annuity business, means the method adopted for the purposes of section 98 which has effect in relation to the period of account in which the income or other return arises, and

(b) in relation to the company's non-BLAGAB long-term business, means the method adopted for the purposes of section 115 which has effect in relation to the period of account in which the income or other return arises.

(8) For the purposes of this section any income or other return arising from an asset is to be regarded as specifically referable to a category of business in accordance with the applicable method in so far as that method is adopted in relation to the income or other return in consequence of a contractual requirement imposed on the company relating to the category of business in question.

Minor definitions

139

(1) In this Part—

“closing”, in relation to a period of account, means the position at the end of the period of account,

“derivative contract” has the same meaning as in Part 7 of CTA 2009,

“fair value”—in relation to money, means its amount, andin relation to other assets, means the amount which an independent person selling the assets would get,

“HMRC Commissioners” means the Commissioners for Her Majesty's Revenue and Customs,

“insurance business transfer scheme” means—a scheme falling within section 105 of FISMA 2000, including an excluded scheme falling within Case 2, 3, 4 or 5 of subsection (3) of that section, ora scheme which would fall within that subsection but for subsection (1)(b) of that section,

“insurance special purpose vehicle” means an undertaking which—assumes risks from insurance or re-insurance undertakings, andfully funds its exposures to those risks through the proceeds of a debt issue or other financing mechanism where the repayment rights of the providers of the mechanism are subordinated to the re-insurance obligations of the undertaking,

“liabilities”, in relation to an insurance company, means—the mathematical reserves of the company as determined in accordance with section 1.2 of the INSPRU, andliabilities of the company (whose value falls to be determined in accordance with section 1.3 of the GENPRU) which arise from deposit back arrangements,

“overseas life insurance company” means an insurance company which is not resident in the United Kingdom but which carries on life assurance business in the United Kingdom through a permanent establishment there,

“re-insurance” includes retrocession,

“UK life insurance company” means an insurance company other than an overseas life insurance company,

“with-profits fund” has the meaning given by the IPRU (INS).

(2) In this Part any reference to the debiting or crediting of an amount in accounts drawn up by an insurance company is a reference to bringing in the amount as a debit or credit in—

(a) the company's profit and loss account, income statement or statement of comprehensive income (or other comprehensive income),

(b) a statement of total recognised gains and losses, or

(c) any other statement of items used in calculating the company's income or gains, or its losses or expenses, for accounting purposes,

irrespective of how any account or statement within any of paragraphs (a) to (c) is described or otherwise referred to.

(3) For this purpose—

“credit” means an amount which for accounting purposes increases or creates a profit, or reduces a loss, for a period of account, and

“debit” means an amount which for accounting purposes reduces a profit, or increases or creates a loss, for a period of account.

(4) In this section—

“deposit back arrangements” means arrangements by which an amount is deposited by the re-insurer under a contract of re-insurance with the cedant,

“GENPRU” means the General Prudential Sourcebook made by the Prudential Regulation Authority under FISMA 2000,

“INSPRU” means the Prudential Sourcebook for Insurers made by the Prudential Regulation Authority under FISMA 2000, and

“IPRU (INS)” means the Interim Prudential Sourcebook for Insurers made by the Prudential Regulation Authority under FISMA 2000.

Abbreviations

140

(1) In this Part—

“FISMA 2000” means the Financial Services and Markets Act 2000, and

“FISMA (Regulated Activities) Order 2001” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

(2) For abbreviations of other Acts, see section 228.

Index of defined terms, etc

141

(1) In this Part the following expressions are defined or otherwise explained by the provisions indicated—

Expression	Where explained
basic life assurance and general annuity business (abbreviated to “BLAGAB”)	sections 57 and 67(5)
BLAGAB trade loss	section 136
BLAGAB trade profit	section 136
closing	section 139(1)
contract of insurance	section 64
contract of long-term insurance	section 64
debiting or crediting an amount in accounts drawn up by a company	section 139(2) and (3)
derivative contract	section 139(1)
excess BLAGAB expenses	section 73
fair value	section 139(1)
HMRC Commissioners	section 139(1)
I - E profit	section 73
the I - E rules	section 70(1) and (2)
insurance business transfer scheme	section 139(1)
insurance company	section 65
insurance special purpose vehicle	section 139(1)
liabilities	section 139(1)
life assurance business	section 56
long-term business	section 63(1)
long-term business fixed capital	section 137
matched (in case of assets matched to a BLAGAB liability or other long-term business liability)	section 138
non-BLAGAB long-term business	sections 66 and 67
non-taxable distributions	section 94(4) and (5)
overseas life insurance company	section 139(1)
PHI business	section 63(2)
re-insurance	section 139(1)
UK life insurance company	section 139(1)
with-profits fund	section 139(1)

