Legalize / United Kingdom / Public General Act

Income and Corporation Taxes Act 1988

Type Public General Act

Publication 1988-02-09

Last updated 2022-07-14

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) the company is not entitled by virtue of any term subject to which the shares are issued or held to reduce the amount of, or not to pay, any of the dividends.

(3) Condition B is that—

(a) the dividends are of a rate per cent of the nominal value of the shares and the rate fluctuates in accordance with—

(i) a standard published rate of interest, or

(ii) the retail prices index, or any similar general index of prices which is published by the government, or by an agent of the government, of the country or territory in whose currency the shares are denominated, and

(b) the company is not entitled by virtue of any term subject to which the shares are issued or held to reduce the amount of, or not to pay, any of the dividends.

(4) Condition C is that condition A or B would be met but for sub-paragraph (2)(b) or (3)(b), and—

(a) the company is only entitled to reduce the amount of, or not to pay, any of the dividends in relevant circumstances, or

(b) having regard to all the circumstances, it is reasonable to assume that the company is only likely to reduce the amount of, or not to pay, any of the dividends in relevant circumstances.

(5) For the purposes of sub-paragraph (4) a company reduces the amount of, or does not pay, dividends “in relevant circumstances” if—

(a) at the time the dividend is or would be payable, the company is in severe financial difficulties, or

(b) it does so for the purpose of following a recommendation of a relevant regulatory body.

(6) The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of sub-paragraph (5)(a).

(7) In sub-paragraph (5)(b) “relevant regulatory body” means—

(a) in relation to a dividend paid by a company that is authorised for the purposes of the Financial Services and Markets Act 2000, the Financial Services Authority, and

(b) in relation to a dividend paid by any other company, a body discharging functions in relation to the company under the law of a country or territory outside the United Kingdom that correspond to functions discharged by the Financial Services Authority in relation to a company authorised as mentioned in paragraph (a).

(8) In this paragraph “new consideration” has the same meaning as in section 254.

5A

(1) In a case where paragraphs 4 and 5 above apply, each of the following percentages, namely—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and

(b) the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,

shall be determined on each of the different bases set out in sub-paragraph (2) below.

(2) The bases are—

(a) the basis specified in paragraph 4(2) above;

(b) the basis specified in paragraph 5(2) above;

(d) the basis specified in paragraph 2(1) or 3(1) above (according to the percentage concerned) without regard to paragraphs 4(2) and 5(2) above.

(3) The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph.

(4) The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.

5B

(1) This paragraph applies if, at any time in the relevant accounting period, option arrangements exist; and option arrangements are arrangements of any kind (whether in writing or not) as regards which the two conditions set out below are fulfilled.

(2) The first condition is that the arrangements are ones by virtue of which there could be a variation in—

(a) the percentage of profits to which any of the equity holders is entitled on the profit distribution, or

(b) the percentage of assets to which any of the equity holders is entitled on the notional winding-up.

(3) The second condition is that, under the arrangements, the variation could result from the exercise of any of the following rights (option rights)—

(a) a right to acquire shares or securities in the second company referred to in paragraphs 2(1) and 3(1) above;

(b) a right to require a person to acquire shares or securities in that company.

(4) For the purposes of sub-paragraph (3) above—

(a) it is immaterial whether or not the shares or securities were issued before the arrangements came into existence;

(b) “shares” does not include relevant preference shares;

(d) “right” does not include a right of an individual to acquire shares, if the right was obtained by reason of his office or employment as a director or employee of the company and in accordance with the provisions of a share option scheme which was approved at the time it was obtained.

(4A) In sub-paragraph (4)(d) above—

“share option scheme” means—an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of ITEPA 2003 (approved SAYE option schemes)), ora CSOP scheme within the meaning of the CSOP code (see section 521(4) of that Act (approved CSOP schemes)); and

“approved” means—in relation to an SAYE option scheme, approved under Schedule 3 to that Act (approved SAYE option schemes), andin relation to a CSOP scheme, approved under Schedule 4 to that Act (approved CSOP schemes).

(5) As regards each point in time when option arrangements exist in the relevant accounting period—

(a) there shall be taken each possible state of affairs that could then subsist if the outstanding option rights, or any of them or any combination of them, became effective at that point, and

(b) taking each such state of affairs, it shall be assumed that the rights and duties of the equity holders in the relevant accounting period were to be found accordingly.

(6) The following rules shall have effect—

(a) for the purposes of sub-paragraph (5) above outstanding option rights are all such option rights under the arrangements (or sets of arrangements if more than one) as exist at the point in time concerned but have not become effective at or before that point;

(b) for the purpose of applying sub-paragraph (5) above it is immaterial whether or not the rights are exercisable at or before the point in time concerned and it is immaterial whether or not they are capable of becoming effective at or before that point;

(c) for the purposes of sub-paragraph (5) above and this sub-paragraph an option right becomes effective when the shares or securities to which it relates are acquired in pursuance of it.

(7) The determination mentioned in sub-paragraph (8) below shall be made as regards each point in time when option arrangements exist in the relevant accounting period; and for each such point in time a separate determination shall be made for each of the possible states of affairs mentioned in sub-paragraph (5) above.

(8) The determination is a determination of—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and

(b) the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,

if the rights and duties of the equity holders in the relevant accounting period were found as mentioned in sub-paragraph (5) above.

(9) Where different determinations yield different percentages of profits and different percentages of assets, only one determination of each percentage (yielding the lowest figure) shall be treated as having been made.

(10) Sub-paragraphs (3) and (4) of paragraph 4 above shall apply for the purposes of this paragraph as they apply for the purposes of that paragraph and, accordingly, references there to sub-paragraphs (2)(a) and (2)(b) of that paragraph shall be construed as references to sub-paragraphs (8)(a) and (8)(b) of this paragraph.

5C

(1) In a case where paragraphs 4 and 5B above apply, each of the following percentages, namely—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and

(b) the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,

shall be determined on each of the different bases set out in sub-paragraph (2) below.

(2) The bases are—

(a) the basis specified in paragraph 4(2) above;

(b) the basis specified in paragraph 5B(8) above;

(d) the basis specified in paragraph 2(1) or 3(1) above (according to the percentage concerned) without regard to paragraphs 4(2) and 5B(8) above.

