Finance Act 1989 (c. 26)

(The document as of February, 2008)

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(b) at that time, the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed,

(d) before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes, and

(e) before the end of the claim period a claim for relief under this section is made.

(2) In such a case the sum--

(a) shall be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or

(b) if the company is an investment company or a company in the case of which section 75 of the Taxes Act 1988 applies by virtue of section 76 of that Act, shall be treated as expenses of management.

(3) For the purposes of subsection (1)(b) above, the question whether one company is controlled by another shall be construed in accordance with section 840 of the Taxes Act 1988.

(4) For the purposes of subsection (1)(d) above each of the following is a qualifying purpose--

(a) the acquisition of shares in the company which established the trust;

(b) the repayment of sums borrowed;

(d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

(e) the meeting of expenses.

(5) For the purposes of subsection (1)(d) above the expenditure period is the period of nine months beginning with the day following the end of the period of account in which the sum is charged as an expense of the company, or such longer period as the Board may allow by notice given to the company.

(6) For the purposes of subsection (1)(e) above the claim period is the period of two years beginning with the day following the end of the period of account in which the sum is charged as an expense of the company.

(7) For the purposes of this section the trustees of an employee share ownership trust shall be taken to expend sums paid to them in the order in which the sums are received by them (irrespective of the number of companies making payments).

68 Principal charges to tax

(1) This section applies where a chargeable event (within the meaning of section 69 below) occurs in relation to the trustees of an employee share ownership trust.

(2) In such a case--

(a) the trustees shall be treated as receiving, when the event occurs, annual profits or gains whose amount is equal to the chargeable amount (within the meaning of section 70 below),

(b) the profits or gains shall be chargeable to tax under Case VI of Schedule D for the year of assessment in which the event occurs, and

(c) the rate at which the tax is chargeable shall be a rate equal to the sum of the basic rate and the additional rate for the year of assessment in which the event occurs.

(3) If the whole or any part of the tax assessed on the trustees is not paid before the expiry of the period of six months beginning with the day on which the assessment becomes final and conclusive, a notice of liability to tax under this subsection may be served on a qualifying company and the tax or the part unpaid (as the case may be) shall be payable by the company on service of the notice.

(4) Where a notice of liability is served under subsection (3) above--

(a) any interest which is due on the tax or the part (as the case may be) and has not been paid by the trustees, and

(b) any interest accruing due on the tax or the part (as the case may be) after the date of service,

shall be payable by the company.

(5) Where a notice of liability is served under subsection (3) above and any amount payable by the company (whether on account of tax or interest) is not paid by the company before the expiry of the period of three months beginning with the date of service, the amount unpaid may be recovered from the trustees (without prejudice to the right to recover it instead from the company).

(6) For the purposes of this section each of the following is a qualifying company--

(a) the company which established the employee share ownership trust;

(b) any company falling within subsection (7) below.

(7) A company falls within this subsection if, before it is sought to serve a notice of liability on it under subsection (3) above--

(a) it has paid a sum to the trustees, and

(b) the sum has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

69 Chargeable events

(1) For the purposes of section 68 above each of the following is a chargeable event in relation to the trustees of an employee share ownership trust--

(a) the transfer of securities by the trustees, if the transfer is not a qualifying transfer;

(b) the transfer of securities by the trustees to persons who are at the time of the transfer beneficiaries under the terms of the trust deed, if the terms on which the transfer is made are not qualifying terms;

(c) the retention of securities by the trustees at the expiry of the period of seven years beginning with the date on which they acquired them;

(d) the expenditure of a sum by the trustees for a purpose other than a qualifying purpose.

(2) For the purposes of subsection (1)(a) above a transfer is a qualifying transfer if it is made to a person who at the time of the transfer is a beneficiary under the terms of the trust deed.

(3) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if--

(a) it is made to the trustees of a scheme which at the time of the transfer is a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988, and

(b) it is made for a consideration which is not less than the price the securities might reasonably be expected to fetch on a sale in the open market.

(4) For the purposes of subsection (1)(b) above a transfer of securities is made on qualifying terms if--

(a) all the securities transferred at the same time are transferred on similar terms,

(b) securities have been offered to all the persons who are beneficiaries under the terms of the trust deed when the transfer is made, and

(5) For the purposes of subsection (1)(d) above each of the following is a qualifying purpose--

(a) the acquisition of shares in the company which established the trust;

(b) the repayment of sums borrowed;

(d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

(e) the meeting of expenses.

(6) For the purposes of subsection (4) above, the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service, or similar factors, shall not be regarded as meaning that the terms are not similar.

(7) In ascertaining for the purposes of this section whether particular securities are retained, securities acquired earlier by the trustees shall be treated as transferred by them before securities acquired by them later.