(2) The expressions in the above table have the same meaning in any other provision of the Corporation Tax Acts that makes special provision in relation to—

(a) insurance companies,

(b) any category of life assurance business carried on by insurance companies, or

CHAPTER 12 — Supplementary

Powers conferred on Treasury or HMRC Commissioners

Power to amend Part 2 etc

142

(1) If, in consequence of the exercise of any power under FISMA 2000, they consider it expedient to do so, the Treasury may by order amend—

(a) this Part, or

(b) any other provision of the Corporation Tax Acts that makes special provision in relation to insurance companies, any category of life assurance business carried on by insurance companies or long-term business carried on by insurance companies.

(2) An order under subsection (1) may be made so as to have effect in relation to—

(a) any period ending on or before the day on which the order is made, or

(b) any period beginning before and ending after that day,

but only if the power under FISMA 2000 is exercised so as to have effect in relation to the period.

(3) An order under subsection (1) may—

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

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

Power to amend definition of “insurance business transfer scheme” etc

143

(1) If, in consequence of any amendment of section 105 of FISMA 2000 (insurance business transfer schemes), they consider it expedient to do so, the Treasury may by order amend—

(a) the definition of “insurance business transfer scheme” given by section 139, or

(b) any other provision of the Corporation Tax Acts that makes special provision in relation to insurance companies, any category of life assurance business carried on by insurance companies or long-term business carried on by insurance companies.

(2) An order under subsection (1) may be made so as to have effect in relation to—

(a) any period ending on or before the day on which the order is made, or

(b) any period beginning before and ending after that day,

but only if the amendment of section 105 of FISMA 2000 has effect in relation to that period.

(3) An order under subsection (1) may—

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

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

Power to modify provisions applying to overseas life insurance companies

144

(1) The Treasury may by regulations provide for the Corporation Tax Acts to have effect in relation to overseas life insurance companies subject to such exceptions and other modifications as may be prescribed by the regulations.

(2) The power under subsection (1) includes power to make provision in place of, and in consequence to repeal or revoke, any provision in relation to overseas life insurance companies which is made by or under—

(a) this Part, or

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

(3) Regulations under subsection (1) may be made so as to have effect in relation to any period ending on or after the day on which the regulations are made.

(4) Regulations under subsection (1) may—

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

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

(5) The power to make consequential provision conferred by subsection (4)(b) includes power to amend any provision made by or under any Act.

Orders and regulations

145

(1) Any power of the Treasury or HMRC Commissioners to make any order or regulations under this Part is exercisable by statutory instrument.

(2) Any statutory instrument containing any order or regulations made by the Treasury or HMRC Commissioners under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(3) Nothing in this Part that authorises the inclusion of any particular kind of provision in any order or regulations under this Part is to be read as restricting the generality of the provision that may be included in the order or regulations.

Minor and consequential amendments and transitional provision

Minor and consequential amendments

146

Schedule 16 contains minor and consequential amendments.

Transitional provision

147

Schedule 17 contains transitional provision in connection with the coming into force of this Part.

Commencement etc

Commencement

148

(1) The provisions of this Part (other than section 149) have effect in relation to accounting periods of companies beginning on or after 1 January 2013.

(2) Subsection (1) is subject to the operation of any provision of Schedule 17 in relation to times before that date.

Accounting periods straddling 1 January 2013

149

(1) If, apart from this section, an insurance company would have had an accounting period beginning before 1 January 2013 and ending on or after that date, the accounting period of the company is to end instead on 31 December 2012.

(2) Accordingly, the rules in section 10 of CTA 2009 (end of accounting period) are subject to this section.

PART 3 — Friendly societies carrying on long-term business

Outline of provisions of Part

Overview

150

(1) This Part makes special provision for corporation tax purposes in relation to long-term and other business carried on by friendly societies.

(2) Sections 151 and 152 contain provision for applying provisions of the Corporation Tax Acts relating to insurance companies so that they also apply to friendly societies, subject to provision made by regulations.

(3) Sections 153 to 163 make provision for, and in connection with, a special exemption from corporation tax for BLAGAB or eligible PHI business.

(4) Sections 164 to 169 make provision for, and in connection with, a further exemption from corporation tax for other business.

