Law

Finance Act 2012

United Kingdom · statute

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In force since 2026-04-01, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 274 provisions

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274 provisions

40 Venture capital trusts

Schedule 8 contains provision about venture capital trusts.

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41 Plant and machinery: restricting exception for manufacturers and suppliers

(1) In section 230 of CAA 2001 (exception for manufacturers and suppliers), in subsection (1), for “restrictions in sections 217 and 218 do” substitute “ restriction in section 218 does ”. (2) The amendment made by subsection (1) has effect in relation to expenditure of B's that is incurred on or after 12 August 2011 (regardless of when the relevant transaction was entered into). (3) But, in relation to any such expenditure that is incurred before the next amendment date, the restriction in section 217 of CAA 2001 does not apply (despite subsection (1)) if B can show that the condition in subsection (4) is met. (4) The condition is that, had the amendments made by paragraphs 1 to 7 of Schedule 9 had effect in relation to the expenditure, the restriction in section 217 would not have applied. (5) “The next amendment date” means the date defined in paragraph 9 of Schedule 9 as the start date.

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42 Plant and machinery allowances: anti-avoidance

Schedule 9 contains provision to counter abuse of Part 2 of CAA 2001.

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43 Plant and machinery allowances: fixtures

Schedule 10 contains provision about plant and machinery allowances in respect of fixtures.

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44 Expenditure on plant and machinery for use in designated assisted areas

Schedule 11 contains provision about first-year allowances in respect of expenditure on plant and machinery for use in designated assisted areas.

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45 Allowances for energy-saving plant and machinery

(1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In section 104A (special rate expenditure)— (a) in subsection (1), omit the “and” after paragraph (e), and after paragraph (f) insert , and (g) expenditure incurred on or after the third relevant date on the provision of solar panels. , and (b) after subsection (3) insert— (3A) The third relevant date is— (a) for corporation tax purposes, 1 April 2012, and (b) for income tax purposes, 6 April 2012.

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46 Plant and machinery: long funding leases

(1) Section 70E of CAA 2001 (disposal events and disposal values) is amended as follows. (2) In subsection (2A), for the definition of “R” substitute— R is the sum of— (a) any relevant rebate (see subsections (2F) and (2G)), and (b) any other relevant lease-related payment (see subsections (2FA) and (2G)). (3) After subsection (2F) insert— (2FA) Relevant lease-related payment” means any payment which— (a) is payable at any time for the benefit (directly or indirectly) of the lessee or a person connected with the lessee, (b) is connected with the long funding lease, or with any arrangement connected with that lease, and (c) is not— (i) an initial payment or any other payment made to the lessor by the lessee under the lease, (ii) a payment made to the lessor by the lessee under a guarantee of any residual amount (as defined in section 70YE), (iii) an initial payment or any other payment made under a relevant superior lease to the person who is the lessor under that lease by the person who is the lessee under that lease, or (iv) a payment to the seller of the proceeds of a sale of the plant or machinery to which subsection (2FC) applies, if, and to the extent that, the payment is not otherwise brought into account for tax purposes as income or a disposal receipt by the person for whom the benefit is payable (or would not be if that person were within the charge to tax). (2FB) For the purposes of subsection (2FA)— “payment” includes the provision of any benefit, the assumption of any liability and any other transfer of money's worth (and “payable” is to be construed accordingly); “relevant superior lease” means any lease of the plant or machinery to which the long funding lease mentioned in subsection (1)(a) is inferior. (2FC) This subsection applies to a sale of the plant or machinery if— (a) a person has entered into a relevant transaction with another person in respect of the plant or machinery for the purposes of Chapter 17 of this Part (see section 213) and the sale is within section 213(1)(a), (b) the plant or machinery is within section 216(1)(b) (sale and lease back), and (c) the conditions in section 227(2) are met. (4) For subsection (2G) substitute— (2G) In the case of a lease that is not a transaction at arm's length, “relevant rebate” and “relevant lease-related payment” include any amount that would reasonably be expected to have fallen within subsection (2F) or, as the case may be, (2FA) if the lease had been such a transaction. (5) The amendments made by this section have effect in relation to cases where the relevant event occurs on or after 21 March 2012.

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47 Foreign income and gains

Schedule 12 contains provision about the taxation of foreign income and gains.

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48 Employer asset-backed pension contributions etc

Schedule 13 contains— (a) provision relating to employers who pay contributions under registered pension schemes and arrangements for which their contributions are used (directly or indirectly), and (b) provision amending Chapter 5B of Part 13 of ITA 2007 and Chapter 2 of Part 16 of CTA 2010 (finance arrangements).

