Finance Act 1984

Section 72(7) and 76.

SCHEDULE 15OFFSHORE LIFE ASSURANCE: NEW NON-RESIDENT POLICIES

PART IParagraph to be Inserted in Part I of Schedule 2 To [1975 c. 7.] Finance Act 1975

“1A(1)The provisions of this paragraph apply to a policy of life insurance—

(a)which is issued in respect of an insurance made after 17th November 1983 ; and

(b)which is so issued by a company resident outside the United Kingdom;

and in the following provisions of this paragraph such a policy is referred to as a " new non-resident policy " and the company by which it is issued is referred to as " the issuing company ".

(2)Notwithstanding anything in paragraph 1 above—

(a)a new non-resident policy shall not be certified under sub-paragraph (1)(a) of that paragraph, and

(b)a new non-resident policy which conforms with such a form as is mentioned in sub-paragraph (1)(b) of that paragraph shall not be a qualifying policy,

until such time as the conditions in either sub-paragraph (3) or sub-paragraph (4) below are fulfilled with respect to it.

(3)The conditions first referred to in sub-paragraph (2) above are—

(a)that the issuing company is lawfully carrying on in the United Kingdom life assurance business (as defined in section 323(2) of the Taxes Act); and

(b)that the premiums under the policy are payable to a branch in the United Kingdom of the issuing company, being a branch through which the issuing company carries on its life assurance business ; and

(c)the premiums under the policy form part of those business receipts of the issuing company which arise through that branch.

(4)The conditions secondly referred to in sub-paragraph (2) above are—

(a)that the policy holder is resident in the United Kingdom ; and

(b)that the income of the issuing company from the investments of its life assurance fund is, by virtue of section 316 of the Taxes Act, charged to corporation tax under Case III of Schedule D ;

and expressions used in paragraph (b) above have the same meaning as in subsection (1) of the said section 316.”

PART IIModifications of Provisions Relating to Qualifying Policies

1In this Part of this Schedule—

• " Schedule 1 " means Schedule 1 to the Taxes Act (qualifying conditions etc.);

• " Schedule 2 " means Schedule 2 to the [1975 c. 7.] Finance Act 1975 (certification of qualifying policies etc.) ; and

• " the old policy" and " the new policy " have the same meaning as in paragraph 9 of Schedule 1.

2(1)In the application of paragraph 9 of Schedule 1 (substitutions) in any case where—

(a)the old policy was issued in respect of an insurance made after 17th November 1983 and could not be a qualifying policy by virtue of paragraph 1A of Schedule 2, and

(b)the new policy is not a new non-resident policy, as defined in the said paragraph 1A,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modifications in sub-paragraph (2) below.

(2)The modifications referred to in sub-paragraph (1) above are as follows:—

(a)if, apart from paragraph 1A of Schedule 2, the old policy and any related policy (within the meaning of sub-paragraph (2)(b) of paragraph 9 of Schedule 1) of which account falls to be taken would have been, or would have been capable of being certified qualifying policy under paragraph 1 of Schedule 2, that policy shall be assumed to have been a qualifying policy for the purposes of paragraph 9(2) of Schedule 1 ; and

(b)if, apart from this paragraph, the new policy would be, or would be capable of being certified as, a qualifying policy, it shall not be such a policy or, as the case may be, be capable of being so certified unless the circumstances are as specified in paragraph 9(3) of Schedule 1 ; and

(c)in paragraph 9(3)(b) of Schedule 1 the words "either by a branch or agency of theirs outside the United Kingdom or " shall be omitted.

(3)In the application of paragraph 9 of Schedule 1 in any case where—

(a)the old policy is a qualifying policy which was issued in respect of an insurance made on or before 17th November 1983 but, if the insurance had been made after that date, the policy could not have been a qualifying policy by virtue of paragraph 1A of Schedule 2, and

(b)the new policy is issued after 17th November 1983 and is not a new non-resident policy, as defined in the said paragraph 1A,

the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modification in sub-paragraph (2)(c) above.