(3) The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph.

(4) The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.

(5) For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.

5D

(1) In a case where paragraphs 5 and 5B above apply, each of the following percentages, namely—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and

(b) the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,

shall be determined on each of the different bases set out in sub-paragraph (2) below.

(2) The bases are—

(a) the basis specified in paragraph 5(2) above;

(b) the basis specified in paragraph 5B(8) above;

(d) the basis specified in paragraph 2(1) or 3(1) above (according to the percentage concerned) without regard to paragraphs 5(2) and 5B(8) above.

(3) The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph.

(4) The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.

(5) For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.

5E

(1) In a case where paragraphs 4 and 5 and 5B above apply, each of the following percentages, namely—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled, and

(b) the percentage of assets to which, on the notional winding-up, the first company referred to in paragraph 3(1) above would be entitled,

shall be determined on each of the different bases set out in sub-paragraph (2) below.

(2) The bases are—

(a) the basis specified in paragraph 4(2) above;

(b) the basis specified in paragraph 5(2) above;

(d) the basis specified in paragraph 4(2) above and the basis specified in paragraph 5(2) above taken together;

(e) the basis specified in paragraph 4(2) above and the basis specified in paragraph 5B(8) above taken together;

(f) the basis specified in paragraph 5(2) above and the basis specified in paragraph 5B(8) above taken together;

(g) the basis specified in paragraph 4(2) above and the basis specified in paragraph 5(2) above and the basis specified in paragraph 5B(8) above all taken together;

(h) the basis specified in paragraph 2(1) or 3(1) above (according to the percentage concerned) without regard to paragraphs 4(2), 5(2) and 5B(8) above.

(3) The lowest of the eight percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph.

(4) The lowest of the eight percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.

(5) For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.

5F

(1) This paragraph has effect, in the cases specified in sub-paragraphs (2) and (3) below, for the following purposes (“the relevant purposes”)—

(a) the determination, in a case where the surrendering company or the claimant company is a non-resident company, of whether that company is a 75 per cent. or a 90 per cent. subsidiary of another company;

(b) the determination of a member’s share in a consortium in any case where the surrendering company or the claimant company is a non-resident company owned by the consortium; but this paragraph does not have effect in relation to any determination in the case of amounts falling within section 402(1)(b).

(2) The first case in which this paragraph applies is where any of the equity holders—

(a) to whom the profit distribution is made, or

(b) who is entitled to participate in the notional winding-up of that company,

holds, as such an equity holder of the non-resident company, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which have effect wholly or partly by reference to whether or not, or to what extent, the profits or assets distributed are referable to the non-resident company’s UK trade.

(3) The second case in which this paragraph applies is where—

(a) option arrangements (within the meaning of paragraph 5B above) exist at any time in the relevant accounting period; and

(b) the percentage which, in any of the states of affairs referred to in sub-paragraph (5) of that paragraph, is—

(i) the percentage of profits to which any of the equity holders of the non-resident company would be entitled on the profit distribution, or

(ii) the percentage of assets to which any of the equity holders of that company would be entitled on the notional winding-up,

would differ, at any of the times so referred to, according to whether or not, or to what extent, the profits or assets distributed are referable to the non-resident company’s UK trade.

(4) If the percentage of profits to which, on the profit distribution, a particular equity holder would be taken for the relevant purposes to be entitled would be less if the determination under paragraph 2(1) above were made on the basis specified in sub-paragraph (7) below, then that shall be the basis used for the relevant purposes in the case of that equity holder.

(5) If the percentage of assets to which, on the notional winding-up, a particular equity holder would be taken for the relevant purposes to be entitled would be less if the determination under paragraph 3(1) above were made on the basis specified in sub-paragraph (7) below, then that shall be the basis used for the relevant purposes in the case of that equity holder.

(6) If the percentage that falls to be taken for any of the purposes of section 403C or section 413(7) would, under any of paragraphs 4 to 5E above, be the lower or lowest of a number of percentages determined on different bases—

(a) each of the percentages falling to be compared for the purposes of that paragraph shall be determined both—

(i) on the basis specified in sub-paragraph (7) below, and

(ii) without making the assumption required for a determination on that basis;

and

(b) the comparison required by that paragraph, so far as made for the relevant purposes, shall be made using, in the case of each of the percentages to be compared, only the lower of the percentages determined under paragraph (a) above.

(7) That basis is the assumption—

(a) that the profit distribution or the distribution on the notional winding-up is confined to a distribution of profits or assets that are referable to the non-resident company’s UK trade; and

(b) that the amount of the distribution does not exceed whichever is the greater of £100 and the following amount—

(i) in the case of a profit distribution, the amount (if any) of so much of the company’s chargeable profits for the relevant accounting period as is referable to its UK trade; and

(ii) in the case of a distribution on a notional winding-up, its net UK assets;

and

(c) that none of the ordinary equity holders has an entitlement to a proportion of the profits or assets mentioned in paragraph (a) above that is any greater than the proportion of the distribution to which he would be entitled if—

(i) the assumptions specified in paragraphs (a) and (b) above were disregarded; but

(ii) it were assumed, where it is less, that the distribution is equal to £100.

(8) In sub-paragraph (7) above—

“net UK assets”, in relation to a non-resident company, means the excess, if any, of the total amount of the assets of the company that are referable to its UK trade (as shown in the relevant balance sheet), over the total amount of those of its liabilities (as so shown) which are so referable and are not liabilities to equity holders as such; and

“ordinary equity holder” means any equity holder whose entitlement on the profit distribution or the distribution on the notional winding-up does not differ according to whether or not, or the extent to which, the profits or assets distributed are referable to the non-resident company’s UK trade.

(9) In sub-paragraph (8) above “relevant balance sheet”, in relation to a company, means any balance sheet relating to its affairs as at the end of the relevant accounting period.

(10) For the purposes of this paragraph profits, assets or liabilities of a non-resident company shall be taken to be referable to its UK trade to the extent only that they—

(a) are attributable to, or used for the purposes of, activities the income and gains from which are, or (were there any) would be, brought into account in computing the company’s chargeable profits for any accounting period, and

(b) are not attributable to, or used for the purposes of, any activities which (within the meaning of section 403D) are made exempt from corporation tax for any accounting period by any double taxation arrangements.

