LIFE ASSURANCE BUSINESS (Hansard, 4 April 1995)

HC Deb 04 April 1995 vol 257 cc1593-8 1593

§ Amendments made: No. 35, in page 216, line 2, leave out from second 'business' to end of line 44 and insert

'with a policy holder or annuitant not residing in the United Kingdom, and (b) in the case of reinsurance business, is—

(i) reinsurance of life assurance business with a policy holder or annuitant not residing in the United Kingdom, or
(ii) reinsurance of business within sub-paragraph (i) above or this sub-paragraph.'.

No. 41, in page 216, line 45, leave out 'subsection' and insert 'subsections (7A) and'.

No. 36, in page 216, line 45, leave out 'subsections (2) to (4)' and insert 'subsection (1)'.

No. 42, in page 217, line 7, leave out 'subsection' and insert 'subsections (7A) and'.

No. 37, in page 217, line 7, leave out 'subsections (2) to (4)' and insert 'subsection (1)'.

No. 43, in page 217, line 10, at end insert—' (7A) Subsections (5) and (7) above do not apply if—

(a) the rights conferred by the policy or contract for the business are held subject to a trust,
(b) the settlor does not reside in the United Kingdom, and
(c) each beneficiary is either an individual not residing in the United Kingdom or a charity.

(7B) In subsection (7A) above—

(a) "settlor" means the person, or (where more than one) each of the persons, by whom the trust was directly or indirectly created (and for this purpose a person shall, in particular, be regarded as having created the trust if he provided or undertook to provide funds directly or indirectly for the purposes of the trust or made with any other person a reciprocal arrangement for that other person to create the trust),
(b) "beneficiary" means any person who is, or will or may become, entitled to any benefit under the trust (including any person who may become so entitled on the exercise of a discretion by the trustees of the trust), and
(c) "charity" means a person or body of persons established for charitable purposes only;

and for the purpose of that subsection an individual who is a trustee (of any trust) shall not be regarded as an individual.'. No. 38, in page 217, leave out lines 28 to 35.

No. 44, in page 217, line 49, after 'from' insert 'trustees or'.

No. 48, in page 222, line 27, at end insert—

'Receipts to be brought into account .—(1) For section 83 of the Finance Act 1989 substitute— "Receipts to be brought into account 83.—(1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period—

(a) the company's investment income from the assets of its long term business fund, and
(b) any increase in value (whether realised or not) of those assets.

If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business any amount transferred into the company's long term business fund from other assets of the company, or otherwise added to that fund, shall be taken into account, in the period in which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. This subsection does not apply where, or to the extent that, the amount concerned—

(a) would fall to be taken into account as a receipt apart from this section,
(b) is otherwise taken into account under subsection (2) above, or
(c) is specifically exempted from tax.

Meaning of "brought into account" 83A.—(1) In section 83 "brought into account" means brought into account in an account which is recognised for the purposes of that section. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of that section are—

(a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the company's long term business;
(b) any separate revenue account required to be prepared under that Act in respect of a part of that business.

Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business. (4) If in any such case the total of the items brought into account in the separate accounts is not equal to the total amount brought into account in the account prepared for the whole business, there shall be treated as having been required and prepared a further separate revenue account covering the balance. (5) Where a company carries on both ordinary long term business and industrial assurance business, the references above 1595 to the company's long term business shall be construed as references to either or both of those businesses, as the case may require.". (2) In section 432B of the Taxes Act 1988—

(a) in subsection (1) for the words from "brought into account" to "1982" substitute "brought into account, within the meaning of that section,"; and
(b) for subsection (2) substitute

(2) Where for that purpose reference falls to be made to more than one account recognised for the purposes of that section, the provisions of sections 432C to 432F apply separately in relation to each account.". (3) In section 432E(1) of the Taxes Act 1988 for the words from "of the items referred to in subsection (1)" to "paragraph (b))" substitute "to be taken into account in accordance with section 83(2) of the Finance Act 1989 (that is to say, the aggregate amount to be taken into account as receipts reduced by the aggregate amount to be taken into account as expenses)". (4) In section 436(3) of the Taxes Act 1988, after paragraph (a) insert— (aa) section 83(3) of that Act shall not apply;". (5) In section 441(4) of the Taxes Act 1988, after paragraph (a) (and before the word "and" following that paragraph) insert— (aa) section 83(3) of that Act shall not apply,". (6) In section 65(2) of the Finance (No.2) Act 1992 for paragraph (d) substitute (d) section 83(2) of the Finance Act 1989 (amounts to be taken into account as receipts or expenses);".'. No. 45, in page 223, line 3, leave out

'beginning on or after 1st January 1995'. No. 46, in page 223, line 17, at end insert—

'( ) In section 444A of the Taxes Act 1988 (transfers of business) after subsection (3) insert (3A) Any subsection (2) excess (within the meaning of section 432F(2)) which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available under section 432F(3) or (4) to reduce a subsection (3) figure (within the meaning of section 432F(l)) of the transferor in an accounting period following that which ends with the day on which transfer takes place—