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49 Gifts to the nation

Schedule 14 contains provision for a person's tax liability to be reduced in return for giving pre-eminent property to the nation.

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50 Gift aid: giving through self-assessment return

(1) Section 429 of ITA 2007 (gift aid: giving through self-assessment return) is repealed. (2) The following repeals are made in consequence of subsection (1)— (a) in section 426 of ITA 2007 (election by donor: gift treated as made in previous tax year), omit subsection (8), (b) in section 538 of that Act (requirement to make claim), omit subsection (3), (c) in section 133 of FA 2008 (set-off etc where right to be paid a sum has been transferred), in subsection (8)(a), omit the words from “except” to the end, (d) in section 472 of CTA 2010 (gifts qualifying for gift aid relief: corporation tax liability and exemption), omit subsection (5), and (e) in section 475 of that Act (gifts qualifying for gift aid relief: income tax treated as paid and exemption), omit subsection (7). (3) Accordingly, the following provisions are also repealed— (a) section 130(9) of FA 2008, and (b) paragraph 3(4) of Schedule 8 to FA 2010. (4) The repeals made by this section are treated as having come into force on 6 April 2012.

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51 Relief for gift aid and other income of charities etc

Schedule 15 contains provision about relief in respect of gifts qualifying for gift aid relief and other income of charities and other bodies.

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52 Meaning of “community amateur sports club”

(1) In section 658 of CTA 2010 (meaning of “community amateur sports club”), for subsection (1) substitute— (1) A club is entitled to be registered as a community amateur sports club if conditions A and B are met. (1A) Condition A is that the club is, and is required by its constitution to be, a club which— (a) is open to the whole community (see section 659), (b) is organised on an amateur basis (see section 660), and (c) has as its main purpose the provision of facilities for, and the promotion of participation in, one or more eligible sports (see section 661). (1B) Condition B is that the club meets— (a) the location condition (see section 661A), and (b) the management condition (see section 661B). (2) In consequence of the amendment made by subsection (1), omit paragraph 31 of Schedule 6 to FA 2010. (3) The amendments made by this section are treated as having come into force on 6 April 2010.

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53 Site restoration payments

(1) In section 168 of ITTOIA 2005 (site restoration payments), at the beginning of subsection (2) insert “ Subject to subsection (3A), ”. (2) For subsection (3) of that section substitute— (3) The deduction is allowed— (a) (if the payment is made, whether directly or indirectly, to a connected person) for the period of account in which that part of the restoration work to which the payment relates is completed, or (b) (in any other case) for the period of account in which the payment is made. (3A) But no deduction is allowed if the payment arises from arrangements— (a) to which the person carrying on the trade is a party, and (b) the main purpose, or one of the main purposes, of which is to obtain a deduction under this section. (3) At the end of that section insert— (7) Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (4) In section 145 of CTA 2009 (site restoration payments), at the beginning of subsection (2) insert “ Subject to subsection (3A), ”. (5) For subsection (3) of that section substitute— (3) The deduction is allowed— (a) (if the payment is made, whether directly or indirectly, to a connected person) for the period of account in which that part of the restoration work to which the payment relates is completed, or (b) (in any other case) for the period of account in which the payment is made. (3A) But no deduction is allowed if the payment arises from arrangements— (a) to which the company carrying on the trade is a party, and (b) the main purpose, or one of the main purposes, of which is to obtain a deduction under this section. (6) At the end of that section insert— (7) Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (7) The amendments made by this section have effect in relation to any site restoration payment made on or after 21 March 2012, other than a payment made pursuant to an unconditional obligation in a contract made before 21 March 2012. (8) An unconditional obligation is an obligation which may not be varied or extinguished by the exercise of a right (whether or not under the contract).

