Finance Act 2003

Case I profits

6 (1) In section 88 of the Finance Act 1989 (c. 26) (corporation tax: policy holders' share of profits), after subsection (3) insert—

“(3A) In subsection (3) above “income and gains of the company’s life assurance business” means the aggregate of—

(a) income and chargeable gains referable to the company’s basic life assurance and general annuity business, and

(b) profits of the company chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (pension business, life reinsurance business and overseas life assurance business).

(3B) In subsection (3A)(a) above (and section 89(1B) below) “chargeable gains referable to the company’s basic life assurance and general annuity business”, in relation to an accounting period, means the chargeable gains so far as referable to that business accruing to the company in the accounting period after deducting—

(a) any allowable losses so referable accruing to the company in the accounting period, and

(b) so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.”.

(2) Section 89 of that Act (meaning of policy holders' share of profits) is amended as follows.

(3) In subsection (1), for the words after “references to” substitute—

“(a) in a case where there are no Case I profits of the company for the period in respect of its life assurance business, the amount of the relevant profits, and

(b) in any other case, the amount arrived at in accordance with subsection (1A) below.”.

(4) After that subsection insert—

“(1A) An amount is arrived at in accordance with this subsection by—

(a) deducting from any profits of the company for the period chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (as reduced by any losses under those sections and any charges on income referable to any category of business other than basic life assurance and general annuity business) so much of the Case I profits of the company for the period in respect of its life assurance business as does not exceed the amount of any profits of the company for the period so chargeable, and

(b) deducting any remaining Case I profits of the company for the period in respect of its life assurance business from any BLAGAB profits of the company for the period.

(1B) For the purposes of this section, the BLAGAB profits of a company for an accounting period are the income and chargeable gains referable to the company’s basic life assurance and general annuity business reduced by the aggregate amount of—

(a) any non-trading deficit on the company’s loan relationships,

(b) expenses of management falling to be deducted under section 76 of the Taxes Act 1988, and

(c) charges on income,

so far as referable to the company’s basic life assurance and general annuity business.”.

(5) In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”.

(6) In section 76(2B) of the Taxes Act 1988 (expenses of management: relevant income)—

(a) in paragraph (a), for “of the company’s life assurance business for that accounting period; and” substitute “for that accounting period which are referable to the company’s basic life assurance and general annuity business;”, and

(b) after paragraph (b) insert “and

(c) profits of the company for that accounting period which are chargeable under Case VI of Schedule D under section 436, 439B or 441.”.

(7) In—

(a) section 434(6A)(b) of the Taxes Act 1988 (franked investment income), and

(b) the second sentence of section 434A(3) of that Act (computation of losses and limitation on relief),

for “88” substitute “89”.

(8) In section 434A(2)(a)(i) of the Taxes Act 1988 (computation of losses and limitation on relief), for “for the period, otherwise than in accordance with those provisions, the profits or losses of the company’s life assurance business” substitute “, otherwise than in accordance with those provisions, the relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of the company for the period”.

(9) In section 437(1A) of the Taxes Act 1988 (general annuity business), for “profits for any accounting period of a company’s life assurance business” substitute “relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of an insurance company for any accounting period”.

(10) In paragraph 16(1) of Schedule 7 to the Finance Act 1991 (c. 31) (transitional relief for old general annuity contracts), for “profits for any accounting period of an insurance company’s life assurance business” substitute “relevant profits (within the meaning of section 88(1) of the Finance Act 1989) of an insurance company for any accounting period”.

(11) Section 89(1B) of the Finance Act 1989 (c. 26) (inserted by sub-paragraph (4)) has effect for the purposes of section 210A of the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by paragraph 14(1)) in relation to any accounting period of a company if it is necessary under that section to determine the company’s BLAGAB profits for the period.

(12) But, subject to that, this paragraph has effect for accounting periods ending on or after 9th April 2003.