(5) The remainder of the Part contains—

(a) provision in relation to certain transfer schemes (see section 170),

(b) provision for an exemption from corporation tax for unregistered friendly societies (see section 171), and

Long-term business rules to apply to friendly societies

Friendly societies subject to same basic rules as mutual insurers

151

(1) The Corporation Tax Acts apply to—

(a) life assurance business carried on by friendly societies, and

(b) other long-term business carried on by friendly societies,

in the same way as they apply respectively to mutual life assurance business carried on by insurance companies and other long-term business carried on by insurance companies.

(2) Subsection (1) does not apply to business which is exempt BLAGAB or eligible PHI business.

(3) The Treasury may by regulations provide that the Corporation Tax Acts as applied by subsection (1) have effect subject to such exceptions or other modifications as may be prescribed by the regulations.

(4) The regulations may require any part of any business to be treated as a separate business.

(5) The regulations may make provision having retrospective effect.

(6) The regulations may—

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

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

Friendly societies subject to transfer of business rules

152

(1) In this section “the transfer of business rules” means—

(a) Chapter 10 of Part 2, and

(b) any other provisions of the Corporation Tax Acts that apply on the transfer from an insurance company to another insurance company of the whole or part of its life assurance business or of its other long-term business.

(2) The transfer of business rules apply in the same way—

(a) on the transfer of the whole or part of the business of a friendly society to another friendly society,

(b) on the amalgamation of friendly societies,

(c) on the transfer of the whole or part of the business of a friendly society to a company which is not a friendly society,

(d) on the conversion of a friendly society into a company which is not a friendly society, and

(e) on the transfer of the whole or part of the business of an insurance company to a friendly society.

(3) The Treasury may by regulations provide that the transfer of business rules as applied by subsection (2) have effect subject to such exceptions or other modifications as may be prescribed by the regulations.

(4) The regulations may make provision having retrospective effect.

(5) The regulations may—

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

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

Exempt BLAGAB or eligible PHI business

Exemption for certain BLAGAB or eligible PHI business

153

(1) A friendly society is not liable to pay corporation tax (whether on income or chargeable gains) on its profits arising from exempt BLAGAB or eligible PHI business.

(2) The exemption applies only if the society makes a claim.

(3) For the meaning of “BLAGAB or eligible PHI business”, see section 154.

(4) For the meaning of “exempt” BLAGAB or eligible PHI business, see section 155.

Meaning of “BLAGAB or eligible PHI business”

154

(1) In this Part “BLAGAB or eligible PHI business” means—

(a) basic life assurance and general annuity business, and

(b) any PHI business so far as consisting of the effecting or carrying out of qualifying contracts,

but see subsections (3) and (4) for some qualifications.

(2) A contract is a “qualifying” contract if—

(a) it is made before 1 September 1996, or

(b) it is made on or after that date and it also falls within paragraph I, II or III of Part 2 of Schedule 1 to the FISMA (Regulated Activities) Order 2001.

(3) A contract made before 1 September 1996 which effects a policy affording provision for injury, sickness or other infirmity is to be regarded for the purposes of this Part as forming part of “BLAGAB or eligible PHI business” only if—

(a) the policy also affords assurance for a gross sum independent of injury, sickness or other infirmity,

(b) at least 60% of the total premiums are attributable to the provision afforded during injury, sickness or other infirmity, and

(4) Business is not to be regarded as “BLAGAB or eligible PHI business” of a friendly society for the purposes of this Part so far as it consists of the assurance of any annuity the consideration for which consists of sums obtainable—

(a) on the maturity, or

(b) on the surrender,

of any other policy of assurance issued by the society which forms part of its exempt BLAGAB or eligible PHI business.

Meaning of “exempt” BLAGAB or eligible PHI business

155

(1) In this Part “exempt” BLAGAB or eligible PHI business means BLAGAB or eligible PHI business other than non-qualifying business.

(2) Business is “non-qualifying” so far as it consists of—

(a) the assurance of gross sums, or the granting of annuities, which meet the conditions set out in the following table (which vary according to the date on which the contracts in question were made), or

(b) the effecting or carrying out of contracts for the assurance of gross sums which are made on or after 20 March 1991 and which are expressed at the outset not to be made in the course of exempt BLAGAB or eligible PHI business.