SCHEDULE 18A

Part 1 — Meaning of conditions for the purposes of section 403F

Introduction

1

This Part of this Schedule applies, in the case of any non-resident company, for the purposes of section 403F (relief in respect of overseas losses of non-resident companies).

The equivalence condition

2

An amount meets the equivalence condition if it corresponds (in all material respects) to an amount of a kind that, for the purposes of section 403, could be available for surrender by way of group relief by a company resident in the United Kingdom.

The EEA tax loss condition: companies resident in EEA territory

3

(1) In the case of a non-resident company which is resident in an EEA territory (“the relevant territory”), an amount meets the EEA tax loss condition in relation to the relevant territory in so far as conditions A and B are met.

(2) Condition A is that the amount is calculated in accordance with the applicable rules under the law of the relevant territory for determining, in the case of the company, the amount of any loss or other amount eligible for relief from any tax under the relevant territory.

(3) Condition B is that, for the purposes of corporation tax, the amount is not attributable to a UK permanent establishment of the company.

(4) “UK permanent establishment”, in relation to the company, means any permanent establishment through which it carries on a trade in the United Kingdom.

(5) For the meaning of tax under any territory outside the United Kingdom, see paragraph 17.

The EEA tax loss condition: companies not resident in EEA territory

4

(1) In the case of a non-resident company which is not resident in any EEA territory but which carries on a trade in an EEA territory (“the relevant territory”) through a permanent establishment, an amount meets the EEA tax loss condition for any period in relation to the relevant territory in so far as conditions A and B are met.

(2) Condition A is that the amount is calculated in accordance with the applicable rules under the law of the relevant territory for determining, in the case of the company, the amount of any loss or other amount eligible for relief from any tax under the relevant territory.

(3) Condition B is that the amount is not attributable to activities of the company which are made exempt from tax under the relevant territory for the period by any double taxation arrangements.

(4) For this purpose, activities of the company are made exempt from tax under the relevant territory for the period by any double taxation arrangements if those arrangements—

(a) have the following effect, or

(b) would have the following effect if a claim were made.

(5) The effect is that the income and gains (if any) arising for the period from those activities are ignored in calculating the company's profits, income or gains chargeable to tax under the relevant territory for the period.

(6) For the purposes of this paragraph, arrangements are double taxation arrangements if they are made with a view to affording relief from double taxation in relation to—

(a) any tax under the relevant territory and any other territory outside the United Kingdom, or

(b) any tax under the relevant territory and United Kingdom income or corporation tax.

The qualifying loss condition

5

(1) This paragraph applies in the case of a non-resident company—

(a) which is resident in any EEA territory, or

(b) which is not so resident but which carries on a trade in an EEA territory through a permanent establishment,

and for the purposes of this paragraph “the EEA territory concerned” means the EEA territory in which the company is resident or (as the case may be) in which it carries on a trade through a permanent establishment.

(2) An amount meets the qualifying loss condition in so far as the amount—

(a) cannot be given qualifying relief for any period (“the current period”) or any other period, and

(b) has not been given any other qualifying relief under the law of any territory outside the United Kingdom (other than the EEA territory concerned).

(3) Paragraph 6 determines whether the amount cannot be given qualifying relief for the current period or any previous period.

(4) Paragraph 7 determines whether the amount cannot be given qualifying relief for any period after the current period.

(5) Paragraph 8 determines whether the amount has not been given qualifying relief under the law of any territory outside the United Kingdom (other than the EEA territory concerned).

Qualifying relief for current period and previous periods

6

(1) For the purposes of paragraph 5, an amount cannot be given qualifying relief for the current period or any previous period if conditions A and B are met.

(2) Condition A is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be taken into account in calculating any profits, income or gains which—

(a) arise to the company or any other person in the current period or any previous period, and

(b) are chargeable to that tax for the current period or any previous period.

(3) Condition B is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be relieved in the current period or any previous period—

(a) by the payment of a credit,

(b) by the elimination or reduction of a tax liability, or

(4) An amount is to be regarded for the purposes of this paragraph as meeting conditions A and B if (but only if) every step to secure that the amount is so taken into account or relieved is taken (whether by the company or any other person).

(5) In this paragraph “relevant territory” means—

(a) if the company is resident in any EEA territory and is also resident in any other territory outside the United Kingdom, that other territory,

(b) if the company is not resident in any EEA territory but carries on a trade in an EEA territory through a permanent establishment, the territory (or territories) in which it is resident.

Qualifying relief for future periods

7

(1) For the purposes of paragraph 5, an amount cannot be given qualifying relief for any period after the current period if conditions A and B are met.

(2) Condition A is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be taken into account in calculating any profits, income or gains which—

(a) might arise to the company or any other person in any period after the current period, and

(b) (if there were any) would be chargeable to that tax for any period after the current period.

(3) Condition B is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be relieved in any period after the current period—

(a) by the payment of a credit,

(b) by the elimination or reduction of a tax liability, or

(4) In determining for the purposes of conditions A and B whether an amount can be so taken into account or relieved, the time at which the determination is to be made is the time immediately after the end of the current period.

(5) In this paragraph “relevant territory” means—

(a) if the company is resident in any EEA territory and is also resident in any other territory outside the United Kingdom, that other territory,

(b) if the company is not resident in any EEA territory but carries on a trade in an EEA territory through a permanent establishment, the territory (or territories) in which it is resident.

Amount not given other qualifying relief under law of territory outside UK

8

(1) For the purposes of paragraph 5, an amount has not been given qualifying relief under the law of any territory outside the United Kingdom (other than the EEA territory concerned) if conditions A and B are met.

(2) Condition A is that, for the purposes of any tax under any territory outside the United Kingdom (other than the EEA territory concerned), the amount has not been taken into account in calculating any profits, income or gains which—

(a) have arisen to the company or any other person in any period, and

(b) were chargeable to that tax for the period (or, but for so taking the amount into account, would have been so chargeable).