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54 Changes of accounting policy

(1) In section 227 of ITTOIA 2005 (adjustment on change of accounting basis: income tax)— (a) in subsection (3)(a) for “relevant change of accounting approach” substitute “ change of accounting policy ”, and (b) for subsection (4) substitute— (4) A “change of accounting policy” includes, in particular— (a) a change from using UK generally accepted accounting practice to using generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards, and (b) a change from using generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards to using UK generally accepted accounting practice. (2) In section 180 of CTA 2009 (adjustment on change of accounting basis: corporation tax)— (a) in subsection (3)(a) for “relevant change of accounting approach” substitute “ change of accounting policy ”, and (b) for subsection (4) substitute— (4) A “change of accounting policy” includes, in particular— (a) a change from using UK generally accepted accounting practice to using generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards, and (b) a change from using generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards to using UK generally accepted accounting practice. (3) Corresponding amendments are to be treated as having been made in section 64 of FA 2002. (4) In consequence of the amendment made by subsection (1)(b), omit paragraph 2 of Schedule 6 to F(No.2)A 2005. (5) The amendments made by this section have effect in relation to a change of basis if the new basis— (a) is adopted for a period of account which begins on or after 1 January 2012, or (b) is adopted for a period of account which begins before 1 January 2012 and the adoption is in consequence of the issue, revocation, amendment or recognition of, or withdrawal of recognition from, an accounting standard by an accounting body on or after 1 January 2012. (6) In this section— “accounting body” means the International Accounting Standards Board, the Accounting Standards Board, or a successor body to either of those Boards; “accounting standard” includes any statement of practice, guidance or other similar document.

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55 Overview

(1) This Part makes special provision for corporation tax purposes in relation to life assurance business and other long-term business carried on by insurance companies. (2) Chapter 1 explains some of the key concepts for the purposes of this Part, including the concept of basic life assurance and general annuity business (abbreviated to “BLAGAB”). (3) Chapter 2— (a) provides for the profits of BLAGAB to be subject to a charge to corporation tax on the I - E basis as the profits of a separate business, and (b) provides for the profits of other long-term business to be charged to corporation tax under section 35 of CTA 2009 as the profits of a single trade. (4) Chapter 3 sets out the rules applicable to the I - E charge (which operate in part by reference to the calculation of an insurance company's BLAGAB trade profit or loss). (5) Chapter 4 sets out rules for determining for the purposes of the I - E charge how to apportion items to an insurance company's basic life assurance and general annuity business. (6) Chapter 5— (a) provides for the policyholders' share of the I - E profit to be charged at the policyholders' rate (the basic rate of income tax), and (b) provides for policyholder tax to be taken into account in calculating an insurance company's BLAGAB trade profit or loss. (7) Chapter 6 contains special rules that are to apply for the purpose of calculating an insurance company's BLAGAB trade profit or loss or the profits of an insurance company's other long-term business. (8) Chapter 7 sets out rules for determining for the purposes of that calculation how to allocate items between BLAGAB and other long-term business. (9) The remainder of the Part contains— (a) provision in relation to assets held for the purposes of an insurance company's long-term business (see Chapter 8), (b) provision for relieving BLAGAB trade losses and restrictions in relation to the policyholders' share of an I - E profit (see Chapter 9), (c) provision in relation to the transfer of BLAGAB or other long-term business (see Chapter 10), and (d) definitions and other supplementary material (see Chapters 11 and 12).

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56 Meaning of “life assurance business”

(1) This section defines for the purposes of this Part what is meant by “life assurance business”. (2) Business is “life assurance business” if— (a) it consists of the effecting or carrying out of contracts of insurance which fall within paragraph I, II, III or VII(b) of Part 2 of Schedule 1 to the FISMA (Regulated Activities) Order 2001, or (b) it is capital redemption business (see subsection (3)). (3) Business is “capital redemption business” if it consists of the effecting on the basis of actuarial calculations, and the carrying out, of contracts under which, in return for one or more fixed payments, a sum of a specified amount (or a series of sums of a specified amount) become payable at a future time or over a period.

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57 Meaning of “basic life assurance and general annuity business”

(1) This section defines for the purposes of this Part what is meant by “basic life assurance and general annuity business”. (2) “Basic life assurance and general annuity business” means life assurance business other than— (a) pension business (which is defined for the purposes of this section by section 58), (b) child trust fund business (which is defined for the purposes of this section by section 59), (c) individual savings account business (which is defined for the purposes of this section by section 60), (d) business which consists of the effecting or carrying out of immediate needs annuities (within the meaning of section 725 of ITTOIA 2005), (e) re-insurance of life assurance business other than excluded business, (f) overseas life assurance business (which is defined for the purposes of this section by section 61), or (g) protection business (which is defined for the purposes of this section by section 62). (3) In subsection (2)(e) “excluded business” means business of any description excluded for the purposes of this section by regulations made by HMRC Commissioners.

