Finance Act 1989

[F1 89 Policy holders’ share of profits.U.K.

(1)The references in [F2section 88] above to the policy holders’ share of the relevant profits for an accounting period of a company carrying on life assurance business F3... are references to —

[F4(a)in a case where there are no Case I profits of the company for the period in respect of its life assurance business, the amount of the relevant profits, and

(b)in any other case, the amount arrived at in accordance with subsection (1A) below.]

[F5(1A)An amount is arrived at in accordance with this subsection by—

(a)deducting from any profits of the company for the period chargeable under Case VI of Schedule D under sections 436, 439B and 441 of the Taxes Act 1988 (as reduced by any losses under those sections and any charges on income referable to any category of business other than basic life assurance and general annuity business) so much of the Case I profits of the company for the period in respect of its life assurance business as does not exceed the amount of any profits of the company for the period so chargeable, and

(b)deducting any remaining Case I profits of the company for the period in respect of its life assurance business from any BLAGAB profits of the company for the period.

(1B)For the purposes of this section, the BLAGAB profits of a company for an accounting period are the income and chargeable gains referable [F6(in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business reduced by the aggregate amount of—

[F7(a)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, and

(b)the basic deduction given by Step 8 in section 76(7) of the Taxes Act 1988.]]

(2)For the purposes of [F8subsections (1) and (1A)] above, the Case I profits for a period shall be reduced by—

F9( a ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the shareholders’ share of any F10... [F11distributions received from companies resident in the United Kingdom in the period which are] [F12referable [F13(in accordance with section 432A of the Taxes Act 1988)] to the company’s basic life assurance and general annuity business][F14, and

(c)the shareholders’ share of any foreign income dividends arising to the company in the period [F15which are referable to the company’s basic life assurance and general annuity business].]

[F16(2A)For the purposes of subsection (2) above—

(a) “ foreign income dividends ” shall be construed in accordance with Chapter VA of Part VI;

(b)the shareholders’ share of any foreign income dividends is so much of the income they represent as is the shareholders’ share.]

(3) For the purposes of those section “ the shareholders’ share ” in relation to any income is so much of the income as is represented by the fraction

where—

• A is an amount equal to the Case I profits of the company for the period in question in respect of its life assurance business, and

• B is an amount equal to the excess of the company’s relevant non-premium income and relevant gains over its relevant expenses and relevant interest for the period.

(4)Where there is no such excess as is mentioned in subsection (3) above, or where the Case I profits are greater than any excess, the whole of the income shall be the shareholders’ share; and (subject to that) where there are no Case I profits, none of the income shall be the shareholders’ share.

(5)In subsection (3) above the references to the relevant non-premium income, relevant gains, relevant expenses and relevant interest of a company for an accounting period are references respectively to the following items as brought into account for the period, so far as referable to the company’s life assurance business,—

(a)the company’s investment income from the assets of its long-term [F17insurance] fund together with its other income, apart from premiums;

(b)any increase in the value (whether realised or not) of those assets;

(c)expenses payable by the company;

(d)interest payable by the company;

and if for any period there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of the period.

(6) Except in so far as regulations made by the Treasury otherwise provide, in this section “ brought into account ” means brought into account in the revenue account prepared for the purposes of [F18Chapter 9 of the Prudential Sourcebook (Insurers)]; and where the company’s period of account does not coincide with the accounting period, any reference to an amount brought into account for the accounting period is a reference to the corresponding amount brought into account for the period of account in which the accounting period is comprised, proportionately reduced to reflect the length of the accounting period as compared with the length of the period of account.

[F19(7)In this section—

• “Case I profits” means profits computed in accordance with the provisions of the Taxes Act 1988 applicable to Case I of Schedule D [F20and adjusted in respect of losses in accordance with [F21the second sentence of section 76(10)] of the Taxes Act 1988;]

• F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

F23(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]