Explanatory note

Schedule 19AB to the Income and Corporation Taxes Act 1988 (c. 1) (“Schedule 19AB” and “the Taxes Act” respectively) applies to an insurance company carrying on pension business; and makes provision for payments on account of tax borne by deduction and tax credits in respect of distributions received (“provisional repayments”). Schedule 19AB also makes provision determining how the amounts of provisional repayments are to be calculated.

Section 121 of the Finance Act 1993 empowers the Treasury to provide by regulations for Schedule 19AB to have effect in relation to the tax exempt business of a friendly society as it has effect in relation to the pension business of an insurance company; and the Friendly Societies (Provisional Repayments for Exempt Business) Regulations 1993 (S.I. 1993/3112, amended by S.I. 1997/474) (“the 1993 Regulations”) provide for Schedule 19AB to have such effect (subject to certain modifications and exceptions).

In relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to friendly societies carrying on tax exempt business further modifications of the 1993 Regulations were made by the Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1996 (S.I. 1996/21) (“the principal Regulations”).

These Regulations make a number of detailed amendments to the principal Regulations consequent upon the amendment, by section 171(1) of the Finance Act 1996 (c. 8), of the definition of “life or endowment business” in section 466(1) of the Taxes Act and the replacement of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992 (S.I. 1992/1655) by the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473).