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58 Section 57: meaning of “pension business”

(1) This section defines for the purposes of the definition of “basic life assurance and general annuity business” given by section 57 what is meant by “pension business”. (2) Life assurance business is “pension business” if— (a) it consists of the effecting or carrying out of contracts entered into for the purposes of a registered pension scheme, or (b) it is the re-insurance of business within paragraph (a). (3) Subsection (4) applies if the pension scheme ceases to be a registered pension scheme as a result of the withdrawal of its registration under section 157 of FA 2004. (4) The company's life assurance business that was pension business when the scheme was a registered pension scheme is treated as ceasing to be pension business at the beginning of the company's period of account in which the scheme so ceases to be a registered pension scheme. (5) If— (a) immediately before 6 April 2006 an annuity contract fell within any of the descriptions of contracts specified in section 431B(2) of ICTA as it had effect immediately before that date, but (b) the contract does not fall to be regarded for the purposes of this section as having been entered into for the purposes of a registered pension scheme, the contract is treated for the purposes of this section as having been entered into for those purposes.

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59 Section 57: meaning of “child trust fund business”

(1) This section defines for the purposes of the definition of “basic life assurance and general annuity business” given by section 57 what is meant by “child trust fund business”. (2) Life assurance business is “child trust fund business” if it consists of the effecting or carrying out of child trust fund policies. (3) But the re-insurance of business consisting of the effecting or carrying out of child trust fund policies is not “child trust fund business”. (4) In this section “child trust fund policy” means a policy of life insurance which is an investment under a child trust fund (within the meaning of the Child Trust Funds Act 2004).

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60 Section 57: meaning of “individual savings account business”

(1) This section defines for the purposes of the definition of “basic life assurance and general annuity business” given by section 57 what is meant by “individual savings account business”. (2) Life assurance business is “individual savings account business” if it consists of the effecting or carrying out of individual savings account policies. (3) But the re-insurance of business consisting of the effecting or carrying out of individual savings account policies is not “individual savings account business”. (4) In this section “individual savings account policy” means a policy of life insurance which is an investment of a kind specified in regulations made as a result of section 695(1) of ITTOIA 2005.

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61 Section 57: meaning of “overseas life assurance business”

(1) This section defines for the purposes of the definition of “basic life assurance and general annuity business” given by section 57 what is meant by “overseas life assurance business”. (2) Life assurance business is “overseas life assurance business” if— (a) it consists of the effecting or carrying out of contracts with policyholders or annuitants who are not resident in the United Kingdom, and (b) it does not consist of excluded business, but the re-insurance of business that meets the conditions in paragraphs (a) and (b) is not “overseas life assurance business”. (3) For this purpose “excluded business” means— (a) business which is pension business within the meaning of section 58, (b) business which is child trust fund business within the meaning of section 59, (c) business which is individual savings account business within the meaning of section 60, or (d) business of any description excluded by regulations made by HMRC Commissioners. (4) HMRC Commissioners may by regulations— (a) make provision as to the circumstances in which a trustee who is a policyholder or annuitant residing in the United Kingdom is to be treated for the purposes of this section as not residing there, and (b) provide that nothing in Chapter 9 of Part 4 of ITTOIA 2005 is to apply to a policy or contract which constitutes overseas life assurance business as a result of provision made under paragraph (a). (5) HMRC Commissioners may by regulations make provision for giving effect to this section. (6) Regulations under subsection (5) may— (a) provide that, in prescribed circumstances, any prescribed issue as to whether business is, or is not, overseas life assurance business (or overseas life assurance business of a particular kind) is to be determined by reference to prescribed matters, (b) require companies to obtain certificates, undertakings, information or declarations from any person for the purposes of the regulations, (c) make provision for dealing with cases where any issue within paragraph (a) is (for any reason) wrongly determined, including provision allowing for charges to tax to be imposed (with or without limits on time) on the insurance company concerned or on the policyholders or annuitants concerned, (d) require companies to supply information and make available books, documents and other records for inspection by officers of Revenue and Customs, and (e) make provision (including provision imposing penalties) for contravention of, or non-compliance with, the regulations. (7) The matters that may be prescribed under subsection (6)(a) include— (a) the giving of certificates or undertakings, (b) the giving or possession of information, and (c) the making of declarations. (8) Regulations under this section may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision (including provision amending any enactment or instrument made under any enactment).

