454Income tax consequences on payments into and out of special reserve fund
(1)Where such a payment as is mentioned in section 452(5) is made into a special reserve fund of an underwriter by reason of the making by him of a profit for an underwriting year—
(a)subject to subsection (2) below, the payment shall be deemed to be an annual payment chargeable to income tax by way of deduction and payable and paid in the year of assessment corresponding to that underwriting year; and
(b)the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.
(2)Subsection (1)(a) above—
(a)shall not reduce any income other than income derived from the underwriter’s underwriting business or from any deposit made or assets held on trust in connection with that business; and
(b)subject to paragraph (a) above, shall reduce income other than investment income before reducing investment income.
(3)Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter into a premiums trust fund of his by reason that he has sustained a loss for an underwriting year then, subject to section 453(7)—
(a)the payment shall be deemed for all income tax purposes—
(i)to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and
(ii)to have been payable and paid to the underwriter; and
(iii)to have been payable and paid to him on the last day of the year of assessment corresponding to that underwriting year or, if he ceased to carry on his business before that day, on the last day on which he carried on his business; and
(b)the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted for the year of assessment in which the payment is so deemed to have been payable and paid.
(4)Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter by reason that he has sustained a loss, relief in respect of the loss shall, so far as possible, be given by treating the loss as reducing the income represented by the payment.
(5)Where the underwriter ceases to carry on his business before his death and under so much of the arrangements as gives effect to section 452(4)(b) a sum is paid to him or his personal representatives or assigns—
(a)the payment shall be deemed for all income tax purposes—
(i)to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and
(ii)to have been payable and paid to the underwriter; and
(iii)to have been payable and paid to him on the last day on which he carried on his business; and
(b)the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.
(6)Neither the arrangements, nor any disposition, trust, covenant, agreement or arrangement entered into for the purposes of the arrangements, shall be treated as included in the expression “settlement” for the purposes of Chapter III or IV of Part XV.