(3) Condition B is that, for the purposes of any tax under any territory outside the United Kingdom (other than the EEA territory concerned), the amount has not been relieved in any period—

(a) by the payment of a credit,

(b) by the elimination or reduction of a tax liability, or

Precedence condition

9

(1) This paragraph applies in the case of a non-resident company (“the relevant company”)—

(a) which is resident in any EEA territory, or

(b) which is not so resident but which carries on a trade in an EEA territory through a permanent establishment.

(2) An amount meets the precedence condition in relation to the EEA territory concerned in so far as relief for the amount cannot be given in any other territory outside the United Kingdom which is a qualifying territory in relation to the relevant company.

(3) For this purpose a territory is a qualifying territory in relation to the relevant company if—

(a) another company is resident in that territory (which need not be an EEA territory),

(b) that other company owns directly or indirectly any ordinary share capital in the relevant company,

(c) a third company which is resident in the United Kingdom owns directly or indirectly any ordinary share capital of that other company,

(d) the relevant company is a 75 per cent. subsidiary of that third company, and

(e) the relevant company is not a 75 per cent. subsidiary of that third company as a result of its being a 75 per cent. subsidiary of a fourth company which is resident in the United Kingdom.

(4) In this paragraph references, in relation to any amount and any territory, to relief being given for the amount in the territory are to relief being given—

(a) by taking the amount into account in calculating any profits, income or gains of any person chargeable to tax under the law of that territory,

(b) by the payment of a credit to any person under the law of that territory,

(d) by any other means of any kind.

(5) “The EEA territory concerned” means the EEA territory in which the relevant company is resident or (as the case may be) in which it carries on a trade through a permanent establishment.

Part 2 — Application of UK rules to non-resident company

Introduction

10

(1) This Part of this Schedule applies in the case of any loss or other amount (“the EEA amount”) arising to a non-resident company (“the EEA company”) in any period (“the loss period”) in so far as the EEA amount meets the conditions mentioned in subsection (2)(a) to (d) of section 403F.

(2) In this Part of this Schedule “the EEA territory concerned” means the EEA territory in which the EEA company is resident or (as the case may be) in which it carries on a trade through a permanent establishment.

(3) In this Part of this Schedule any reference to the appropriate part of the EEA amount is to that amount in so far as it meets the conditions mentioned in subsection (2)(a) to (d) of section 403F.

Basic rules

11

(1) The EEA amount must, on the relevant assumptions (see sub-paragraph (5)), be recalculated in accordance with the applicable UK tax rules (see paragraph 16).

(2) The amount of the EEA amount that is available for surrender by the EEA company by way of group relief is so much of the appropriate part of it as does not exceed the relevant proportion (see sub-paragraph (5)) of the amount given by that recalculation.

(3) But if the amount given by that recalculation is an amount of income or other profits, no part of the EEA amount is available for surrender by way of group relief.

(4) So far as any part of the EEA amount is available for surrender by the EEA company by way of group relief, the provisions of this Chapter have effect in that case on the basis that the relevant assumptions are made.

(5) In this paragraph—

“the relevant assumptions” are the assumptions set out in paragraphs 12 to 15, and

“the relevant proportion” means the proportion that the appropriate part of the EEA amount bears to the EEA amount.

Assumptions as to UK residence

12

(1) It is to be assumed that the EEA company is resident in the United Kingdom throughout the loss period.

(2) But this does not require it to be assumed—

(a) that there is any change in the place or places at which the EEA company carries on its activities (although see paragraph 13), or

(b) that the EEA company ceases to be resident in the United Kingdom at the end of the loss period.

(3) It is to be assumed that the EEA company becomes resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the loss period.

Assumptions as to places in which activities carried out

13

(1) In the case of any trade carried on by the EEA company in the loss period wholly or partly in the EEA territory concerned, it is to be assumed that the trade is carried on wholly or partly in the United Kingdom.

(2) In the case of any estate, interest or rights in or over land in the EEA territory concerned which are held by the EEA company, it is to be assumed that the land is in the United Kingdom.

(3) For this purpose, the reference to domestic concepts of law in relation to the land in the EEA territory concerned is to be read so as to produce the result that most closely corresponds with that produced for the purpose of calculating the profits of a UK property business under Part 4 of CTA 2009 in relation to land in the United Kingdom.

Deemed accounting period

14

(1) It is to be assumed that an accounting period of the EEA company begins at the beginning of the loss period.

(2) It is to be assumed that the accounting period ends on the earlier of—

(a) the end of 12 months from the beginning of the loss period, or

(b) the end of the loss period.

(3) If an accounting period ends in accordance with sub-paragraph (2)(a), it is to be assumed that a further accounting period begins when the previous one ends.

(4) It is to be assumed that the further accounting period ends on the earlier of—

(a) the end of 12 months from the beginning of the further accounting period, or

(b) the end of the loss period.

Capital allowances

15

(1) This paragraph applies if, before the beginning of the loss period, the EEA company incurs any capital expenditure on the provision of plant or machinery for the purposes of any activity.

(2) It is to be assumed for the purposes of Part 2 of the Capital Allowances Act that the plant or machinery—

(a) was provided for purposes wholly other than those of the activity, and

(b) was not brought into use for the purposes of the activity until the beginning of the loss period,

and section 13 of the Capital Allowances Act (use for qualifying activity of plant or machinery provided for other purposes) is to apply accordingly.

(3) This paragraph is to be read as one with Part 2 of the Capital Allowances Act.

Applicable UK tax rules

16

(1) For the purposes of this Part of this Schedule references to recalculating the EEA amount in accordance with the applicable UK tax rules are to recalculating it in accordance with any provision made by or under the Corporation Tax Acts—

(a) which applies for the purpose of calculating for corporation tax purposes the amount of the loss or other amount to which the EEA amount corresponds, or

(b) which otherwise affects in any way the amount of that loss or other amount for which relief from corporation tax is available.

(2) For the purposes of sub-paragraph (1), the Treasury may by regulations provide for the modification of any provision made by or under the Corporation Tax Acts—

(a) which applies as mentioned in sub-paragraph (1)(a), or

(b) which otherwise affects an amount as mentioned in sub-paragraph (1)(b).

(3) Regulations under this paragraph may make provision in relation to—

(a) all classes of trade or business, or

(b) any particular class or classes of trade or business.