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62 Section 57: meaning of “protection business”

(1) This section defines for the purposes of the definition of “basic life assurance and general annuity business” given by section 57 what is meant by “protection business”. (2) Life assurance business is “protection business” if it consists of the effecting or carrying out of any contract of long-term insurance in relation to which the following conditions are met— (a) the benefits payable cannot exceed the amount of premiums paid except on death or in respect of incapacity due to injury, sickness or other infirmity, and (b) the contract is made on or after 1 January 2013. (3) For the purposes of subsection (2)(a) ignore— (a) any benefit (other than a payment of money) that, when the contract is entered into, is provided as an inducement for entering into the contract and that is not repayable (to any extent) in any circumstances, (b) any case where the amount by which the benefits can exceed the amount of premiums paid is an insignificant proportion of those premiums, and (c) any case which a reasonable person, as the policyholder under the policy effected by the contract, can reasonably regard as highly unlikely to arise. (4) If at any time— (a) a contract is varied otherwise than as a result of the operation of, or the exercise of rights conferred by, provisions forming part of the contract or a connected arrangement, and (b) as a result of the variation the contract becomes, or ceases to be, one in respect of which the condition in subsection (2)(a) is met, the contract is to be treated for the purposes of this section as ending at that time and a new contract (on the varied terms) is to be treated for those purposes as being made immediately after that time. (5) For this purpose a “connected arrangement”, in relation to a contract, means any agreement or other arrangement entered into in connection with the making of the contract. (6) If— (a) a contract (“the new contract”) is made on or after 1 January 2013 as a result of the operation of, or the exercise of rights conferred by, provisions of a contract (“the old contract”) made before that date, and (b) the provisions of the new contract were (or could have been) determined by reference to provisions of the old contract when the old contract was made, the new contract is to be regarded for the purposes of this section as if it were made before 1 January 2013.

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63 Meaning of “long-term business” and “PHI business”

(1) For the purposes of this Part “long-term business” means— (a) life assurance business, or (b) other business which consists of the effecting or carrying out of contracts of long-term insurance. (2) For the purposes of this Part “PHI business” means the other business mentioned in subsection (1)(b).

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64 Meaning of “contract of insurance” and “contract of long-term insurance”

For the purposes of this Part— “contract of insurance” has the meaning given by article 3(1) of the FISMA (Regulated Activities) Order 2001, and “contract of long-term insurance” means a contract which falls within Part 2 of Schedule 1 to that Order.

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65 Meaning of “insurance company”

(1) This section defines for the purposes of this Part what is meant by an “insurance company”. (2) A person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if— (a) the person has permission under Part 4 of FISMA 2000 to carry on that activity, (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) The above definition is subject to the following qualifications— (a) a friendly society within the meaning of Part 3 is not an insurance company, and (b) an insurance special purpose vehicle (see section 139) is an insurance company only if, in addition to falling within subsection (2)(a), ... it is a BLAGAB group re-insurer. (4) A person is a “BLAGAB group re-insurer” if for an accounting period— (a) the person carries on basic life assurance and general annuity business, (b) it is not the case that substantially all of the person's long-term business is long-term business other than basic life assurance and general annuity business, and (c) all of its life assurance business is re-insurance business of a description which is excluded business for the purposes of section 57(2)(e).

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66 Separate businesses for BLAGAB and other long-term business

(1) If an insurance company carries on— (a) basic life assurance and general annuity business, and (b) other long-term business, the general rule is that business within paragraphs (a) and (b) is to be treated for corporation tax purposes as two separate businesses carried on by the company. (2) One of the separate businesses is to consist of the basic life assurance and general annuity business. (3) The other separate business is to be regarded for corporation tax purposes as a single trade consisting of the other long-term business. (4) If an insurance company carries on— (a) life assurance business none of which is basic life assurance and general annuity business, and (b) PHI business, the company is to be treated for corporation tax purposes as carrying on a single trade consisting of the businesses within paragraphs (a) and (b). (5) For the purposes of this Part “non-BLAGAB long-term business” means— (a) a single trade within subsection (3) or (4), or (b) in a case where an insurance company carries on life assurance business none of which is basic life assurance and general annuity business but does not carry on other long-term business, that life assurance business. (6) If an insurance company carries on short-term insurance business, that business is to be regarded for corporation tax purposes as a separate trade. (7) For this purpose “short-term insurance business” means any insurance business which is not long-term business.