3If, in the case of a substitution of policies falling within sub-paragraph (1) or sub-paragraph (3) of paragraph 2 above, the new policy confers such an option as results in the application to it of sub-paragraph (3) of paragraph 3 of Schedule 2 (amendment of qualifying conditions) the new policy shall be treated for the purposes of that sub-paragraph as having been issued in respect of an insurance made on the same day as that on which was made the insurance in respect of which the old policy was issued.

4(1)For the purposes of Schedule 1 and Part I of Schedule 2, a policy of life insurance which was issued—

(a)in respect of an insurance made on or before 17th November 1983, and

(b)by a company resident outside the United Kingdom,

shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance.

(2)If a policy of life insurance which was issued as mentioned in paragraphs (a) and (b) of sub-paragraph (1) above confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed, then for the purposes of that sub-paragraph any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.

PART IIIModifications of Chargeable Events Legislation

5In this Part of this Schedule—

(a)" chargeable event" has, subject to paragraph 6 below, the meaning assigned to it by section 394 of the Taxes Act (life policies) or, as the case may be, section 398 of that Act (capital redemption policies); and

(b)" new non-resident policy " has the meaning assigned to it by paragraph 1A of Schedule 2 to the [1975 c. 7.] Finance Act 1975.

6If, in the case of a substitution of policies falling within sub-paragraph (1) or sub-paragraph (3) of paragraph 2 above, the new policy is a qualifying policy, section 394 of the Taxes Act shall have effect with the following modifications:—

(a)the surrender of the rights conferred by the old policy shall not be a chargeable event; and

(b)the new policy shall be treated as having been issued in respect of an insurance made on the day referred to in paragraph 3 above.

7If at any time neither the conditions in sub-paragraph (3) nor the conditions in sub-paragraph (4) of paragraph 1A of Schedule 2 to the Finance Act 1975 are fulfilled with respect to a new non-resident policy which has previously become a qualifying policy, then, from that time onwards, Chapter III of Part XIV of the Taxes Act shall apply in relation to the policy as if it did not fall within subsection (2) of section 394 of that Act (qualifying policies).

8(1)On the happening of a chargeable event in relation to a new non-resident policy or a new offshore capital redemption policy, the amount which, apart from this paragraph, would by virtue of section 395 of the Taxes Act be treated as a gain arising in connection with the policy shall be reduced by multiplying it by a fraction of which—

(a)the denominator is the number of days in the period for which the policy has run before the happening of the chargeable event; and

(b)the numerator is the number of days in the period referred to in paragraph (a) above on which the policy holder was resident in the United Kingdom.

(2)The calculation of the number of days in the period referred to in sub-paragraph (1) above shall be made in like manner as is provided in the second paragraph of subsection (3) of section 400 of the Taxes Act (substituting a reference to the number of days for the reference in that paragraph to the number of years).

9(1)Subject to sub-paragraph (2) below, where, under section 395 of the Taxes Act, a gain (reduced in accordance with paragraph 8 above) is to be treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy—

(a)section 399 of that Act shall have effect, in relation to the gain, as if subsection (4) were omitted ; and

(b)the gain shall be chargeable to tax under Case VI of Schedule D ;

but any relief under section 400 of the Taxes Act shall be computed as if this paragraph had not been enacted.

(2)Paragraphs (a) and (b) of sub-paragraph (1) above do not apply to a gain arising in connection with a new non-resident policy if the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 1A of Schedule 2 to the [1975 c. 7.] Finance Act 1975 are fulfilled at all times between the date on which the policy was issued and the date on which the gain is treated as arising.

10Where a claim is made under section 400 of the Taxes Act in respect of the amount of a gain treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy (with or without other amounts), the " appropriate fraction " which, in accordance with subsection (2) of that section, is to be applied to that amount shall be modified by deducting from the number of complete years referred to in subsection (3) of that section any complete years during which the policy holder was not resident in the United Kingdom.

11Paragraph 18 of Schedule 2 to the Finance Act 1975 (which modifies the operation of section 400(3) of the Taxes Act when there is more than one chargeable event of a particular description) shall not apply in relation to a new non resident policy or a new offshore capital redemption policy.