Finance Act 1996

Ascertainment of losses

4In section 83 of the Finance Act 1989 (receipts to be brought into account) for subsection (3) (ascertainment of losses) there shall be substituted—

“(3)In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the company’s long term business fund as part of or in connection with—

(a)a transfer of business to the company, or

(b)a demutualisation of the company not involving a transfer of business,

that amount shall (subject to subsection (4) below) be taken into account, for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above.

(4)Subsection (3) above does not apply where, or to the extent that, the amount concerned—

(a)would fall to be taken into account as a receipt apart from this section,

(b)is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or

(c)is specifically exempted from tax.

(5)Any amount which is to be taken into account pursuant to subsection (3) above for a period of account shall be so taken into account—

(a)after the making of any reduction under subsection (6) of section 83AA below in relation to that period, but

(b)before the making of any reduction under subsection (3) of that section in relation to an accounting period of the company ending in or with that period.

(6)In subsection (3) above “transfer of business” means—

(a)a transfer of the whole or part of the long term business of an insurance company in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982;

(b)a qualifying overseas transfer, within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act 1988; or

(c)the making of a contract of reinsurance which, in whole or in part, constitutes or forms part of a total reinsurance by the reinsured, unless the reinsurer under the contract falls within section 439A of the Taxes Act 1988 (pure reinsurance).

(7)For the purposes of subsection (3)(a) above, a transfer of business falling within subsection (6)(c) above shall be treated as a transfer of business to the company which is the reinsurer under the contract of reinsurance.

(8)In this section—

• “add”, in relation to an amount and a company’s long term business fund, includes transfer (whether from other assets of the company or otherwise);

• “demutualisation” means the conversion, under the law of any territory, of a company which has been carrying on insurance business without having a share capital into a company with a share capital, without any change of legal personality;

• “total reinsurance” means the reinsurance (whether effected by a single contract of reinsurance or by two or more such contracts, taken together, whether or not made with the same reinsurer) of the whole, or substantially the whole, of the reinsured’s risk—

  (a)

  under policies of a particular description issued in respect of insurances made in the course of carrying on life assurance business before the making of the contract of reinsurance (or, in a case where there are two or more contracts of reinsurance, the last of them); or

  (b)

  under contracts of a particular description so made.”