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67 Exception where BLAGAB small part of long-term business

(1) There is an exception to the general rule set out in section 66(1) if for an accounting period of an insurance company substantially all of its long-term business is not basic life assurance and general annuity business. (2) In that case, there is for the accounting period to be no separate business consisting of the company's basic life assurance and general annuity business. (3) There is instead to be one business that is to be regarded for corporation tax purposes as a single trade of the company consisting of its long-term business. (4) That single trade is to be regarded as “non-BLAGAB long-term business” for the purposes of this Part. (5) Accordingly, references in this Part (apart from in section 66 and this section) to a company's basic life assurance and general annuity business do not include any business which, as a result of this section, is regarded as non-BLAGAB long-term business.

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68 Charge to tax on I - E profit

(1) The charge to corporation tax applies to the I - E profit of the basic life assurance and general annuity business carried on by an insurance company. (2) For the meaning of “I - E profit”, see section 73.

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69 Exclusion of charge under s.35 of CTA 2009 etc

The charge to corporation tax under section 68 has effect instead of— (a) the charge to corporation tax on income under section 35 of CTA 2009 (charge to tax on trade profits), (b) any other charge to corporation tax on income under any other provision of the Corporation Tax Acts that would otherwise have applied, and (c) the charge to corporation tax on chargeable gains so far as referable, in accordance with Chapter 4, to the company's basic life assurance and general annuity business.

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70 Rules for calculating I - E profit or excess BLAGAB expenses

(1) The rules set out in Chapter 3 determine whether for an accounting period an insurance company carrying on basic life assurance and general annuity business has an I - E profit or excess BLAGAB expenses (and, if so, the amount of the profit or expenses). (2) Those rules are referred to in this Part as “the I - E rules”. (3) The calculation of the I - E profit or excess BLAGAB expenses is to operate by reference to the amounts that are credited or debited in the accounts of the company for a period of account drawn up in accordance with generally accepted accounting practice. (4) But, in the case of amounts of a particular description, that is subject to any provision which (whether expressly or by implication) provides for that calculation to operate by reference to something else. (5) For the meaning of “excess BLAGAB expenses”, see section 73.

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71 Charge to tax on profits of non-BLAGAB long-term business

(1) The charge to corporation tax on income under section 35 of CTA 2009 (charge to tax on trade profits) applies to the profits of non-BLAGAB long-term business carried on by an insurance company. (2) The rules for calculating those profits are subject to the provision made by— (a) Chapter 6 (trade calculation rules applying to long-term business), (b) Chapter 7 (trading apportionment rules), and (c) section 131 (transfers of business). (3) Subsection (1) does not apply if the business is mutual business, and in that case no other provision of the Corporation Tax Acts has effect to charge the income of the business to corporation tax.

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72 Companies carrying on only PHI business

Nothing in— (a) this Part, or (b) any other provision of the Corporation Tax Acts that makes special provision in relation to, or by reference to, long-term business carried on by insurance companies, is to apply in relation to a company which carries on long-term business which consists wholly of PHI business.

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73 The I - E basis

This section sets out rules, in relation to the basic life assurance and general annuity business carried on by an insurance company, for determining whether the company has an I - E profit or excess BLAGAB expenses for an accounting period (and, if so, the amount of the profit or expenses). Step 1 Calculate the income chargeable for the accounting period that is referable, in accordance with Chapter 4, to the company's basic life assurance and general annuity business. The meaning here of “income” is given by section 74. Step 2 Calculate the BLAGAB chargeable gains of the company for the accounting period as adjusted for allowable losses (see section 75). Step 3 Calculate so much of the amount (or the total amount) of any I - E receipt under section 92 or 93(5)(a) as is not taken into account in the calculation required by step 1 or 2. Step 4 Add together the amounts given by the calculations required by steps 1 to 3. Reduce the total of those amounts by the relievable amount of any non-trading deficit which the company has for the accounting period under section 388 of CTA 2009 (loan relationships and derivative contracts). The result is “I”. In this step, “the relievable amount” of a non-trading deficit means so much of the deficit as does not exceed the total of— (a) the amount given by the calculation required by step 1, (b) the amount given by the calculation required by step 2, and (c) any amount of an I-E receipt under section 92 brought into account under step 3. Step 5 Calculate the adjusted BLAGAB management expenses of the company for the accounting period (see section 76). The result is “E”. Step 6 Subtract E from I (which, if E is a negative figure, would have the effect of increasing the result of the calculation). If the result is a positive amount, that is (subject to section 95) the amount for the accounting period chargeable to corporation tax under section 68. That amount is referred to in this Part as an “I - E profit”. If the result is a negative amount, that amount is to be carried forward by the company as an expense to its next accounting period to be used in accordance with step 5 of section 76. That amount is referred to in this Part as “excess BLAGAB expenses”

