Finance Act 1994

[F169 Charge to tax where different rates of tax apply.U.K.

(1)This section applies for the purpose of determining the chargeable amount in a case where a contract provides cover falling within any one of the following paragraphs, that is to say—

(a)cover for one or more exempt matters,

(b)cover for one or more standard rate matters, or

(c)cover for one or more higher rate matters,

and also provides cover falling within another of those paragraphs.

[F2(1A)But this section does not apply for the purpose of determining the chargeable amount in relation to an excepted premium (as to which see section 69A).]

(2)In the following provisions of this section “the non-exempt premium” means the difference between—

(a)the amount of the premium; and

(b)such part of the premium as is attributable to any exempt matter or matters or, if no part is so attributable, nil.

(3)If the contract provides cover for one or more exempt matters and also provides cover for either—

(a)one or more standard rate matters, or

(b)one or more higher rate matters,

the chargeable amount is such amount as, with the addition of the tax chargeable at the standard rate or (as the case may be) the higher rate, is equal to the non-exempt premium.

(4)If the contract provides cover for both—

(a)one or more standard rate matters, and

(b)one or more higher rate matters,

the higher rate element and the standard rate element shall be found in accordance with the following provisions of this section.

(5)For the purposes of this section—

(a)“the higher rate element” is such portion of the non-exempt premium as is attributable to the higher rate matters (including tax at the higher rate); and

(b)“the standard rate element” is the difference between—

(i)the non-exempt premium; and

(ii)the higher rate element.

(6)In a case falling within subsection (4) above, tax shall be charged separately—

(a)at the standard rate, by reference to the standard rate chargeable amount, and

(b)at the higher rate, by reference to the higher rate chargeable amount,

and the tax chargeable in respect of the premium is the aggregate of those amounts of tax.

(7)For the purposes of this section—

• “the higher rate chargeable amount” is such amount as, with the addition of the tax chargeable at the higher rate, is equal to the higher rate element;

• “the standard rate chargeable amount” is such amount as, with the addition of the tax chargeable at the standard rate, is equal to the standard rate element.

(8)References in this Part to the chargeable amount shall, in a case falling within subsection (4) above, be taken as referring separately to the standard rate chargeable amount and the higher rate chargeable amount.

(9)In applying subsection (2)(b) above, any amount that is included in the premium as being referable to tax (whether or not the amount corresponds to the actual amount of tax payable in respect of the premium) shall be taken to be wholly attributable to the non-exempt matter or matters.

(10)In applying subsection (5)(a) above, any amount that is included in the premium as being referable to tax at the higher rate (whether or not the amount corresponds to the actual amount of tax payable at that rate in respect of the premium) shall be taken to be wholly attributable to the higher rate element.

(11)Subject to subsections (9) and (10) above, any attribution under subsection (2)(b) or (5)(a) above shall be made on such basis as is just and reasonable.

(12)For the purposes of this section—

(a)an “exempt matter” is any matter such that, if it were the only matter for which the contract provided cover, the contract would not be a taxable insurance contract;

(b)a “non-exempt matter” is a matter which is not an exempt matter;

(c)a “standard rate matter” is any matter such that, if it were the only matter for which the contract provided cover, tax at the standard rate would be chargeable on the chargeable amount;

(d)a “higher rate matter” is any matter such that, if it were the only matter for which the contract provided cover, tax at the higher rate would be chargeable on the chargeable amount.

(13)If the contract relates to a lifeboat and lifeboat equipment, the lifeboat and the equipment shall be taken together in applying this section.

(14)For the purposes of this section “lifeboat” and “lifeboat equipment” have the same meaning as in paragraph 6 of Schedule 7A to this Act.]