Finance Act 2006

Valid from 19/07/2006

7(1)After section 83 of FA 1989 insert—U.K.

“83YAChanges in value of assets brought into account: non-profit companies

(1)This section applies if, in the case of any non-profit company,—

(a)the amount shown in line 51 of Form 14 of its periodical return in respect of the whole of its long-term business for any period of account (“the current period of account”), exceeds

(b)the aggregate amount of the amounts shown in line 51 of Form 14 of its periodical return in respect of its with-profits funds (if any) for that period.

(2)A comparison shall be made between—

(a)the appropriate line 51 amount of the company for the current period of account (“the current line 51 amount”), and

(b)the aggregate amount of the appropriate line 51 amount of the company for the previous period of account (if any) and the amount of any transfer-in amount of the company for that period.

(3)If the current line 51 amount is greater than that aggregate amount, an amount equal to the difference shall be deemed for the purposes of section 83(2) to be brought into account for the current period of account as an increase in the value of non-linked assets.

(4)If the current line 51 amount is less than that aggregate amount, an amount equal to the difference shall be deemed for the purposes of section 83(2) to be brought into account for the current period of account as a decrease in the value of non-linked assets.

(5)The amount brought into account by virtue of this section shall be deemed for the purposes of section 83(2) to be brought into account—

(a)in the revenue account mentioned in section 83A(2)(a), or

(b)if section 83A(4) is applicable, in the separate revenue account treated as prepared by virtue of that provision.

(6)Any amount brought into account by virtue of this section is in addition to any amount brought into account for the purposes of section 83(2) for the current period of account as an increase or decrease in the value of non-linked assets apart from this section.

(7)For the purposes of this section a company has a transfer-in amount for any period of account (“the previous period of account”) if—

(a)a transfer takes place in the following period of account, and

(b)the company, as the transferee, is a party to an election under section 444AD of the Taxes Act 1988 (transfers of business: modification of section 83(2B)),

and the amount of the transfer-in amount for the previous period of account is the amount specified in subsection (4) of that section.

(8)For the purposes of this section and section 83YB “non-profit company”, in relation to a period of account, means a company carrying on long-term business where, at the end of that period,—

(a)none of the liabilities of that business, or

(b)none but an insignificant proportion of those liabilities,

are with-profits liabilities.

(9)But if a company considers that, in relation to a period of account, it is no longer such a company, it may elect to be treated for the purposes of this section and section 83YB as if, in relation to that period of account and every subsequent period of account, it were a non-profit company.

(10)Any such election—

(a)is irrevocable, and

(b)must be made by notice to an officer of the Board on or before the end of the period of 6 months beginning with the day on which that period of account ends.

(11)For the purposes of this section and section 83YB—

• “amount”, in relation to line 51 of Form 14 of the company's periodical return, includes a nil amount;

• “with-profits fund” has the same meaning as in the Integrated Prudential Sourcebook.

83YBMeaning of “appropriate line 51 amount” for purposes of s.83YA

(1)For the purposes of section 83YA, the appropriate line 51 amount of a non-profit company for any period of account is determined as follows.

Step 1

Find the company's basic line 51 amount for the period of account.

Step 2

Reduce that amount (but not below nil) by the amount of any unrecognised capital amount of the company for the period of account.

But this step applies only if the period of account for which the appropriate line 51 amount of the company is being determined is the current period of account for the purposes of section 83YA.

Step 3

Increase the resulting amount by the amount of any relevant loan repayment made by the company in the period of account.

(2)For the purposes of step 1, the company's basic line 51 amount for any period of account is—

(a)in the case where no with-profits funds form part of its long-term business for that period, the amount shown in line 51 of Form 14 of its periodical return in respect of the whole of its long-term business for that period, and

(b)in any other case, so much of that amount as exceeds the aggregate amount of the amounts shown in line 51 of Form 14 of its periodical return in respect of its with-profits funds for that period.

(3)For the purposes of step 2, the company has an unrecognised capital amount for any period of account if—

(a)any assets (“the added assets”) become assets of its long-term insurance fund but do not become assets of any of its with-profits funds,

(b)the consideration for the acquisition of the added assets does not comprise any assets which, immediately before the acquisition, were assets of its long-term insurance fund,

(c)no amount is shown in respect of the added assets in any of lines 17 to 41 of Form 14 of its periodical return in respect of the whole of its long-term business for the period of account, and

(d)no amount is brought into account for the period of account in consequence of the acquisition of the added assets.

