Finance Act 1995

Linked assetsU.K.

11(1)In section 431(2) of the Taxes Act 1988, for the definition of “linked assets” substitute—U.K.

““linked assets”, and related expressions, shall be construed in accordance with section 432ZA;”.

(2)After section 432 of the Taxes Act 1988 insert—

“432ZA Linked assets.

(1)In this Chapter “linked assets” means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined.

(2)Linked assets shall be taken—

(a)to be linked to long term business of a particular category if the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category; and

(b)to be linked solely to long term business of a particular category if all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.

(3)Where an asset is linked to more than one category of long term business, a part of the asset shall be taken to be linked to each category; and references in this Chapter to assets linked (but not solely linked) to any category of business shall be construed accordingly.

(4)Where subsection (3) above applies, the part of the asset linked to any category of business shall be a proportion determined as follows—

(a)where in the records of the company values are shown for the asset in funds referable to particular categories of business, the proportion shall be determined by reference to those values;

(b)in any other case the proportion shall be equal to the proportion which the total of the linked liabilities of the company referable to that category of business bears to the total of the linked liabilities of the company referable to all the categories of business to which the asset is linked.

(5)For the purposes of sections 432A to 432F—

(a)income arising in any period from assets linked but not solely linked to a category of business,

(b)gains arising in any period from the disposal of such assets, and

(c)increases and decreases in the value of such assets,

shall be treated as arising to that category of business in the proportion which is the mean of the proportions determined under subsection (4) above at the beginning and end of the period.

(6)In this section “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.

(7)In the case of a policy or contract the effecting of which constitutes a class of life assurance business the fact that it also constitutes long term business other than life assurance business shall be disregarded for the purposes of this section unless the benefits to be provided which constitute long term business other than life assurance business are to be determined by reference to the value of assets.”.

12(1)In the following provisions for “linked solely” substitute “ linked ”

(a)section 432C(1), section 432D(1) (twice) and section 432E(3)(a) and (b) and (6)(a) of the Taxes Act 1988;

(b)paragraph 1(5)(b)(i) of Schedule 19AB to the Taxes Act 1988;

(c)paragraph 1(4)(b) of Schedule 18 to the M1Finance Act 1994.

(2)The amendments made by paragraph 11 above do not affect the meaning of “linked assets”, and related expressions, in sections 214 and 214A of the M2Taxation of Chargeable Gains Act 1992 (transitional provisions relating to changes made in 1990 and 1991).

(3)In section 432 of the Taxes Act 1988 for “class” in each place where it occurs substitute “ category ”.

13(1)Section 432A of the Taxes Act 1988 is amended as follows.U.K.

(2)For subsections (1) to (3) substitute—

“(1)This section has effect where in any period an insurance company carries on more than one category of business and it is necessary for the purposes of the Corporation Tax Acts to determine in relation to the period what parts of—

(a)income arising from the assets of the company’s long term business fund, or

(b)gains or losses accruing on the disposal of such assets,

are referable to any category of business.

(2)The categories of business referred to in subsection (1) above are—

(a)pension business;

(b)life reinsurance business;

(c)overseas life assurance business;

(d)basic life assurance and general annuity business which is ordinary life assurance business;

(e)basic life assurance and general annuity business which is industrial assurance business; and

(f)long term business other than life assurance business.

(3)Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business (apart from overseas life assurance business) shall be referable to that category of business.”.

(3)In subsections (5) and (6)(b)(i) for “any of the appropriate categories” substitute “ any category ”.

(4)For subsection (7) substitute—

“(7)For the purposes of subsections (5) and (6) above—

(a)income, gains or losses are directly referable to a category of business if referable to that category by virtue of subsection (3) or (4) above, and

(b)assets are directly referable to a category of business if income arising from the assets is, and gains or losses accruing on the disposal of the assets are, so referable by virtue of subsection (3) above.”.

(5)For subsection (9) substitute—

“(9)Where a company carries on overseas life assurance business—

(a)references in this section to liabilities do not include liabilities of that business, and

(b)the appropriate part of the investment reserve as defined by paragraph 4(2)(a) of Schedule 19AA shall be left out of account in determining that reserve for the purposes of this section.”.

14(1)Section 432C of the Taxes Act 1988 is amended as follows.U.K.

(2)In subsection (1) for the words from “life assurance business” to “general annuity business” substitute “ pension business, life reinsurance business, basic life assurance and general annuity business or long term business other than life assurance business ”.

(3)In subsection (3) for “any of the appropriate categories of business” substitute “ any category of business ”.

(4)In subsection (4)(b) for “any of the appropriate categories of business” substitute “ any category of business ”.

(5)In subsection (5), omit paragraph (a).

(6)For subsection (6) substitute—

“(6)For the purposes of this section, where a company carries on overseas life assurance business “liabilities” does not include liabilities of that business.”.

15(1)Section 432D of the Taxes Act 1988 is amended as follows.U.K.

(2)In subsection (1) for the words from “life assurance business” to “general annuity business” substitute “ pension business, life reinsurance business, basic life assurance and general annuity business or long term business other than life assurance business ”.

(3)In subsection (2) for “any of the appropriate categories of business” substitute “ any category of business ”.

(4)For subsection (3) substitute—

“(3)For the purposes of subsection (2) above “the relevant fraction”, in relation to a category of business, is the fraction of which—

(a)the numerator is the mean of the opening and closing liabilities of the relevant business so far as referable to the category, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to the category; and

(b)the denominator is the mean of the opening and closing liabilities of the relevant business, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to any category of business.

(4)For the purposes of subsections (2) and (3) above, the part of the amount brought into account as the increase or decrease in the value of assets which is directly referable to a category of business is the part referable to the category by virtue of subsection (1) above and assets are directly referable to a category of business if such part of the amount brought into account as the increase or decrease in the value of assets as is attributable to them is so referable.”.