HC Deb 28 March 1996 vol 274 cc1198-205

Rate for mixtures of light oil

8.—(1) Subject to paragraph 10 below, duty under section 20AAA(1) of this Act shall be charged at the following rates.

(2) In the case of a mixture produced in contravention of paragraph 1 above, the rate is the rate for light oil in force at the time that the mixture is produced.

(3) In the case of a mixture produced in contravention of paragraph 2 above, the rate is the rate produced by deducting from the rate for light oil in force at the time the mixture is produced the rate of rebate which at that time is in force under section 13A(1A)(a) of this Act.

(4) In this paragraph 'the rate for light oil' means the rate given in the case of light oil by section 6(1) of this Act.

Rate for mixtures of heavy oil

9.—(1) Subject to paragraph 10 below, duty charged under subsection (2) of section 20AAA of this Act shall be charged at the rate for heavy oil in force at the time when the mixture is supplied as mentioned in that subsection.

(2) In this paragraph 'the rate for heavy oil' means the rate given in the case of heavy oil by section 6(1) of this Act.

Credit for duty paid on ingredients of mixture

10. Where duty is charged under section 20AAA of this Act in respect of any mixture, the amount of duty produced by applying paragraph 8 or 9 above shall be reduced by the amount of any duty under section 6 of this Act which the Commissioners are satisfied has been paid in respect of any ingredient of the mixture.

Interpretation

11. In this Schedule— `fuel oil' and 'gas oil' have the same meanings as in section 11 of this Act; `leaded petrol' and 'unleaded petrol' shall be construed in accordance with section 13A of this Act."'— [Mr. Jack.]

Brought up, read the First and Second time, and added to the Bill.

No. 65, a new schedule—

Life assurance business losses—

Expenses of management

1. In section 76 of the Taxes Act 1988 (expenses of management: insurance companies) in subsection (1) (which applies section 75 of that Act with specified exceptions) before paragraph (a) there shall be inserted—

Computation of losses and limitation on relief

2.—(1) In relation to accounting periods beginning on or after 1st January 1996 and ending after 31st March 1996, section 434A of the Taxes Act 1988 (life assurance business: computation of losses and limitation on relief) shall be amended as follows—

  1. (a) for subsection (2) there shall be substituted the subsection (2) set out in sub—paragraph (2) below; and
  2. (b) in subsection (2A) (which is inserted by paragraph 23(2) of Schedule 13 to this Act) for "(2)(c)" there shall be substituted "(2)(a)(ii)".

(2) The subsection (2) set out in this sub—paragraph is as follows— (2) Where for any accounting period the loss arising to an insurance company from its life assurance business falls to be computed in accordance with the provisions of this Act applicable to Case I of Schedule D—

  1. (a) the loss resulting from the computation shall be reduced (but not below nil) by the aggregate of—
    2. 1200
    1. (i) the aggregate amount treated as a charge on income in computing for the period, otherwise than in accordance with those provisions, the profits or losses of the company's life assurance business; and
    2. (ii) any relevant non—trading deficit for that period on the company's debtor relationships; and
  2. (b) if the whole or any part of that loss as so reduced is set off—
    1. (i) under section 393A, or
    2. (ii) under section 403(1),

any losses for that period under section 436, 439B or 441 shall be reduced to nil, unless the aggregate of those losses exceeds the total of the amounts set off as mentioned in sub—paragraphs (i) and (ii) above, in which case each of those losses shall be reduced by an amount which bears to that total the proportion which the loss in question bears to that aggregate."

(3) In relation to accounting periods beginning on or after 1st January 1996 and ending on or before 31st March 1996. for subsection (2) of section 434A of the Taxes Act 1988 there shall be substituted the subsection (2) set out in sub—paragraph (2) above, but with the following amendments to paragraph (a), that is to say—

  1. (a) in the words preceding sub—paragraph (i), the words "the aggregate of shall be omitted;
  2. (b) in sub—paragraph (i), for "aggregate amount treated as a charge on income" there shall be substituted "amount of interest and annuities treated as charges on income"; and
  3. (c) sub—paragraph (ii) shall be omitted.