(4) Regulations under this paragraph may make—

(a) different provision for different cases or different purposes, and

(b) incidental, supplemental, consequential or transitional provision and savings.

(5) Regulations under this paragraph may make provision having effect before the date on which the regulations are made.

Part 3 — Definitions for the purposes of this Schedule

Charge to tax under the law of any territory outside the United Kingdom

17

(1) This paragraph applies for the purposes of this Schedule.

(2) Any reference to a tax under a territory outside the United Kingdom is a reference to a tax chargeable under the law of that territory which—

(a) is charged on income and corresponds to United Kingdom income tax, or

(b) is charged on income or chargeable gains or both and corresponds to United Kingdom corporation tax.

(3) A tax chargeable under the law of a territory outside the United Kingdom is not to be regarded as failing to correspond to income or corporation tax just because—

(a) it is chargeable under the law of a province, state or other part of a country, or

(b) it is levied by or on behalf of a municipality or other local body.

SCHEDULE 19AA

1

(1) This Schedule shall have effect for determining for the purposes of this Chapter the assets of a company which are the assets of its overseas life assurance fund.

(2) The Treasury may by order amend any of the following provisions of this Schedule (including any modification of any of those provisions made by paragraph 14A of Schedule 19AC).

2

(1) Assets of a company at the end of a period of account which—

(a) were assets of the overseas life assurance fund at the end of the immediately preceding period of account, and

(b) are assets of the long-term insurance fund of the company throughout the period,

shall be assets of the overseas life assurance fund throughout the period .

(2) Where in a period of account assets of a company which were assets of the overseas life assurance fund at the end of the immediately preceding period of account are disposed of by the company, or otherwise cease to be assets of the long-term insurance fund of the company, they shall be assets of the overseas life assurance fund from the beginning of the period until they are disposed of or, as the case may be, they cease to be assets of the long-term insurance fund.

(3) Where—

(a) in any period of account assets are acquired by a company as assets of the long-term insurance fund , or otherwise become assets of that fund,

(b) the assets are disposed of by the company, or otherwise cease to be assets of that fund, later in the same period,

(c) throughout the part of the period during which the assets are assets of the long-term insurance fund they are assets within paragraph 5(5)(a) or assets within paragraph 5(5)(c) below, and

(d) it is appropriate having regard to all the circumstances (including a comparison between the relationship of the value of the assets of the overseas life assurance fund and the liabilities of the overseas life assurance business and that of the value of the assets of the long-term insurance fund and the liabilities of the company’s long-term business) that they be assets of the overseas life assurance fund,

they shall be assets of the overseas life assurance fund for the part of the period during which they are assets of the long-term insurance fund.

3

(1) Where the value of the assets mentioned in paragraph 2(1) above at the end of the period is less than the amount mentioned in paragraph 4 below (or where there are no assets within paragraph 2(1)), assets which—

(a) are assets of the long-term insurance fund of the company at the end of the period,

(b) have a value at that time equal to the difference (or to that amount), and

shall become assets of the overseas life assurance fund at the relevant time.

(2) In sub-paragraph (1) above “the relevant time” means—

(a) where the asset is not an asset of the long-term insurance fund of the company throughout the period, the time when it became such an asset, and

(b) in any other case, the end of the period.

(3) Where the value of the assets mentioned in paragraph 2(1) above at the end of the period is greater than the amount mentioned in paragraph 4 below, assets which—

(a) are assets of the long-term insurance fund of the company at the end of the period,

(b) have a value at that time equal to the difference, and

shall cease to be assets of the overseas life assurance fund at the end of the period.

4

(1) The amount referred to in paragraph 3 above shall be determined by the formula—

$$A+B-C-D$ where—A is the liabilities of the company’s overseas life assurance business at the end of the period of account,B is the aggregate of—(a) the appropriate part of the free assets amount at that time, and(b) the appropriate part of any liabilities of the company’s long-term insurance fund at that time which represent a money debt,C is the value, at that time, of any land in the United Kingdom which is an asset linked solely to the company’s overseas life assurance business, andD is the relevant fraction of the value, at that time, of any land in the United Kingdom which is an asset linked both to the company’s overseas life assurance business and to some other category of business.$

This is subject to sub-paragraph (1A) below.

(1A) If for the purposes of sub-paragraph (1) above A is below nil then the amount referred to in paragraph 3 above shall be nil.

(2) In sub-paragraph (1) above, in B, the “appropriate part" of the company’s free assets amount at the end of the period of account, or of any liabilities of its long-term insurance fund at that time which represent a money debt, is—

(a) where none (or none but an insignificant proportion) of the liabilities of the company’s long-term business at that time are with-profits liabilities, the part which bears to the whole the proportion A/B; and

(b) in any other case, the part which bears to the whole the proportion C/D.

For this purpose—

A is the amount of the liabilities of the company’s overseas life assurance business at the end of the period of account (but taking that amount to be nil if it would otherwise be below nil),

B is the whole amount of the liabilities of the company’s long-term business at that time,

C is the amount of the with-profits liabilities of the company’s overseas life assurance business at that time, and

D is the whole amount of the with-profits liabilities of the company’s long-term business at that time.This is subject to sub-paragraph (2A) below.

(2A) If for the purposes of sub-paragraph (2) above B is nil then, in sub-paragraph (1) above, in B, the appropriate part” of the company's free assets amount, at the end of the period of account, or of any liabilities of its long-term insurance fund at that time which represents a money debt, means the part which bears to the whole such proportion as is just and reasonable.

(3) In this Schedule “land” includes buildings and other structures, land covered with water, and any estate, interest, easement, servitude, right or licence in or over land.

(4) In sub-paragraph (1) above, in D, “the relevant fraction” is the fraction of which—

(a) the numerator is the value, at the end of the period of account, of such of the liabilities of the company’s overseas life assurance business as were liabilities in respect of benefits to be determined by reference to the value of the asset; and

(b) the denominator is the value, at that time, of all the liabilities of the company’s long-term business which were liabilities in respect of benefits to be so determined.

(5) In this paragraph—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“money debt" has the same meaning as in Chapter II of Part IV of the Finance Act 1996 .

5

(1) Any designation of assets required for the purposes of paragraph 3 above shall be made by a company in accordance with the following provisions of this paragraph.