(3) This is the table mentioned above—

Contracts to which assurance or annuities relate	Applicable limit for premiums or gross sums	Applicable limit for annuities
Contracts made on or after 1 May 1995	Assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £270	Granting of annuities of annual amounts exceeding £156
Contracts made on or after 25 July 1991 but before 1 May 1995	Assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £200	Granting of annuities of annual amounts exceeding £156
Contracts made on or after 1 September 1990 but before 25 July 1991	Assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £150	Granting of annuities of annual amounts exceeding £156
Contracts made on or after 1 September 1987 but before 1 September 1990	Assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £100	Granting of annuities of annual amounts exceeding £156
Contracts made on or after 14 March 1984 but before 1 September 1987	Assurance of gross sums exceeding £750	Granting of annuities of annual amounts exceeding £156
Contracts made before 14 March 1984	Assurance of gross sums exceeding £500	Granting of annuities of annual amounts exceeding £104

(4) In applying the limits in the above table in relation to the total premiums payable in any period of 12 months (in the case of contracts made on or after 1 September 1987)—

(a) if the premiums are payable more frequently than annually, ignore an amount equal to 10% of the premiums, and

(b) ignore so much of any premium as is charged on the ground that an exceptional risk of death or disability is involved.

(5) In applying the limits in the above table in the case of contracts made on or after 1 September 1987, ignore any bonus or addition declared upon an annuity.

(6) In applying the limits in the above table in the case of contracts made before 1 September 1987, ignore any bonus or addition which—

(a) is declared upon the assurance of a gross sum or annuity, or

(b) accrues upon the assurance of a gross sum or annuity by reference to an increase in the value of any investments.

(7) In the case of a contract for the assurance of a gross sum under exempt BLAGAB or eligible PHI business made on or after 1 September 1987 but before 1 May 1995, there is a special rule if the amount payable by way of premium under the contract is increased as a result of a variation made—

(a) in the period beginning with 25 July 1991 and ending with 31 July 1992, or

(b) in the period beginning with 1 May 1995 and ending with 31 March 1996.

(8) The rule is that, in relation to any profits relating to the contract as varied, the contract is to be treated for the purposes of the above table as made at the time of the variation.

Societies with no provision for assuring gross sums exceeding £2,000 etc

156

(1) This section applies to a friendly society if its rules make no provision for it to carry on BLAGAB or eligible PHI business, or other long-term business, consisting of—

(a) the assurance of gross sums exceeding £2,000, or

(b) the granting of annuities of annual amounts exceeding £416.

(2) The table in section 155 applies in relation to a friendly society to which this section applies as if, in the final row of that table—

(a) the reference to £500 were a reference to £2,000, and

(b) the reference to £104 were a reference to £416.

(3) If at any time a friendly society to which this section applies amends its rules so as to cease to be such a friendly society, any part of its BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI business,

continues to be exempt BLAGAB or eligible PHI business for the purposes of this Part.

(4) If at any time a friendly society to which this section does not apply amends its rules so as to become a friendly society to which this section applies, any part of its BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was not exempt BLAGAB or eligible PHI business,

continues not to be exempt BLAGAB or eligible PHI business for the purposes of this Part.

(5) If at any time a friendly society to which this section does not apply acquires by way of transfer of engagements or amalgamation from another friendly society any BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI business,

that business continues to be exempt BLAGAB or eligible PHI business for the purposes of this Part.

(6) If at any time a friendly society to which this section applies acquires by way of transfer of engagements or amalgamation from another friendly society any BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was not exempt BLAGAB or eligible PHI business,

that business continues not to be exempt BLAGAB or eligible PHI business for the purposes of this Part.

Transfers to friendly societies

157

(1) If at any time an insurance business transfer scheme transfers any long-term business to a friendly society, any BLAGAB or eligible PHI business which relates to contracts included in the transfer is subsequently not to be capable of being exempt BLAGAB or eligible PHI business for the purposes of this Part.

(2) This rule does not apply in relation to business relating to contracts to which section 158 applied immediately before the transfer had effect.

Transfers from friendly societies to insurance companies etc

158

(1) If at any time an insurance company acquires by way of transfer of engagements from a friendly society any BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI business,

that business continues to be exempt from corporation tax (whether on income or chargeable gains) on profits arising from it.

(2) If at any time a friendly society ceases as a result of section 91 of FSA 1992 (conversion into company) to be registered under that Act, any part of its BLAGAB or eligible PHI business which—

(a) relates to contracts made before that time, and

(b) immediately before that time was exempt BLAGAB or eligible PHI business,

continues to be exempt from corporation tax (whether on income or chargeable gains) on profits arising from it.