(a) shall, instead, be treated as a subsection (2) excess of the transferee, and
(b) shall be taken into account in the first accounting period of the transferee ending after the date of the transfer (to reduce the subsection (3) figure or, as the case may be, to produce or increase a subsection (2) excess for that period),

in relation to the revenue account of the transferee dealing with or including the business transferred.". ( ) In section 444A(5) of the Taxes Act 1988 for "subsection (2) or (3)" substitute "subsection (2), (3) or (3A)".'. No. 49, in page 229, line 28, after '82(1)(a)', insert—

'( ) section 83(3) of that Act shall not apply,'. No. 39, in page 234, line 41, leave out from beginning to end of line 8 on page 235 and insert—

'6A. In section 431D(1), the words "carried on through a branch or agency in the United Kingdom by an overseas life insurance company" shall be treated as inserted after the words "means life assurance business"." '. No. 50, in page 235, line 40, leave out from beginning to 'substitute' and insert—

'.—(1) Paragraph 8 of Schedule 19AC to the Taxes Act 1988 is amended as follows. 1596 (2) In sub-paragraph (1)—

(a) for "paragraph I" substitute "paragraph IC"; and
(b) for "the word '1982'" substitute "the words 'brought into account, within the meaning of that section,"'.

(3) In sub-paragraph (2) for "paragraph 1(6), (7) or (8)" substitute "any provision of paragraph 1C". (4) For sub-paragraph (3)'. No. 51, in page 235, line 44, leave out '1' and insert '1C'.

No. 54, in page 235, line 45, leave out second 'and' and insert 'to'.

No. 52, in page 239, line 21, at end insert—

'.—(1) Schedule 8A to the Finance Act 1989 is amended as follows. (2) For paragraph 1 substitute— 1.—(1) In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs IA to IC below. (2) In those paragraphs—

(a) any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and
(b) any expression to which a meaning is given by section 11A of that Act has that meaning.

1A.—(1) The reference in section 83(2)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business. (2) The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) shall be construed as a reference to such of the assets concerned—

(a) as are—

(i) section 11(2)(b) assets;
(ii) section 11(2)(c) assets; or
(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets—

(i) (in a case where section 1 IC of that Act (other than subsection (9)) applies) of the relevant fund, or
(ii) (in a case where that section including that subsection applies) of the relevant funds,

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

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

(a) no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (2) above; and
(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

For the purposes of paragraph (b) above the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section I IC of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset. (4) For the reference in section 83(3) to any amount being transferred into the company's long term business fund from other assets of the company, or otherwise added to that fund, there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company's United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes. 1597 The amount of the increase in value under section 83(2)(b), as it applies in relation to such a transfer, shall be taken to be an amount equal to the value of the assets transferred. 1B. The references in section 83A to the company's long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required. 1C.—(1) Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period. (2) Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders. (3) Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders. (4) Where in any period of account any such transfer is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made.". (3) In paragraph 2(7) for the words following paragraph (b) substitute— and in paragraph (b) above "the specified portion" has the same meaning as in paragraph IA(3)(b) above. (4) After paragraph 2(7) insert— (7A) For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning.".'. No. 55, in page 239, line 33, after '(1)', insert— 'The Taxes Act 1988 is amended as follows. ( )'. No. 47, in page 239, line 42, at end insert— '.—(1 ) The amendments made by paragraph 16 above have effect in relation to accounting periods ending on or after 1st January 1994. (2) In the first accounting period of a company ending on or after 1st January 1994 in which the subsection (3) figure for any category of business exceeds the subsection (2) figure, the subsection (2) figure shall be treated as increased by an amount not exceeding the amount or aggregate amount of any subsection (2) excesses in relation to that category of business for accounting periods beginning on or after 1st January 1990 and ending before 1st January 1994, but not so as to produce a subsection (2) excess for that period. For this purpose the subsection (2) excess for an accounting period beginning on or after I st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure. Expressions used in this sub-paragraph have the same meaning as in section 432F of the Taxes Act 1988. (3) Where a transfer mentioned in section 444A of the Taxes Act 1988 took place at the end of an accounting period of the transferor beginning on or after 1st January 1990 and ending before 1st January 1994, section 444A(3A) shall have effect in relation to the transfer as if it read— (3A) Any subsection (2) excess (within the meaning of section 432F(2)) of the transferor for an accounting period 1598 beginning on or after 1st January 1990 and ending before 1st January 1994 which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to increase the subsection (2) figure (within the meaning of section 432F(1)) of the transferor in the first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeded the subsection (2) figure—

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

in relation to the revenue account of the transferee dealing with or including the business transferred. For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.".'.

§ No. 40, in page 240, line 12, leave out sub-paragraphs (2) to (4) and insert— '(2) Where the policy or contract for any life assurance business was made before 1st November 1994, the amendments made by this Schedule (and the repeals consequential on those amendments) shall not have effect for determining whether the business is overseas life assurance business. (3) Where the policy or contract for any life assurance business effected by a company resident in the United Kingdom at or through a branch or agency outside the United Kingdom was made before 29th November 1994, subsections (5) to (9) of section 431D of the Taxes Act 1988 shall not have effect for determining whether the business is overseas life assurance business.'.—[Sir George Young.]