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74 Meaning of “income”

(1) In section 73 “income”, in relation to an insurance company, means the following income or credits so far as arising from the company's long-term business— (a) income of the company chargeable under Chapter 3 of Part 4 of CTA 2009 in respect of any separate UK property business or overseas property business within section 86(4), (b) credits in respect of any loan relationships of the company, (c) credits in respect of any derivative contracts of the company, (d) credits brought into account by the company under Part 8 of CTA 2009 (intangible fixed assets), (e) income of the company chargeable under Part 9A of CTA 2009 (company distributions), (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (g) income of the company chargeable under Chapter 6 of Part 10 of CTA 2009 (sale of foreign dividend coupons), (h) income of the company chargeable under Chapter 7 of Part 10 of CTA 2009 (annual payments not otherwise charged), (i) income of the company arising from a source outside the United Kingdom which is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged), ... (j) income of the company chargeable under any provision to which section 1173 of CTA 2010 (miscellaneous charges) applies other than section 752 of CTA 2009 (non-trading gains on intangible fixed assets), and (k) income of the company chargeable under regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013. (2) The reference in subsection (1)(a) to income chargeable under Chapter 3 of Part 4 of CTA 2009 includes income chargeable under that Chapter in respect of distributions treated by section 548(5) of CTA 2010 as profits of a UK property business carried on by the company. (3) References in subsection (1)(b) to (d) to credits need to be read with section 88(3) and (4). (4) The reference in subsection (1)(j) to income chargeable as mentioned there needs to be read with section 89(1). (5) For the purposes of this section references to income or credits that are chargeable or brought into account under any provision are to income or credits that, but for sections 68 and 69, would be chargeable or brought into account under that provision. (6) For the purposes of this section no account is to be taken of income which arises from an asset forming part of the long-term business fixed capital of the company (see section 137).

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75 Meaning of “BLAGAB chargeable gains” etc

(1) This section explains for the purposes of section 73 how to calculate the BLAGAB chargeable gains of the company for the accounting period as adjusted for allowable losses. Step 1 First, calculate the chargeable gains— that accrue to the company in the accounting period from the disposal of assets held for the purposes of the company's long-term business, and that are referable, in accordance with Chapter 4, to its basic life assurance and general annuity business. Step 2 Then, deduct from the amount of those gains— any allowable losses that accrue to the company in the accounting period from the disposal of assets held for the purposes of the company's long-term business and that are so referable, and so far as not previously deducted from any chargeable gains, any allowable losses that accrued to the company in a previous accounting period from the disposal of assets held for the purposes of the company's long-term business and that were so referable. The resulting amount is the amount of the BLAGAB chargeable gains of the company for the accounting period as adjusted for allowable losses. (2) The deduction at step 2 may reduce an amount to nil but no further. (3) For the purposes of this section no account is to be taken of a chargeable gain or allowable loss accruing to the company on a disposal for the purposes of TCGA 1992 of an asset that forms part of the long-term business fixed capital of the company. (4) References in this section to chargeable gains or allowable losses are references to those gains or losses as calculated in accordance with the rules contained in TCGA 1992.

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76 Meaning of “adjusted BLAGAB management expenses”

This section explains for the purposes of section 73 how to calculate the adjusted BLAGAB management expenses of the company for the accounting period. Step 1 Calculate the ordinary BLAGAB management expenses of the company referable to the accounting period (see sections 77, 81 and 82). In making the calculation ignore so much of those expenses as is deductible under other relevant rules (see section 78(2)). If the company is an overseas life insurance company, see also section 96. ... Step 3 Calculate the total amount of any deemed BLAGAB management expenses for the accounting period (see section 78(3)). For this purpose ignore any amounts that have already been included in step 1. Step 4 Find the basic amount by adding together the amount given by the calculation required by step 1 ... and the amount given by the calculation required by step 3. Adjust the basic amount by deducting from it any expenses reversed in the accounting period (see section 78(4)) and any BLAGAB trade loss relieved for the accounting period (see section 78(5)). Step 5 Add together any amounts carried forward as expenses from the previous accounting period to the accounting period as a result of section 73 or 93 to give the carried-forward amount. Add the carried-forward amount to the basic amount or, as the case may be, the basic amount adjusted in accordance with step 4. The resulting amount is the amount of adjusted BLAGAB management expenses of the company for the accounting period.