(3) If contracts constituting or forming part of the business of a company covered by this section are varied during an accounting period of the company so as to increase the premiums payable under them, the business relating to those contracts is not exempt from corporation tax for that or any subsequent accounting period.

(4) For the purposes of the Corporation Tax Acts any part of a company's business which is exempt from corporation tax as a result of this section is to be treated as a separate business from any other business carried on by the company.

(5) The Treasury may by regulations provide that, where any part of the business of a company is exempt from corporation tax as a result of this section, the Corporation Tax Acts have effect subject to such exceptions or other modifications as they consider appropriate.

(6) The regulations may make provision having retrospective effect.

(7) The regulations may—

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

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

Exception in case of breach of maximum benefits payable to members

159

(1) The exemption from corporation tax afforded by section 153, 156(3) or (5) or 158 does not apply in relation to so much of the profits arising to a friendly society or insurance company from any business as is attributable to a policy which—

(a) is not a qualifying policy as a result of sub-paragraph (2) of paragraph 6 of Schedule 15 to ICTA and is not an excluded policy, and

(b) would not be a qualifying policy as a result of that sub-paragraph if all excluded policies were ignored.

(2) A policy is an excluded policy if—

(a) it is held otherwise than with the friendly society or insurance company, or

(b) the person who has the contract effecting the policy acquired the rights under it on an assignment otherwise than for money or money's worth.

(3) This section does not withdraw the exemption from corporation tax afforded by section 153, 156(3) or (5) or 158 in relation to profits arising from any part of a business relating to contracts made on or before 3 May 1966.

Exempt BLAGAB or eligible PHI business: benefits payable by friendly societies etc

Maximum benefits payable to members

160

(1) This section imposes restrictions on the entitlement of a person to have at any time outstanding contracts with any one or more friendly societies, registered branches or insurance companies (“relevant persons”) which are—

(a) for the assurance of gross sums under business which is afforded exemption from corporation tax under section 153, 156(3) or (5) or 158 (see subsections (2) and (3)), or

(b) for the assurance by way of annuity under business which is afforded exemption from corporation tax under any of those provisions (see subsection (4)).

(2) In the case of contracts for the assurance of gross sums made before 1 September 1987, a person is not entitled to have outstanding at any time with relevant persons contracts which, taking them all together, are for the assurance of more than £750 (but see subsection (9)).

(3) In the case of contracts for the assurance of gross sums at least one of which was made on or after that date, a person is not entitled to have outstanding at any time with relevant persons—

(a) contracts under which the total premiums payable in any period of 12 months exceed £270,

(b) contracts made before 1 May 1995 under which the total premiums payable in any period of 12 months exceed £200,

(d) contracts made before 1 September 1990 under which the total premiums payable in any period of 12 months exceed £100.

(4) In the case of contracts for the assurance by way of annuity, a person is not entitled to have at any time outstanding with relevant persons contracts which, taking them all together, are for the assurance of more than £156 (but see subsection (9)).

(5) In applying the limits in this section in relation to the total premiums payable in any period of 12 months—

(a) if the premiums are payable more frequently than annually, ignore an amount equal to 10% of the premiums, and

(b) ignore so much of any premium as is charged on the ground that an exceptional risk of death or disability is involved.

(6) In applying the limits in this section, ignore —

(a) any bonus or addition which is declared upon an assurance of a gross sum or annuity or which accrues upon an assurance of a gross sum or annuity by reference to an increase in the value of any investments,

(b) any policy of insurance or annuity contract by means of which the benefits to be provided under an occupational pension scheme (within the meaning of section 150(5) of FA 2004) are secured,

(c) any annuity contract which constitutes, or is issued or held in connection with, a registered pension scheme other than one within paragraph (b), and

(d) any increase in a benefit under a friendly society contract (within the meaning given by section 6 of the Decimal Currency Act 1969) resulting from the adoption of a scheme prescribed or approved under subsection (3) of that section.

(7) In the case of a contract for the assurance of a gross sum made on or after 1 September 1987 but before 1 May 1995, there is a special rule if the amount payable by way of premium under the contract is increased as a result of a variation made—

(a) in the period beginning with 25 July 1991 and ending with 31 July 1992, or

(b) in the period beginning with 1 May 1995 and ending with 31 March 1996.

(8) The rule is that, in relation to times when the contract has effect as varied, the contract is to be treated for the purposes of this section as made at the time of variation.

