The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004

These Regulations may be cited as the Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2004, come into force on 8th April 2004, and except as otherwise provided have effect for accounting periods beginning on or after 1st January 2003.

The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997^f1 are amended as follows.

In regulation 2—

After regulation 2 insert—

“2A.

In the Corporation Tax Acts, in their application to a friendly society—

• “insurance business transfer scheme” means a scheme which effects—

  1. (a)

     the transfer of the whole or part of the business of a friendly society to another friendly society,

  2. (b)

     the amalgamation of two or more friendly societies,

  3. (c)

     the transfer of the whole or part of the business of a friendly society to a company which is not a friendly society,

  4. (d)

     the conversion of a friendly society into a company which is not a friendly society, or

  5. (e)

     the transfer of the whole or part of the long-term business of an insurance company to a friendly society.”.

Omit regulations 3 and 4.

After regulation 7 insert—

“7A.

In the case of a friendly society not required to keep a separate fund for long-term business, the following section shall be treated as inserted after section 431AA of the Taxes Act—

“Friendly societies: meaning of “long-term insurance fund”

431AB.

(1)

“Long-term insurance fund” means the fund made up of—

(a)

assets held primarily for the purposes of long-term business carried on by a friendly society, and

(b)

the relevant fraction of each asset held neither primarily for the purposes of long-term business nor primarily for the purposes of some other specific business carried on by that society.

(2)

For the purposes of subsection (1) “the relevant fraction” means—

$$\colorbox[rgb]{}{$\genfrac{}{}{0.1ex}{}{\left(\mathrm{0.5}\times \left(\mathrm{OLB}+\mathrm{CLB}\right)\right)-\left(\mathrm{0.5}\times \left(\mathrm{OLA}+\mathrm{CLA}\right)\right)}{\left(\mathrm{0.5}\times \left(\mathrm{OTB}+\mathrm{CTB}\right)\right)-\left(\mathrm{0.5}\times \left(\mathrm{OTA}+\mathrm{CTA}\right)\right)}$}$$

Where—

• OLB and CLB are respectively the balances brought forward and carried forward in the fund accounts for those accounts within which the society conducts its long-term business;

• OLA and CLA are respectively the opening and closing values of the assets already recognised at the beginning and end of the period of account as held for the purposes of long-term business carried on by the society;

• OTB and CTB are respectively the total balances brought forward and carried forward on all the society’s fund accounts; and

• OTA and CTA are respectively the opening and closing values of the assets already recognised at the beginning and end of the period of account as held for the purposes of long-term business or for the purposes of other specific business carried on by the society.

(3)

In calculating the values and balances for the purpose of determining the relevant fraction in subsection (2), a balance on a general management fund or a general reserve fund shall be excluded.

(4)

In subsection (2), references to balances brought forward and carried forward are references to balances brought forward and carried forward as shown in the society’s periodical return.”.”.

In regulation 9—

In regulation 13—

For regulation 14 substitute—

“14.

(1)

Section 432E of the Taxes Act shall apply to the life or endowment business of a friendly society with the following modifications.

(2)

In subsection (1), the words “or, as the case may be, subsection (2B)” shall be inserted after the words “subsections (2) and (2A)”.

(3)

After subsection (2A), the following subsection shall be treated as inserted—

“(2B)

In a case where an amount is taken into account under subsection (2) of section 83 of the Finance Act 1989 by virtue of subsection (2F) of that section, the amount determined under subsection (2) above is increased by

$$\genfrac{}{}{0.1ex}{}{\mathrm{CAS}\times \mathrm{RP}}{\mathrm{AS}}$$

where—

• CAS and AS have the same meanings as in subsection (2) above; and

• RP is the amount taken into account under subsection (2) of section 83 of the Finance Act 1989 by virtue of subsection (2F) of that section.”.”.

Omit regulation 15.

In regulation 19(1), for “non-directive societies” substitute “non annual return societies”.

In regulation 19A(1)^f1, for “non-directive societies” substitute “non annual return societies”.

