Part IIU.K. Income Tax, Corporation Tax and Capital Gains Tax

CHAPTER IU.K. General

Life assuranceU.K.

88 Corporation tax: policy holders’ fraction of profits.U.K.

(1)Subject to subsection (2) F1[F2...] below, in the case of a company carrying on life assurance business, the rate of corporation tax chargeable for any financial year on

[F3(a)the policy holders’ share of the relevant profits for any accounting period, or

(b)where the business is mutual business, the whole of those profits,

shall] be deemed to be the rate at which income tax at the [F4lower] rate is charged for the year of assessment which begins on 6th April in the financial year concerned.

(2)Subsection (1) above does not apply in relation to profits charged under Case I of Schedule D.

[F5(3)For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the income and gains of the company’s life assurance business reduced by the aggregate amount of—

[F6(aa)amounts falling in respect of any non-trading deficits on the company’s loan relationships to be brought into account in that period in accordance with paragraph 4 of Schedule 11 to the Finance Act 1996,] [F7and

( a)the basic deduction given by Step 8 in section 76(5) of the Taxes Act 1988.]]

[F8(3A)In subsection (3) above “income and gains of the company’s life assurance business” means the aggregate of—

(a)income and chargeable gains referable [F9(in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business, F10...

[F11(aa)receipts of the company chargeable under Case VI of Schedule D by virtue of section 85(1) above,

(ab)income of the company treated as referable to basic life assurance and general annuity business by section 441B(2) of the Taxes Act 1988 (treatment of UK land),

(ac)amounts treated as accruing to the company and charged to tax under Case VI of Schedule D by virtue of section 442A of that Act (taxation of investment return where risk reinsured), and]

(b)profits of the company chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (pension business, life reinsurance business and overseas life assurance business).

(3B)In subsection (3A)(a) above (and section 89(1B) below) “chargeable gains referable [F12(in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business”, in relation to an accounting period, means the chargeable gains so far as [F13so referable] accruing to the company in the accounting period after deducting—

(a)any allowable losses so referable accruing to the company in the accounting period, and

(b)so far as they have not been allowed as a deduction from chargeable gains in any previous accounting period, any allowable losses so referable previously accruing to the company.]

(4)In determining for the purposes of section 13 of the Taxes Act 1988 (small companies’ relief) the profits and basic profits (within the meaning of that section) of an accounting period of a company carrying on life assurance business, the policy holders’ [F14share] of the company’s relevant profits for that period [F15, or where the business is mutual business the whole of those profits,] shall be left out of account.

(5)This section has effect with respect to the profits of a company for accounting periods beginning on or after 1st January 1990 (including the 1990 component period); and, for this purpose, the profits of the 1990 component period shall be taken to be that portion of the profits of the straddling period which the length of the 1990 component period bears to the length of the straddling period.