(2) When designating assets for the purposes of paragraph 3(1) above, a company shall not designate an asset falling within any paragraph of sub-paragraph (5) below unless it designates all assets falling within each of the preceding paragraphs of that sub-paragraph.

(3) When designating assets for the purposes of paragraph 3(3) above, a company shall not designate an asset falling within any paragraph of sub-paragraph (5) below unless it designates all assets falling within each of the succeeding paragraphs of that sub-paragraph.

(4) When an asset falls within more than one paragraph of sub-paragraph (5) below, it shall be taken for the purposes of this paragraph to fall only within the first of them.

(5) The categories of assets referred to in sub-paragraphs (2) and (3) above are—

(a) assets , other than land in the United Kingdom, linked solely to overseas life assurance business;

(b) so many of any assets denominated in an overseas currency, other than any non-overseas linked assets, as have a value at the end of the period not exceeding the amount of the company’s non-linked liabilities in respect of benefits expressed in that currency so far as referable to overseas life assurance business;

(i) are shown in the books of the company as being held as assets of a fund where all, or all but an insignificant part, of the liabilities of the fund are in respect of overseas life assurance business carried on by the company at or through a permanent establishment outside the United Kingdom; or

(ii) are managed under the control of a person whose normal place of work is at a permanent establishment outside the United Kingdom at or through which the company carries on overseas life assurance business;

(d) assets other than land in the United Kingdom;

(e) land in the United Kingdom;

but assets linked solely to pension business, life reinsurance business or basic life assurance and general annuity business are not within any paragraph of this sub-paragraph (and may not be designated for the purposes of paragraph 3 above).

(5A) For the purposes of sub-paragraph (5)(a) above, in determining whether assets are linked solely to overseas life assurance business, assets linked to policies or contracts which, by virtue of regulation 18 or 19 of the Insurance Companies (Overseas Life Assurance Business) (Compliance) Regulations 1995 are to be treated as referring to basic life assurance and general annuity business, shall be treated as linked solely to overseas life assurance business.

(6) For the purposes of sub-paragraph (5)(b) above assets are “non-overseas linked assets” if they are linked assets and none of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of overseas life assurance business.

(6A) For the purposes of sub-paragraph (5)(b) above “non-linked liabilities" means liabilities other than liabilities in respect of benefits to be determined by reference to the value of linked assets falling within sub-paragraph (5)(a) above.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule 19AB

Entitlement to certain payments on account

1

(1) An insurance company carrying on pension business shall for each provisional repayment period in an accounting period be entitled on a claim made in that behalf to a payment (in this Schedule referred to as a “provisional repayment”) of an amount equal , subject to paragraph 2 below, to the aggregate of—

(a) the appropriate portion of any income tax borne by deduction on any payment received by the company in that provisional repayment period and referable to its pension business, and

(b) the appropriate portion of any tax credit in respect of a distribution received by the company in that provisional repayment period and referable to its pension business,

or of such lesser amount as may be specified in the claim.

(2) For the purposes of this paragraph, a “provisional repayment period” of a company—

(a) shall begin whenever—

(i) the company begins to carry on pension business;

(ii) an accounting period of the company begins, at a time when the company is carrying on such business; or

(iii) a provisional repayment period of the company ends, at a time when the company is carrying on such business; and

(b) shall end on the first occurrence of either of the following—

(i) the expiration of three months from the beginning of the provisional repayment period; or

(ii) the end of an accounting period of the company.

(3) In the application of subsections (5) to (9) of section 432A for the purpose of determining the amounts to which a company is entitled by way of provisional repayments in the case of any accounting period of the company, the reference in subsection (5) to “the relevant fraction” shall be taken as a reference to the provisional fraction for that accounting period.

(4) For the purposes of this paragraph—

(a) the provisional fraction for an accounting period of a company is the fraction which would, on the basis of the company’s latest company tax return, be the relevant fraction for the purposes of section 432A(5) for the accounting period to which that return relates; but

(b) if there is no company tax return on the basis of which that fraction can be ascertained, the provisional fraction shall be taken to be nil;

but this sub-paragraph is subject to paragraph 2 below.

(5) In sub-paragraph (1) above “the appropriate portion” means—

(a) in the case of an insurance company carrying on pension business and no other category of long-term business, the whole; and

(b) in the case of an insurance company carrying on more than one category of long-term business—

(i) where the payment or distribution in question is income arising from an asset linked to pension business, the whole; . . .

(ii) if and to the extent that the payment or distribution in question is income which is not referable to a category of business by virtue of subsection (3) or (4) of section 432A, the provisional fraction; and

(iii) except as provided by sub-paragraph (i) or (ii) above, none.

(6) Paragraphs 57 to 60 of Schedule 18 to the Finance Act 1998 (general provisions as to procedure on claims and elections) do not apply to a claim for a provisional repayment.

(6A) A claim for a provisional repayment shall be in such form as the Board may determine and the form of claim shall provide for a declaration to the effect that all the particulars given in the form are correctly stated to the best of the knowledge and belief of the person making the claim.

(7) A provisional repayment for a provisional repayment period shall be regarded as a payment on account of the amounts (if any) which the company would, apart from this Schedule, be entitled to be . . . repaid in respect of its pension business for the accounting period in which that provisional repayment period falls, in respect of—

(a) income tax borne by deduction on payments received by the company in that accounting period and referable to its pension business, . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

on a claim such as is mentioned in paragraph 9(2) of Schedule 18 to the Finance Act 1998. . . in respect of that accounting period.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) In this paragraph—

“latest company tax return”, in the case of an accounting period of a company (“the current accounting period”), means, subject to sub-paragraph (11) below, the company tax return for the latest preceding accounting period of the company for which such a return has been delivered before the making of the first claim for a provisional repayment for the current accounting period; and

“self-assessment” means an assessment included in a company tax return, and includes a reference to such an assessment as amended.