(9) If a person's outstanding contracts with relevant persons were contracts which were all made before 14 March 1984—

(a) subsection (2) has effect as if the reference to £750 were a reference to £2,000, and

(b) subsection (4) has effect as if the reference to £156 were a reference to £416.

Section 160: supplementary

161

(1) This section makes further provision for the purposes of section 160 the application of which depends on whether or not a friendly society is an old society.

(2) For the purposes of this Part an “old society” means—

(a) a registered friendly society which was registered before 4 February 1966,

(b) a registered friendly society which was registered in the period beginning with that date and ending with 3 May 1966 and which on or before 3 May 1966 carried on any life or endowment business (within the meaning of section 29 of FA 1966), or

(c) an incorporated friendly society which, before its incorporation, was a registered friendly society within paragraph (a) or (b).

(3) In applying the limits in section 160(3) in relation to the total premiums payable in any period of 12 months, ignore £10 of the premiums payable under any contract made before 1 September 1987 by an old society.

(4) In applying the limits in section 160(3), the premiums under any contract for an annuity which was made before 1 June 1984 by a friendly society other than an old society are to be dealt with as if the contract were for the assurance of a gross sum.

(5) In applying the limits in section 160 in any case where a person has outstanding with relevant persons one or more contracts made after 13 March 1984 and one or more contracts made on or before that date, any contract for an annuity which was made before 1 June 1984 by a friendly society other than an old society is to be regarded—

(a) as a contract for the annual amount concerned, and

(b) as a contract for the assurance of a gross sum equal to 75% of the total premiums which would be payable under the contract if it were to run for its full term or, as the case may be, if the member concerned were to die at the age of 75.

Section 160: statutory declarations

162

A friendly society, registered branch or insurance company may require a person to make and sign a statutory declaration—

(a) that the total amount assured under outstanding contracts entered into by that person with any one or more friendly societies, registered branches or insurance companies (taken together) does not exceed the limits set out in section 160, and

(b) that the total premiums under those contracts do not exceed those limits.

Exempt BLAGAB or eligible PHI business: directions to old societies

Directions given to old societies

163

(1) HMRC Commissioners may give a direction under this section to an old society.

(2) The Commissioners may give the direction if—

(a) the society begins to carry on exempt BLAGAB or eligible PHI business or, in their opinion, begins to carry on exempt BLAGAB or eligible PHI business on an enlarged scale or of a new character, and

(b) it appears to them, having regard to the restrictions placed on qualifying policies issued by friendly societies other than old societies by paragraphs 3(1)(b) and 4(3)(b) of Schedule 15 to ICTA, that for the protection of the revenue it is expedient to give the direction.

(3) The direction is that (and has the effect that) the society is to be treated for the purposes of this Part and Schedule 15 to ICTA as a friendly society other than an old society with respect to business carried on after the date of the direction.

(4) The society may appeal against the direction on the ground that—

(a) it has not begun to carry on business as mentioned in subsection (2)(a), or

(b) the direction is not necessary for the protection of the revenue.

(5) The appeal must be made within 30 days of the date on which the direction is given.

(6) If a registered friendly society in respect of which a direction is in force under this section becomes an incorporated friendly society, the direction continues to have effect, so that for the purposes of this Part and Schedule 15 to ICTA it is treated as a friendly society other than an old society.

Exemption for other business

Societies registered before 1 June 1973, etc

164

(1) A registered friendly society which is a qualifying society is not liable to pay corporation tax (whether on income or chargeable gains) on its profits other than those arising from—

(a) life assurance business, or

(b) PHI business comprised in BLAGAB or eligible PHI business.

(2) A registered friendly society is a qualifying society if—

(a) it was registered before 1 June 1973 (but see section 168 for circumstances in which it ceases to be a qualifying society),

(b) it is registered on or after that date and its business is limited to the provision, in accordance with its rules, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of this section by HMRC Commissioners, or

(c) it is registered on or after that date but before 27 March 1974 and its rules limit the total amount which may be paid by a member by way of contributions and deposits to not more than £1 per month or such greater amount as HMRC Commissioners may authorise for the purposes of this section.

(3) For the purposes of this section a registered friendly society formed on the amalgamation of two or more friendly societies is treated as registered before 1 June 1973 if, at the time of amalgamation, each of the societies amalgamated was a qualifying society (but otherwise is treated as registered at that time).

(4) The exemption applies only if the society makes a claim.

Incorporated friendly societies

165

(1) An incorporated friendly society which is a qualifying society is not liable to pay corporation tax (whether on income or chargeable gains) on its profits other than those arising from—

(a) life assurance business, or

(b) PHI business comprised in BLAGAB or eligible PHI business.

