Finance Act, 1986

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Amendment of provisions relating to taxation of assurance companies.

59.—The Corporation Tax Act, 1976 , is hereby amended—

(a) in section 33 , as respects accounting periods ending after the date of the passing of this Act, by the insertion after subsection (1) of the following subsections:

“(1A) Where the life assurance business of an assurance company includes more than one of the following classes of business, that is to say:

(a) pension business,

(b) general annuity business, and

(c) life assurance business (excluding such pension business and general annuity business),

then, for the purposes of this Act, the business of each such class shall be treated as though it were a separate business and subsection (1) shall apply separately to each such class of business:

Provided that any amount of such an excess as is referred to in section 15 (2) and which is carried forward from an accounting period ending before the date of the passing of the Finance Act, 1986, may, for the purposes of section 15 (1), be deducted in computing the profits of the company for a later accounting period in respect of such of the said classes of business as the company may elect; but any amount so deducted in computing the profits from one of the said classes of business shall not be deducted in computing the profits of the company from another of the said classes of business.

(1B) Relief under subsection (1) shall not be given for any amount of stamp duty (except any part of such amount as is referable to pension business) charged under paragraph (c) of subsection (8) (inserted by the Finance Act, 1984 ) of section 92 of the Finance Act, 1982 , on any statement delivered by a company in pursuance of paragraph (b) of the said subsection (8) in respect of any quarter commencing after the date of the passing of the Finance Act, 1986.”,

(b) in section 39, by the insertion after subsection (4) of the following subsection:

“(4A) Notwithstanding any other provision of the Corporation Tax Acts, any annuity which is paid by a company and is referable to its excluded annuity business—

(a) shall not be treated as a charge on income for the purposes of the Corporation Tax Acts;

(b) shall be deductible in computing for the purposes of Case I of Schedule D the profits of the company in respect of its life assurance business.”,

(c) in section 40, as respects accounting periods ending after the date of the passing of this Act, by the insertion after subsection (1) of the following subsection:

“(1A) Notwithstanding any other provision of the Corporation Tax Acts, any annuities which under subsection (1) are treated as charges on income of a company (hereafter in this subsection referred to as ‘the first-mentioned company’) for an accounting period shall not be allowed as deductions against any profits (whether of the first-mentioned company or of any other company) other than against that part of the total profits (including, where a claim is made under section 25 for the purposes mentioned in subsection (2) (b) of that section, any franked investment income) arising in that accounting period to the first-mentioned company from its general annuity business.”,

and

(d) in section 50, as respects accounting periods ending after the date of the passing of this Act—

(i) in subsection (2), by the deletion of the definition of “general annuity business” and the substitution therefor of the following definitions:

“‘excluded annuity business’, in relation to an assurance company, means annuity business which—

(a) is not pension business, or the liability of the company in respect of which is not taken into account in determining the foreign life assurance fund (within the meaning of section 42 (5)) of the company, and

(b) arises out of a contract for the granting of an annuity on human life being a contract which was effected, extended or varied on or after the 6th day of May, 1986, and which fails to satisfy any one or more of the following conditions, that is to say:

(i) the annuity shall be payable (whether or not its commencement is deferred for any period) until the end of a human life or for a period ascertainable only by reference to the end of a human life (whether or not continuing after the end of a human life),

(ii) the amount of the annuity shall be reduced only on the death of a person who is an annuitant under the contract or by reference to a bona fide index of prices or investment values, and

(iii) the policy document evidencing the contract shall expressly and irrevocably prohibit the company from agreeing to commutation, in whole or in part, of any annuity arising under the contract;

‘general annuity business’ means any annuity business which is not—

(a) excluded annuity business, or

(b) pension business,

and ‘pension business’ shall be construed in accordance with subsections (3) and (4);”,

and

(ii) in subsection (3), by the deletion of paragraph (b) and the substitution therefor of the following paragraph:

“(b) allocating to general annuity business all other annuity business except excluded annuity business,”.