(11) In any case where—

(a) there is a company tax return which would, apart from this sub-paragraph, be the latest such return in the case of an accounting period of a company,

(b) the self-assessment required to be included in that return has been amended, and

(c) that amendment was made before the making of the first claim for a provisional repayment for the accounting period mentioned in paragraph (a) above,

the return which is to be regarded as the latest company tax return in the case of that accounting period shall be that return as it stands amended immediately after the making of that amendment of the self-assessment (or, if the self-assessment has been so amended more than once, that return as it stands amended immediately after the making of the last such amendment) but ignoring amendments which do not give rise to any change in the fraction which, on the basis of the return as it has effect from time to time, would be the relevant fraction for the purposes of section 432A(5) for the accounting period to which the return relates.

Changes in the provisional fraction

2

(1) This paragraph applies in any case where—

(a) a claim has been made for a provisional repayment for at least one provisional repayment period in an accounting period of a company;

(b) subsequently, a further such claim is made for a provisional repayment period falling within that accounting period; and

(c) had that further claim been the first claim made for a provisional repayment for that accounting period, the provisional fraction for the accounting period would have been a different fraction (whether in consequence of the delivery of a company tax return for a later preceding accounting period or the application of paragraph 1(11) above);

and in this paragraph the “substituted provisional fraction” means the different fraction mentioned in paragraph (c) above.

(2) Where this paragraph applies—

(a) the amount of any provisional repayment to which the company is entitled for the provisional repayment period mentioned in sub-paragraph (1)(b) above shall be an amount determined in accordance with sub-paragraph (3) below or such lesser amount as may be specified in the claim; and

(b) in relation to any later provisional repayment period in the same accounting period, the substituted provisional fraction shall, subject to any further application of this paragraph, be treated as the provisional fraction for the accounting period.

(3) The amount referred to in sub-paragraph (2) above is the amount (if any) by which total entitlement exceeds total past payments, and for this purpose—

“total entitlement” means the aggregate of the provisional repayments to which the company would have been entitled (apart from this paragraph) for—the provisional repayment period to which the claim relates, andany earlier provisional repayment period in the same accounting period,had the substituted provisional fraction been the provisional fraction for the accounting period as from the beginning of that period; and

“total past payments” means the aggregate of any amounts already paid by way of provisional repayments for provisional repayment periods falling within that accounting period.

(4) Expressions used in this paragraph and in paragraph 1 above have the same meaning in this paragraph as they have in that paragraph.

Repayment, with interest, of excessive provisional repayments

3

(1) In any case where—

(a) an insurance company’s self-assessment for an accounting period becomes final, and

(b) the aggregate amount of the provisional repayments made to the company for that accounting period exceeds the appropriate amount,

the excess, together with the amount of any relevant interest, shall be treated for the purposes of paragraph 52 of Schedule 18 to the Finance Act 1998 as if it were an amount of corporation tax for that accounting period which had been repaid to the insurance company and which ought not to have been so repaid.

(1ZA) In its application by sub-paragraph (1) above, section 30 of the Management Act shall have effect as if, instead of the provision made by subsection (5), it provided that an assessment under that section by virtue of sub-paragraph (1) above is not out of time under section 34 of that Act if it is made no later than the end of the accounting period following that in which the assessment mentioned in paragraph (a) of that sub-paragraph is finally determined.

(1A) For the purposes of sub-paragraph (1)(b) above, the appropriate amount for an accounting period of a company is the amount (if any) which, on the assumptions in sub-paragraphs (1B) and (1C) below and disregarding any provisional repayments, the company would be entitled to be . . . repaid, when its self-assessment for the period becomes final, in respect of its pension business for that accounting period on a claim such as is mentioned in paragraph 9(2) of Schedule 18 to the Finance Act 1998. . . in respect of—

(a) income tax borne by deduction on payments received by the company in that accounting period and referable to its pension business, . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1B) The first assumption is that no . . . repayments have been made to the company in respect of—

(a) income tax such as is mentioned in paragraph (a) of sub-paragraph (1A) above, . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

before the company’s self-assessment for the accounting period in question becomes final.

(1C) The second assumption is that in making any set off under—

(a) section 7(2), or

(b) paragraph 5 of Schedule 16, . . .

income tax borne by deduction on income which is not referable to pension business is set off before income tax so borne on income which is referable to pension business.

(1D) Paragraph 53 of Schedule 18 to the Finance Act 1998 (time limit for recovery of excessive repayments etc.) does not apply to an assessment under paragraph 52 of that Schedule made by virtue of this paragraph.

But such an assessment is not out of time under paragraph 46 of that Schedule (general six year time limit for assessments) if it is made not later than the end of the accounting period following that in which the self-assessment mentioned in sub-paragraph (1)(a) above becomes final.

(2) In this paragraph, “relevant interest” means interest—

(a) on so much of the excess referred to in sub-paragraph (1) above as is or was from time to time outstanding,

(b) for any period for which it is or was so outstanding, and

(c) at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 87A of the Management Act (interest on overdue corporation tax).

(3) In the application of section 87A of the Management Act in relation to an amount assessed to corporation tax under paragraph 52 of Schedule 18 to the Finance Act 1998 by virtue of this paragraph—

(a) the amount so assessed shall be taken to have become due and payable on the date on which that assessment was made; and

(b) the words “(in accordance with section 59D of this Act)” in subsection (1) shall accordingly be disregarded.

(4) In determining the amount of any relevant interest, any question whether the excess mentioned in sub-paragraph (1) above (in the following provisions of this paragraph referred to as “the principal”) or any part of it is or was “outstanding” at any time shall be determined in accordance with sub-paragraphs (5) to (8) below.

(5) So much of the principal as does not exceed the amount of the last provisional repayment made to the company for the accounting period in question shall be taken to have become outstanding on the date on which that provisional repayment was made.

(6) So much (if any) of the principal as—

(a) exceeds the amount of the provisional repayment referred to in sub-paragraph (5) above, but

(b) does not exceed the amount of the preceding provisional repayment for that accounting period,

shall be taken to have become outstanding on the date on which that preceding provisional repayment was made; and so on with any remaining portion of the principal and any preceding provisional repayments for that accounting period.

(7) So much (if any) of the principal as has become outstanding as mentioned in sub-paragraph (5) or (6) above and has at any time neither been repaid to the Board nor been assessed to corporation tax under paragraph 52 of Schedule 18 to the Finance Act 1998 by virtue of this paragraph shall be taken to remain outstanding at that time (and an amount shall accordingly be taken to cease being outstanding only when it is repaid to the Board or when it is so assessed).