(2) An incorporated friendly society is a qualifying society if it falls within any of cases A to C (but see section 168 for circumstances in which it ceases to be a qualifying society).

(3) Case A is that, immediately before its incorporation, it was a registered friendly society which was a qualifying society within the meaning of section 164.

(4) Case B is that—

(a) it was formed otherwise than by the incorporation of a registered friendly society or the amalgamation of two or more friendly societies, and

(b) its business is limited to the provision, in accordance with its rules, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of this section by HMRC Commissioners.

(5) Case C is that—

(a) it was formed by the amalgamation of two or more friendly societies, and

(b) at the time of the amalgamation each of the societies being amalgamated was a qualifying society within the meaning of section 164 or this section.

(6) The exemption applies only if the society makes a claim.

(7) The exemption does not apply to any profits arising or accruing to the society from, or by reason of its interest in, a body corporate—

(a) which is a subsidiary of the society (within the meaning of FSA 1992), or

(b) of which the society has joint control (within the meaning of FSA 1992).

Transfers from friendly societies to insurance companies etc

166

(1) For the purposes of this Part “relevant other business” means any business other than—

(a) life assurance business, or

(b) PHI business comprised in BLAGAB or eligible PHI business.

(2) If—

(a) at any time an insurance company acquires by way of transfer of engagements from a friendly society any relevant other business, and

(b) immediately before that time the society was exempt from corporation tax on profits arising from that business as a result of section 164 or 165,

the insurance company is exempt from corporation tax on its profits arising from the relevant other business so far as relating to contracts made before that time.

(3) If a friendly society—

(a) at any time ceases as a result of section 91 of FSA 1992 (conversion into company) to be registered under that Act, and

(b) immediately before that time the society was, as a result of section 164 or 165, exempt from corporation tax on profits arising from any relevant other business carried on by it,

the company into which the society is converted is exempt from corporation tax on its profits arising from the relevant other business so far as relating to contracts made before that time.

(4) If during an accounting period of a company there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on relevant other business relating to contracts made before the time of transfer or conversion, the company is not exempt from corporation tax as a result of this section for that or any subsequent accounting period.

(5) For the purposes of the Corporation Tax Acts any part of a company's business which is exempt from corporation tax as a result of this section is to be treated as a separate business from any other business carried on by the company.

(6) The Treasury may by regulations provide that, where any part of the business of a company is exempt from corporation tax as a result of this section, the Corporation Tax Acts have effect subject to such exceptions or other modifications as they consider appropriate.

(7) The regulations may make provision having retrospective effect.

(8) The regulations may—

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

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

Transfers between friendly societies

167

(1) If—

(a) at any time a friendly society acquires by way of transfer of engagements or amalgamation from another friendly society any relevant other business, and

(b) immediately before that time the transferor was exempt from corporation tax on profits arising from that business as a result of section 164 or 165,

the transferee is exempt from corporation tax on its profits arising from the relevant other business so far as relating to contracts made before that time.

(2) If during an accounting period of the transferee there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on relevant other business relating to contracts made before that time, the transferee is not exempt from corporation tax as a result of this section for that or any subsequent accounting period.

(3) If—

(a) at any time a friendly society acquires by way of transfer of engagements or amalgamation from another friendly society any relevant other business, and

(b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business as a result of section 164 or 165,

the transferee is not exempt from corporation tax on its profits arising from the relevant other business so far as relating to contracts made before that time.

(4) The Treasury may by regulations provide that, where any part of the business of a friendly society is, or is not, exempt from corporation tax as a result of this section, the Corporation Tax Acts have effect subject to such exceptions or other modifications as they consider appropriate.

(5) The regulations may make provision having retrospective effect.

(6) The regulations may—

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

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

(7) Nothing in this section applies in relation to transfers or amalgamations taking place before 21 July 2008.

Withdrawal of qualifying status

168

(1) HMRC Commissioners may give a direction under this section to—

(a) a registered friendly society which is a qualifying society for the purposes of section 164 as a result of its registration before 1 June 1973, or

(b) an incorporated friendly society which is a qualifying society for the purposes of section 165 as a result of falling within case A or C and whose business and rules are not of a kind mentioned in section 164(2)(b) or (c).