Spreading of relief for acquisition expenses

3.—(1) In section 86 of the Finance Act 1989 (spreading of relief for acquisition expenses) in subsection (1), for the words from "less any such repayments" to the end there shall be substituted—

"reduced by the items specified in subsection (IA) below."

(2) After that subsection there shall be inserted—

"(1A) Those items are—

  1. (a) the appropriate portion of any deduction falling to be made under paragraph (aa) of subsection (1) of section 76 of the Taxes Act 1988 for the period in question;
  2. (b) any such repayments or refunds falling within paragraph (c) of that subsection as are received in that period;
  3. (c) any reinsurance commissions falling within paragraph (ca) of that subsection. (1B) For the purposes of paragraph (a) of subsection (1A) above, "the appropriate portion" of the deduction there mentioned is the amount which bears to the whole of that deduction the proportion which the acquisition expenses, without making the reduction required by subsection (1) above, would bear to the whole of the expenses of management, without making the deductions required by paragraphs (aa), (a), (c) and (ca) of section 76(1) of the Taxes Act 1988."

Ascertainment of losses

4. In section 83 of the Finance Act 1989 (receipts to be brought into account) for subsection (3) (ascertainment of losses) there shall be substituted—

"(3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the company's long term business fund as part of or in connection with—

  1. (a) a transfer of business to the company, or
  2. (b) a demutualisation of the company not involving a transfer of business,
that amount shall (subject to subsection (4) below) be taken into account, for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above.

(4) Subsection (3) above does not apply where, or to the extent that, the amount concerned—

  1. (a) would fall to be taken into account as a receipt apart from this section,
  2. (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or
  3. (c) is specifically exempted from tax.

(5) Any amount which is to be taken into account pursuant to subsection (3) above for a period of account shall be so taken into account—

  1. (a) after the making of any reduction under subsection (6) of section 83AA below in relation to that period, but
  2. (b) before the making of any reduction under subsection (3) of that section in relation to an accounting period of the company ending in or with that period.

(6) In subsection (3) above "transfer of business" means—

  1. (a) a transfer of the whole or part of the long term business of an insurance company in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the Insurance Companies Act 1982;
  2. (b) a qualifying overseas transfer, within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988; or
  3. (c) the making of a contract of reinsurance which, in whole or in part, constitutes or forms part of a total reinsurance by the reinsured, unless the reinsurer under the contract falls within section 439A of the Taxes Act 1988 (pure reinsurance).

(7) For the purposes of subsection (3)(a) above, a transfer of business falling within subsection (6)(c) above shall be treated as a transfer of business to the company which is the reinsurer under the contract of reinsurance.

(8) In this section—

  1. (a) under policies of a particular description issued in respect of insurances made in the course of carrying on life assurance business before the making of the contract of reinsurance (or, in a case where there are two or more contracts of reinsurance, the last of them); or
  2. (b) under contracts of a particular description so made."

Application of surplus in reduction of certain losses

5. After section 83 of the Finance Act 1989 there shall be inserted—

"Amounts added to long term business fund of a company in

excess of that company's loss

83AA.—(1) If one or more relevant amounts are brought into account for a period of account of a company and either—

  1. (a) the aggregate of those amounts exceeds the loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, or
    2. 1202
  2. (b) no such loss would have so arisen, the surplus for that period shall be applied in accordance with the following provisions of this section and section 83AB below.