(8) For the purposes of sub-paragraph (7) above, any repayment made by the company in respect of an amount . . . repaid to it in respect of—

(a) income tax such as is mentioned in paragraph (a) of sub-paragraph (1A) above, . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

shall be treated as a repayment in respect of the principal, taking an earlier such repayment by the company before a later.

(9) In this paragraph “self-assessment” means an assessment included in a company tax return and includes a reference to such an assessment as amended.

Reduced entitlement during transitional period

4

(1) The Board may by regulations make provision for the amount of any provisional repayment to which a company would otherwise be entitled for any accounting period ending after the opening transitional date and before the closing transitional date to be reduced by a prescribed percentage.

(2) The regulations may require a company claiming a provisional repayment for a provisional repayment period falling within such an accounting period to specify in the claim—

(a) the maximum amount to which it could have been entitled by way of provisional repayment for that provisional repayment period apart from the regulations;

(b) the maximum reduced entitlement for that provisional repayment period; and

(3) The regulations may make provision—

(a) for the charging of interest in any case where an insurance company claims, and is paid, by way of provisional repayment an amount in excess of the maximum reduced entitlement for the provisional repayment period to which the claim relates;

(b) for the period for which, and the rate at which, any such amount is to carry interest under the regulations;

(c) for any such interest to be treated for the purposes of section 30 of the Management Act as if it were an amount of corporation tax which had been repaid and which ought not to have been repaid; and

(d) for section 87A of that Act to apply in relation to an amount assessed to corporation tax under section 30 of that Act by virtue of the regulations with modifications corresponding to those specified in paragraph 3(3) above.

(4) The regulations may prescribe for the purposes of sub-paragraph (1) above different percentages for accounting periods ending after different dates.

(5) Sub-paragraphs (2) to (4) above are without prejudice to the generality of sub-paragraph (1) above.

(6) In this paragraph—

“the maximum reduced entitlement”, in relation to an insurance company and a provisional repayment period, means the maximum amount (as reduced in accordance with the regulations) to which the company could have been entitled by way of provisional repayment for that provisional repayment period;

“the opening transitional date” and “the closing transitional date” mean respectively such date as the Board may specify for the purpose in the first regulations made under this paragraph;

“prescribed” means specified in the regulations;

“the regulations” means any regulations under this paragraph.

Transitional application of pay and file provisions

5

(1) This paragraph applies in relation to an accounting period of an insurance company if—

(a) the accounting period—

(i) begins on or after the commencement day; and

(ii) ends on or before the day appointed for the purposes of section 10;

(b) the company carries on pension business for the whole or part of the accounting period; and

and in this paragraph “transitional accounting period” means an accounting period in relation to which this paragraph applies.

(2) An insurance company shall be entitled—

(a) to make a claim for payment of a tax credit in respect of any income of a transitional accounting period, and

(b) to make a claim for the purposes of section 7(5), so far as relating to section 7(2) or 11(3), in respect of any income tax falling to be set off against corporation tax for a transitional accounting period,

(and may do so whether or not the income in question is referable to the company’s pension business).

(3) For the purposes of sub-paragraph (2) above, sections 7(2) and 11(3) shall have effect in relation to a transitional accounting period as if the words from “and accordingly” to the end, in each provision, were omitted.

(4) A claim under sub-paragraph (2) above may only be made at such time or within such period as the Board may by regulations provide.

(5) In the application of this Schedule in relation to a transitional accounting period, paragraph 1 above shall have effect as if the reference in each of sub-paragraphs (7) and (10) to a claim such as is mentioned in section 7(6) or in section 42(5A) of the Management Act were a reference to a claim under paragraph (a) or (b) of sub-paragraph (2) above.

(6) If and to the extent that the provisions of section 826, or of section 87A of the Management Act, would not, apart from this sub-paragraph, have effect in relation to a transitional accounting period, they shall be treated as having effect for all purposes in relation to that accounting period; and—

(a) in the application of section 826 by virtue of this sub-paragraph, the reference in subsection (1)(a) of that section to an accounting period which ends after the appointed day shall be treated as a reference to a transitional accounting period; and

(b) in the application of section 87A of the Management Act by virtue of this sub-paragraph, corporation tax shall be taken to become due and payable on the day following the expiration of the period within which it is required under section 10(1)(b) to be paid.

(7) If and to the extent that the amendments of section 30 of the Management Act specified in subsections (1) to (4) of section 88 of the Finance (No.2) Act 1987 would not, apart from this sub-paragraph, have effect in relation to a transitional accounting period, they shall be treated as having effect for all purposes in relation to that transitional accounting period.

(8) Subsection (7) of section 88 of the Finance (No.2) Act 1987 shall have effect for the purposes of sub-paragraph (7) above as if the reference in paragraph (a) of that subsection to accounting periods ending after the appointed day were a reference to transitional accounting periods.

(9) In this paragraph “the commencement day” means the day appointed under section 49 of the Finance Act 1991.

Interpretation

6

(1) In this Schedule—

“provisional fraction” shall be construed in accordance with paragraphs 1(4) and 2 above;

“provisional repayment” means a provisional repayment under paragraph 1 above;

“provisional repayment period” shall be construed in accordance with paragraph 1 above.

(2) Any reference in this Schedule to a provisional repayment for an accounting period is a reference to a provisional repayment for a provisional repayment period falling within that accounting period.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Sub-paragraph (5) below applies in any case where an insurance company—

(a) which has delivered a return under section 11 of the Management Act for an accounting period ending before the self-assessment appointed day, but

(b) which has not delivered its first company tax return for an accounting period ending on or after that day,

makes the first claim for a provisional repayment for a particular accounting period ending on or after that day.

(5) Where this sub-paragraph applies—

(a) the provisional fraction for the accounting period to which the claim mentioned in sub-paragraph (4) above relates shall be determined in accordance with paragraph 1(3), (4), and (6) and sub-paragraph (3) above, as they have effect in relation to accounting periods ending before that day; and

(b) paragraph 2 above, as originally enacted, shall have effect in relation to that accounting period as it has effect in relation to accounting periods ending before that day.

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