(2) The Commissioners may give the direction if—

(a) the society begins to carry on relevant other business or, in their opinion, begins to carry on relevant other business on an enlarged scale or of a new character, and

(b) it appears to them, having regard to the restrictions imposed by section 164 on registered friendly societies registered on or after 1 June 1973, that for the protection of the revenue it is expedient to give the direction.

(3) The direction is that (and has the effect that) the society ceases to be a qualifying society as from the date of the direction.

(4) The society may appeal against the direction on the ground that—

(a) it has not begun to carry on business as mentioned in subsection (2)(a), or

(b) the direction is not necessary for the protection of the revenue.

(5) The appeal must be made within 30 days of the date on which the direction is given.

Payments by non-qualifying societies treated as qualifying distributions

169

(1) This section applies if—

(a) a friendly society which is not a qualifying society makes a payment to a member in respect of the member's interest in the society,

(b) the payment is made in the course of relevant other business, and

(c) the payment exceeds the total amount of any sums paid by the member to the society by way of contributions or deposits after deducting from that total any relevant previous payment and any relevant earlier repayment.

(2) The excess is treated for the purposes of corporation tax and income tax as a ... distribution.

(3) In this section—

(a) the reference to a relevant previous payment is to the amount of any previous payment made by the society to the member in respect of the member's interest in the society, and

(b) the reference to a relevant earlier repayment is to the amount of any earlier repayment of sums paid by the member to the society by way of contributions or deposits.

(4) In the case of an incorporated friendly society which, immediately before its incorporation, was a registered friendly society which was not a qualifying society—

(a) references in this section to payments (or repayments) to or from the society include payments (or repayments) to or from the registered friendly society, but

(b) subsection (3)(a) does not apply to a payment made before 27 March 1974 or, if the registered friendly society was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(a), a payment made on or before such later date as was specified in the direction.

(5) In the case of any other incorporated friendly society which was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(b), subsection (3)(a) does not apply to a payment made on or before the date specified in the direction.

(6) In the case of a registered friendly society, subsection (3)(a) does not apply to—

(a) a payment made before 27 March 1974, or

(b) if the society was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(a), a payment made on or before such later date as was specified in the direction.

(7) For the purposes of this section—

(a) a registered friendly society is not a qualifying society at any time if, at that time, it is not a qualifying society within the meaning of section 164, and

(b) an incorporated friendly society is not a qualifying society at any time if, at that time, it is not a qualifying society within the meaning of section 165.

Miscellaneous

Transfer schemes under s.6(5) of FSA 1992

170

(1) This section applies if assets of a branch of a registered friendly society have been identified in a scheme under section 6(5) of FSA 1992 (property, rights etc excluded from transfer to the society on its incorporation).

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Finance Act 2012

Transfers of business and transfers within a group

118

Share pooling rules

UK life insurance companies

119

Overseas life insurance companies: rule corresponding to s.119

120

Sections 119 and 120: supplementary

121

Long-term business fixed capital

Assets forming part of long-term business fixed capital

122

CHAPTER 9 — Relief for BLAGAB trade losses etc

The reliefs

Relief for BLAGAB trade losses against total profits

123

Carry forward of BLAGAB trade losses against subsequent profits

124

Group relief

125

Restrictions

Restrictions in respect of non-trading deficit

126

No relief against policyholders’ share of I - E profit

127

CHAPTER 10 — Transfers of long-term business

Transfers of BLAGAB

Relief for transferee in respect of transferor’s BLAGAB expenses

128

Intra-group transfers and demutualisation

129

Transfers between non-group companies: present value of in-force business

130

Transfers of non-BLAGAB long-term business

Application of ss. 129 and 130 to transfers of non-BLAGAB long-term business

131

Transfers of long-term business: anti-avoidance

Anti-avoidance

132

Clearance procedure

133

Section 133: supplementary

134

Interpretation

Meaning of “group” of companies

135

CHAPTER 11 — Definitions

Meaning of “BLAGAB trade profit” and “BLAGAB trade loss”

136

Meaning of “the long-term business fixed capital”

137

Meaning of assets that are “matched to” liabilities

138

Minor definitions

139

Abbreviations

140

Index of defined terms, etc

141

CHAPTER 12 — Supplementary

Powers conferred on Treasury or HMRC Commissioners

Power to amend Part 2 etc

142

Power to amend definition of “insurance business transfer scheme” etc

143

Power to modify provisions applying to overseas life insurance companies

144

Orders and regulations

145

Minor and consequential amendments and transitional provision

Minor and consequential amendments

146

Transitional provision

147

Commencement etc

Commencement

148

Accounting periods straddling 1 January 2013

149