Finance Act 1989

[F155 Eligible contracts.U.K.

(1)This section has effect to determine whether a contract is at a particular time (the relevant time) an eligible contract for the purposes of section 54 above.

(2)A contract is an eligible contract at the relevant time if—

(a)it was entered into by an insurer who at the time it was entered into was a qualifying insurer and was approved by the Board for the purposes of this section,

(b)the period of insurance under the contract does not exceed one year(commencing with the date it was entered into),

[F2(ba)at the relevant time the contract satisfies the conditions set out in subsection (2A) below,

(bb)the contract is not one in the case of which subsection (2D) below applies,]

(c)the contract is not connected with any other contract at the relevant time and has not been connected with any other contract at any time since it was entered into, [F3and]

(d)no benefit has been provided by virtue of the contract other than an approved benefit, [F4and

(e)the contract meets one or more of the three conditions set out below.]

[F5(2A)The conditions referred to in subsection (2)(ba) above are that—

(a)the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b)the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(c)the premium under the contract is reasonable, and

(d)the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(2B)In a case where—

(a)at the relevant time the contract confers a material right, or more than one such right, but

(b)the total cost to the insurer of providing benefits in pursuance of the material right or (as the case may be) in pursuance of all the material rights would not exceed the prescribed sum,

the contract shall not thereby be regarded as failing to satisfy at the relevant time the condition set out in subsection (2A)(b) above.

(2C)For the purposes of subsection (2B) above a material right is a right which—

(a)is not a right such as is mentioned in subsection (2A)(a) above or such as is for the time being specified in regulations made under subsection (2A)(b) above, and

(b)is not a right to a cash benefit.

(2D)This subsection applies in the case of a contract (the main contract) if—

(a)at least one other contract is entered into which is a contract (a collateral contract) under which a benefit is provided in consideration of the insured’s entering into the main contract, and

(b)the cost to the insurer of fulfilling his obligations under the collateral contract (or, if there is more than one collateral contract, of fulfilling his obligations under all of them) exceeds the prescribed sum.]

[F6(3)The first condition is that the contract is certified by the Board under section 56 below at the relevant time.

F6(4)The second condition is that, at the time the contract was entered into, it conformed with a standard form certified by the Board as a standard form of eligible contract.

F6(5)The third condition is that, at the time the contract was entered into, it conformed with a form varying from a standard form so certified in no other respect than by making additions—

(a)which were (at the time the contract was entered into) certified by the Board as compatible with an eligible contract when made to that standard form, and

(b)which (at that time) satisfied any conditions subject to which the additions were so certified.

F6(6)Where a contract is varied, and the relevant time falls after the time the variation takes effect, subsections (1) to (5) above shall have effect as if “entered into” read “varied” in each place where it occurs in subsections (4) and (5) above.]

(7)For the purposes of this section a contract is connected with another contract at any time if—

(a)they are simultaneously in force at that time,

(b)either of them was entered into with reference to the other, or with a view to enabling the other to be entered into on particular terms, or with a view to facilitating the other being entered into on particular terms, and

(c)the terms on which either of them was entered into would have been significantly less favourable to the insured if the other had not been entered into.

(8)For the purposes of this section each of the following is a qualifying insurer—

(a)an insurer lawfully carrying on in the United Kingdom business of any of the classes specified in Part I of Schedule 2 to the M1Insurance Companies Act 1982;

(b)an insurer not carrying on business in the United Kingdom but carrying on business in another member State and being either a national of a member State or a company or partnership formed under the law of any part of the United Kingdom or another member State and having its registered office, central administration or principal place of business in a member State.

(9)For the purposes of this section a benefit is an approved benefit if it is provided in pursuance of a right of a description

[F7(a)mentioned in subsection (2A)(a) above, or

(b)for the time being specified in regulations made under subsection (2A)(b) above.]

[F8(10)For the purposes of this section a benefit is also an approved benefit if it is not a cash benefit and—

(a)it is a single benefit provided otherwise than as mentioned in subsection (9) above and the cost to the insurer of providing it does not exceed the prescribed sum, or

(b)it is one of a number of benefits provided otherwise than as mentioned in subsection (9) above and the total cost to the insurer of providing the benefits does not exceed the prescribed sum.

(11)In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

(12)For the purposes of this section the prescribed sum is £30.

(13)The Treasury may by order substitute for the sum for the time being specified in subsection (12) above such sum as may be specified in the order; and any such substitution shall have effect in relation to cases where the relevant time falls on or after such date as is specified in the order.]]