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77 Section 76: meaning of “ordinary BLAGAB management expenses” etc

(1) This section explains for the purposes of section 76 what is meant by the “ordinary BLAGAB management expenses of the company referable to the accounting period”. (2) Amounts are “ordinary BLAGAB management expenses” of the company if— (a) they are, in accordance with generally accepted accounting practice, debited in accounts drawn up by the company for a period of account ..., (b) they are expenses of management of the company's long-term business that are referable, in accordance with Chapter 4, to its basic life assurance and general annuity business, and (c) they are not excluded amounts (see subsections (4) to (7)). (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) The following are “excluded amounts”— (a) amounts of a capital nature, (b) re-insurance premiums, (c) refunds of premiums, (d) profit commissions and profit participations (however described), (e) a liability of the company to pay an amount of commission or other expenses so far as exceeding the amount which it could reasonably be expected to pay if sections 68 and 69 were not applicable, (f) non-commercial amounts payable by the company, (g) amounts payable in connection with a policy or contract to a policyholder or annuitant under the policy or contract or to any other person entitled to receive benefits under the policy or contract. (5) For the purposes of subsection (4)(f) expenses or other amounts are “non-commercial amounts” payable by the company so far as the company's purpose in incurring the liability to make the payment is not a business or other commercial purpose of the company. (6) Amounts payable as mentioned in paragraph (g) of subsection (4) include— (a) amounts payable to any person acting on behalf of a person within that paragraph, and (b) amounts payable to the personal representatives of a deceased person who was (or acted on behalf of a person who was) within that paragraph. (7) Amounts payable as mentioned in subsection (4)(g) do not include amounts payable to an insurance company which is a policyholder under the policy. (8) In the case of ordinary BLAGAB management expenses in respect of a period of account which coincides with or falls wholly in an accounting period of the company, all of those expenses are “referable to” the accounting period. (9) In the case of ordinary BLAGAB management expenses in respect of any other period of account— (a) those expenses are to be apportioned to the accounting period of the company in accordance with section 1172 of CTA 2010, and (b) the apportioned amount of those expenses is “referable to” the accounting period.

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78 Section 76: meaning of other expressions

(1) This section explains for the purposes of section 76 what is meant by— “other relevant rules”, “deemed BLAGAB management expenses for the accounting period”, “expenses reversed in the accounting period”, and “BLAGAB trade loss relieved for the accounting period”. (2) An expense is deductible under another “relevant rule” if— (a) it is deductible as a result of section 92(3), (b) it is deductible in calculating, for corporation tax purposes, the profits of a property business, or (c) it is deductible as a result of section 272 of CTA 2009 in calculating income from the letting of rights to work minerals in the United Kingdom. (3) An amount is a “deemed BLAGAB management expense for the accounting period” if it is treated as such for the purposes of section 76 as a result of— ... paragraph 33(2) of Schedule 17 (spreading of acquisition expenses), section 83 (general annuity business), section 87(3) (losses from property businesses where land held for purposes of long-term business), section 88(6) (excess of debits in respect of intangible fixed assets), section 89(2) (excess of miscellaneous losses), paragraph 16(1) of Schedule 7 to FA 1991 (transitional relief for old general annuity contracts), section 256(2)(a) of CAA 2001 (allowances in respect of plant or machinery consisting of management asset), section 270HH of CAA 2001 (allowances in respect of structures or buildings consisting of management asset), section 391(3) of CTA 2009 (loan relationships: carry forward of surplus to next accounting period), ... section 1162 of CTA 2009 (additional relief for remediation of contaminated or derelict land), or section 814C(7) of CTA 2010 (manufactured dividends). (4) “Expenses reversed in the accounting period” means the total amount of the expenses— (a) which were relieved in any previous accounting period in accordance with step 1 ... or step 3 of section 76, but (b) which are subsequently reversed in the accounting period. (5) A “BLAGAB trade loss relieved for the accounting period” means any of the following— (a) a BLAGAB trade loss of the company for the accounting period in question, so far as relief is given for the loss under— (i) section 37 of CTA 2010 (relief for trade losses against total income), as applied by section 123, or (ii) Chapter 4 of Part 5 of that Act (group relief), as applied by section 125; (b) an amount deducted under section 124B (relief for excess carried forward post-1 April BLAGAB trade losses) from the company's total profits of the accounting period in question; (c) an amount of a BLAGAB trade loss of the company relieved under Chapter 3 of Part 5A of CTA 2010 (group relief for carried-forward losses) if the surrender period (see section 188BB(7)) to which the claim relates is the accounting period in question.

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79 Spreading of acquisition expenses

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