(2) In this section—

"relevant amount" means so much of any amount which is added to the long term business fund of a company as mentioned in subsection (3) of section 83 above as does not fail within any of the paragraphs of subsection (4) of that section;

"surplus", in relation to a period of account of a company, means (subject to section 83AB(2) below)—

  1. (a) if the aggregate of the relevant amounts brought into account for that period exceeds the amount of any loss which, after the making of any reduction under subsection (6) below but before any application of section 83(3) above in relation to that period, would have arisen to the company in that period in respect of its life assurance business, the amount of the excess; or
  2. (b) if no such loss would have so arisen, the aggregate of the relevant amounts brought into account for that period.

(3) Where, apart from section 83AB(2) below, there is a surplus for a period of account of a company for which there are brought into account one or more relevant amounts which were added to the company's long term business fund as part of, or in connection with, a particular transfer of business, the appropriate portion of the surplus for that period shall be treated as reducing (but not below nil) so much of any loss arising to the transferor company in the relevant accounting period as, on a just and reasonable apportionment of the loss, is referable to the business which is the subject of that particular transfer.

(4) For the purposes of subsection (3) above, the appropriate portion of the surplus for a period of account of a company is, in the case of any particular transfer of business, the amount which bears to that surplus (apart from any additions by virtue of section 83AB(2) below) the proportion which A bears to B, where—

(5) Any reduction pursuant to subsection (3) above of the loss arising to the transferor company in the relevant accounting period shall be made after—

  1. (a) the making of any reduction under subsection (6) below, and
  2. (b) any application of section 83(3) above, in relation to the period of account of that company in which falls the date of the particular transfer of business in question.

(6) Any loss arising to a company in respect of its life assurance business in a period of account subsequent to one for which there is a surplus shall be reduced (but not below nil) by so much of that surplus as cannot be applied—

  1. (a) under subsection (3) above;
  2. (b) under this subsection, in the reduction of a loss arising to the company in an earlier period of account; or
  3. (c) under section 83AB below, in relation to a transfer of business from the company in that or any earlier period of account.

(7) Any reduction pursuant to subsection (6) above of a loss arising to a company in a period of account shall be made—

  1. (a) before any application of section 83(3) above in relation to that period, and
  2. (b) if the company is also the transferor company in relation to a particular transfer of business, before the making of any reduction under subsection (3) above in 1203 relation to that one of its accounting periods which is the relevant accounting period in relation to that transfer.

(8) A surplus in respect of an earlier period of account shall be applied under subsection (6) above before a surplus in respect of a later period of account.

(9) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(10) In this section—

"add" has the same meaning as in section 83 above;

"the relevant accounting period" means the accounting period of the transferor company which—

  1. (a) ends on the date of the transfer of business mentioned in subsection (3) above, or
  2. (b) if that transfer of business falls within section 83(6)(c) above and no accounting period of the transferor company ends on that date, ends next after that date;

"transfer of business" has the same meaning as in section 83(3) above;

"the transferor company" means the company from which the transfer of business mentioned in subsection (3) above is effected.

(11) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance.

Treatment of surplus where there is a subsequent transfer of business from the company etc

83AB.—(1) If an amount is added to the long term business fund of a company as part of or in connection with a transfer of business to the company, or a demutualisation of the company not involving a transfer of business, and—

  1. (a) there is a surplus for the period of account of the company for which that amount is brought into account,
  2. (b) at any time after the transfer of business or demutualisation, there is a transfer of business from the company (the "subsequent transfer"), and
  3. (c) at the end of the relevant period of account there remains at least some of the surplus mentioned in paragraph (a) above which cannot be applied—
    1. (i) under subsection (3) of section 83AA above,
    2. (ii) under subsection (6) of that section, in the reduction of a loss arising to the company in an earlier period of account, or
    3. (iii) under this section. in relation to an earlier subsequent transfer, so much of the surplus falling within paragraph (c) above as, on a just and reasonable apportionment, is referable to business which is the subject of the subsequent transfer shall be applied under this section.

(2) An amount of surplus which is to be applied under this section shall be so applied by being treated as an amount of surplus (additional to any other amounts of surplus) for the period of account of the transferee company which last precedes the period of account of that company in which the subsequent transfer is effected, whether or not there is in fact any such preceding period of account.