(4)For the purposes of step 2, the amount of the unrecognised capital amount for the period of account is the amount equal to the fair value of the added assets.

(5)For this purpose the “fair value of the added assets” means—

(a)the amount which would be obtained from an independent person purchasing them, or

(b)if the assets are money, its amount.

(6)For the purposes of step 3, a relevant loan repayment is made by the company in any period of account if—

(a)a repayment in respect of a loan is made by the company in the period of account, and

(b)the loan is one in relation to which the company has, for the purposes of step 2, an unrecognised capital amount for that or any other period of account.”.

(2)The amendment made by this paragraph has effect in relation to periods of account ending on or after 29th September 2005.

(3)There are the following modifications of sections 83YA and 83YB of FA 1989 in the case of any period of account of a company (“the straddling period of account”)—

(a)beginning before 29th September 2005, and

(b)ending on or after that date.

(4)The modifications are that sections 83YA and 83YB of FA 1989 have effect in relation to the straddling period of account (as “the current period of account”) as follows.

First modification

Determine the company's basic line 51 amount for the previous period of account by reference to the last period of account (if any) of the company ending before 1st January 2004.

Second modification

Increase the amount of any transfer-in amount of the company for the previous period of account by the aggregate amounts of any transfer-in amounts of the company for any period of account beginning on or after 1st January 2004 and ending before the previous period of account.

Third modification

Increase the amount of any unrecognised capital amount of the company for the straddling period of account by the aggregate amounts of unrecognised capital amounts of the company for any period of account beginning on or after 1st January 2004 and ending before the straddling period of account.

Fourth modification

Reduce (but not below nil) the company's basic line 51 amount for the straddling period of account by the appropriate amount of any resilience capital for the straddling period of account.

For this purpose “the appropriate amount of any resilience capital for the straddling period of account” means the amount by which—

(a)the amount shown in line 32 of Form 2 of the company's periodical return in respect of the whole of its long-term business for the straddling period of account, exceeds

(b)the amount of any unrecognised capital amount of the company for that period as determined in accordance with the third modification.

(5)In any case where any of the above modifications apply—

(a)no amount is to be brought into account for the straddling period of account by virtue of subsection (4) of section 83YA of FA 1989, and

(b)no amount is to be brought into account for subsequent periods of account by virtue of that subsection, except so far as an amount has been brought into account for a previous period of account by virtue of subsection (3) of that section (and has not previously been taken into account under this paragraph).

(6)If, as a result of the fourth modification, the company's basic line 51 amount for the straddling period of account is reduced by an amount (“the reduction”)—

(a)sections 83YA and 83YB of FA 1989 have effect in relation to the company's next period of account after the straddling period of account as if the appropriate line 51 amount of the company for the straddling period of account were determined without making the fourth modification, and

(b)the following adjustments are made.

(7)An amount equal to two-thirds of the reduction is to be deemed to be brought into account for the company's first period of account beginning on or after 1st January 2007 by virtue of subsection (3) of section 83YA of FA 1989.

(8)An amount equal to one-third of the reduction is to be deemed to be brought into account for the company's next period of account by virtue of subsection (3) of section 83YA of FA 1989.

(9)But if the company ceases to carry on long-term business at any time—

(a)before 1st January 2007, or

(b)before the end of its first period of account beginning on or after 1st January 2007,

the whole of the reduction is to be deemed to be brought into account for the company's period of account ending immediately before that time by virtue of subsection (3) of section 83YA of FA 1989.

(10)Any amount brought into account by virtue of any of sub-paragraphs (7) to (9) is in addition to—

(a)any amount that, apart from those sub-paragraphs, is brought into account by virtue of subsection (3) of section 83YA of FA 1989, or

(b)any amount that is brought into account by virtue of subsection (4) of that section.

(11)Any expression which is used in this paragraph and in section 83YA or 83YB of FA 1989 has the same meaning in this paragraph as it has in that section.