In regulation 20(1), for “non-directive societies” substitute “non annual return societies”, wherever occurring.

In regulation 20A(1)^f1, for “non-directive societies” substitute “non annual return societies”.

Omit regulation 21B^f1.

In regulation 22, for paragraphs (1) and (2) substitute—

“(1)

The modifications of section 440 of the Taxes Act given in paragraphs (3) and (4) apply—

(a)

where a friendly society begins or ceases to be required by rule 4.20 of the Prudential Sourcebook (Friendly Societies) to keep a separate fund for long-term business, or

(b)

in relation to a prescribed transaction.”.

Omit regulation 23.

Omit regulation 27.

In regulation 28(1), for “non-directive societies” substitute “non annual return societies”.

Omit regulation 30.

In regulation 30C^f1, after paragraph (1) insert—

“(1A)

The modification of section 804B(4)(a) prescribed by paragraph (2)(a) shall not apply where section 804B(4) is applied by virtue of regulation 4(3) and (5) of the Double Taxation Relief (Surrender of Relievable Tax within a Group) Regulations 2001.”^f2.

In regulation 30D(1)^f1, for “non-directive societies” substitute “non annual return societies”.

For regulation 32 substitute—

“32.

Where section 82(1)(b) of the Finance Act 1989 applies, as originally enacted, by virtue of paragraph 1(6) of Schedule 33 to the Finance Act 2003—

(a)

in the case of a friendly society, subsection (1)(b) of that section shall be modified so that for “section 9.6 of the Prudential Sourcebook (Insurers)” substitute “rule 5.1 of the Prudential Sourcebook (Friendly Societies)”;

(b)

in the case of a non annual return society, after subsection (8) of that section there shall be treated as inserted—

“(9)

Where a period of account ends on a day to which a valuation report has not been prepared, or begins on a day immediately following such a day, the amount of any unappropriated surplus on valuation for the purposes of subsections (1)(b) and (4) shall be the amount which was taken into account at the end of the last period of account for which a valuation report was prepared.””.

After regulation 32 insert—

“32A.

(1)

In the case of a friendly society, section 82B of the Finance Act 1989 shall apply with the following modifications.

(2)

In paragraph (a) of subsection 1, for “section 9.6 of the Prudential Sourcebook (Insurers)” substitute “rule 5.1 of the Prudential Sourcebook (Friendly Societies)”.

(3)

In paragraph (b) of subsection 1, for “Rule 4.1(6) of the Prudential Sourcebook (Insurers)” substitute “Rule 2(6) of Appendix 4 to the Prudential Sourcebook (Friendly Societies)”.

(4)

Where that friendly society is a non annual return society—

(a)

in subsection (2) for “the period of account immediately preceding the period of account in question” substitute “the period of account for which a report was submitted which most closely precedes the period of account in question (“the most closely preceding period of account”)”;

(b)

in subsection (3), wherever occurring, for “that immediately preceding period of account” substitute “the most closely preceding period of account”.”^f1.

In regulation 33—

Omit regulations 34 and 35.

In regulation 36(1), for “directive societies” substitute “annual return societies”.

In regulation 37(1), for “non-directive societies” substitute “non annual return societies”.

Omit regulation 40.

After regulation 40 insert—

“40A.

(1)

In the case of a friendly society, section 89(1B) of the Finance Act 1989 shall be modified by inserting the word “taxable” before the words “basic life assurance and general annuity business”, wherever occurring.

(2)

This regulation has effect for the purposes of section 210A of the Taxation of Chargeable Gains Act 1992 in relation to any accounting period of a company if it is necessary under that section to determine the company’s taxable basic life assurance and general annuity business profits for the period.

(3)

Subject to paragraph (2), this regulation has effect for accounting periods ending on or after 9th April 2003.”^f1, ^f2.

Omit regulation 44.

In regulation 45—

Omit regulations 47, 49, 50, 50A, 50B^f1, 51, 52, 53D^f2, 53E, 53F, 53G and 53J^f3.

(This note is not part of the Regulations)