(3) If, in a case where an amount is treated under subsection (2) above as an amount of surplus for a period of account of a company, the period is not one for which there is brought into account an amount added to the company's long term business fund in connection with the subsequent transfer, subsection (1) above shall have effect in relation to any transfer of business from the company subsequent to that transfer as if an amount had been so added and had been brought into account for that period.

(4) Any question as to what is a just and reasonable apportionment in any case for the purposes of subsection (1) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but any person affected by the apportionment shall be entitled to appear and be heard or make representations in writing.

(5) A surplus in respect of an earlier period of account shall be applied under this section before a surplus in respect of a later period of account.

(6) All such adjustments to the liability to tax of any person shall be made, whether by assessment or otherwise, as may be required to give effect to this section.

(7) In this section—

"add" has the same meaning as in section 83 above;

"demutualisation" has the same meaning as in section 83 above;

"the relevant period of account" means the period of account of the company from which the subsequent transfer is effected which consists of or includes the accounting period of that company which—

  1. (a) ends with the day on which the subsequent transfer is effected; or
  2. (b) if the subsequent transfer is a transfer of business falling within section 83(6)(c) above and no accounting period of the company ends on that day, ends next after that day;

"surplus" has the same meaning as in section 83AA above;

"transfer of business" has the same meaning as in section 83(3) above;

"transferee company" means the company to which the subsequent transfer of business is effected.

(8) Where it is necessary for any purpose of this section to identify the time at which a demutualisation of a company takes place, that time shall be taken to be the time when the company first issues shares.

(9) A transfer of business falling within section 83(6)(c) above shall be treated for the purposes of this section as a transfer of business from the company which is the reinsured under the contract of reinsurance to the company which is the reinsurer under that contract."

Meaning of "brought into account" in sections 83AA and 83AB

6.—(1) In section 83A of the Finance Act 1989, in subsection (1) (meaning of "brought into account" in section 83)—

  1. (a) for "In section 83" there shall be substituted "In sections 83 to 83AB"; and
  2. (b) for "that section" there shall be substituted "those sections".

(2) In subsection (2) of that section (the accounts which are recognised for the purposes of that section) for "that section" there shall be substituted "those sections".

Enactments disapplying section 83(3) of the Finance Act 1989

7.—(1) The following provisions of the Taxes Act 1988 (each of which provides for section 83(3) of the Finance Act 1989 not to apply in certain cases) shall cease to have effect—

  1. (a) section 436(3)(aa);
  2. (b) section 439B(3)(b); and
  3. (c) section 441(4)(aa).

(2) In consequence of sub—paragraph (1)(b) and (c) above, the word "and" shall be added at the end of section 439B(3)(a) and section 441(4)(a) of the Taxes Act 1988.

Overseas life insurance companies

8.—(1) Schedule 8A to the Finance Act 1989 (modifications of sections 83 and 89 in relation to overseas life insurance companies) shall be amended in accordance with the following provisions of this paragraph.

(2) In the Heading "Modifications of sections 83 and 89 in relation to overseas life insurance companies" after "83" there shall be inserted "to 83A".

(3) In paragraph 1(1), for "sections 83 and 83A" there shall be substituted "sections 83 to 83A".

(4) In paragraph IA, in sub—paragraph (4)—

  1. (a) for the words from "being transferred" to "added to that fund" there shall be substituted "being added to the company's long term business fund"; and
  2. (b) in the second sentence, for "a transfer" and "transferred" there shall be substituted respectively "an addition" and "added".

(5) After that sub—paragraph there shall be added—

"(5) Any reference in section 83AA(2), (3) or (4) or 83AB(1) or (3) to an amount being added to the relevant company's long term business fund shall be construed in accordance with sub—paragraph (4) above."

(6) In paragraph 1C(4), for "transfer" there shall be substituted "addition".

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