(8) For the purposes of this section trustees--

(a) acquire securities when they become entitled to them (subject to the exceptions in subsection (9) below);

(b) transfer securities to another person when that other becomes entitled to them;

(9) The exceptions are these--

(a) if securities are issued to trustees in exchange in circumstances mentioned in section 85(1) of the [1979 c. 14.] Capital Gains Tax Act 1979, they shall be treated as having acquired them when they became entitled to the securities for which they are exchanged;

(b) if trustees become entitled to securities as a result of a reorganisation, they shall be treated as having acquired them when they became entitled to the original shares which those securities represent (construing "reorganisation" and "original shares" in accordance with section 77 of that Act).

(10) If trustees agree to take a transfer of securities, for the purposes of this section they shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

(11) If trustees agree to transfer securities to another person, for the purposes of this section the other person shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

(12) For the purposes of this section the following are securities--

(a) shares;

(b) debentures.

70 Chargeable amounts

(1) This section has effect to determine the chargeable amount for the purposes of section 68 above.

(2) If the chargeable event falls within section 69(1)(a), (b) or (c) above the following rules shall apply--

(a) if the event constitutes a disposal of the securities by the trustees for the purposes of the Capital Gains Tax Act 1979, the chargeable amount is an amount equal to the sums allowable under section 32(1)(a) and (b) of that Act;

(b) if the event does not constitute such a disposal, the chargeable amount is an amount equal to the sums which would be so allowable had the trustees made a disposal of the securities for the purposes of that Act at the time the chargeable event occurs.

(3) If the chargeable event falls within section 69(1)(d) above the chargeable amount is an amount equal to the sum concerned.

71 Further charges to tax: borrowing

(1) This section applies where--

(a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees of an employee share ownership trust,

(b) at the time the event occurs anything is outstanding in respect of the principal of an amount or amounts borrowed at any time by the trustees, and

(2) In the following provisions of this section--

(a) "the initial chargeable event" means the event referred to in subsection (1)(a) above, and

(b) "the total outstanding amount" means the total amount outstanding, at the time the initial chargeable event occurs, in respect of the principal of an amount or amounts borrowed at any time by the trustees.

(3) If any of the total outstanding amount is repaid after the initial chargeable event occurs, a further chargeable event shall occur in relation to the trustees at the end of the year of assessment in which the repayment is made.

(4) In such a case--

(a) the trustees shall be treated as receiving, when the further event occurs, annual profits or gains whose amount is equal to the chargeable amount,

(b) the profits or gains shall be chargeable to tax under Case VI of Schedule D for the year of assessment at the end of which the further event occurs, and

(c) the rate at which the tax is chargeable shall be a rate equal to the sum of the basic rate and the additional rate for the year of assessment at the end of which the further event occurs.

(5) Subject to subsection (6) below, for the purposes of subsection (4) above the chargeable amount is an amount equal to the aggregate of the total outstanding amount repaid in the year of assessment.

(6) In a case where section 72(2)(b) below had effect in the case of the initial chargeable event, for the purposes of subsection (4) above the chargeable amount is an amount equal to the smaller of--

(a) the aggregate of the total outstanding amount repaid in the year of assessment, and

(b) an amount found by applying the formula A-B-C.

(7) For the purposes of subsection (6) above--

(a) A is the amount which would be the chargeable amount for the initial chargeable event apart from section 72(2) below,

(b) B is the chargeable amount for the initial chargeable event, and

(8) If, before the further chargeable event occurs, one or more prior chargeable events have occurred in relation to the trustees by virtue of the prior repayment of any of the total outstanding amount found for the time the initial chargeable event occurs, the amount found under this subsection is an amount equal to the chargeable amount for the prior chargeable event or to the aggregate of the chargeable amounts for the prior chargeable events (as the case may be).

(9) In a case where--

(a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees in circumstances mentioned in subsection (1) above,

(b) a sum falls to be included in the total outstanding amount found for the time the event occurs,

(c) another chargeable event (within the meaning of that section) occurs in relation to the trustees in circumstances mentioned in subsection (1) above, and

(d) the same sum or a part of it would (apart from this subsection) fall to be included in the total outstanding amount found for the time the event occurs,

the sum or part (as the case may be) shall not be included in the total outstanding amount found for the time the other chargeable event occurs.

(10) In ascertaining for the purposes of this section whether a repayment is in respect of a particular amount, amounts borrowed earlier shall be taken to be repaid before amounts borrowed later.

(11) Subsections (3) to (7) of section 68 above shall apply where tax is assessed by virtue of this section as they apply where tax is assessed by virtue of that section.

72 Limit on chargeable amount

(1) For the purposes of this section each of the following is a chargeable event in relation to the trustees of an employee share ownership trust--

(a) an event which is a chargeable event by virtue of section 69 above;

(b) an event which is a chargeable event by virtue of section 71 above.

(2) If a chargeable event (the event in question) occurs in relation to the trustees of an employee share ownership trust, the following rules shall apply--

(a) the amount which would (apart from this subsection) be the chargeable amount for the event in question shall be aggregated, for the purposes of paragraph (b) below, with the chargeable amounts for other chargeable events (if any) occurring in relation to the trustees before the event in question,

(b) if the amount which would (apart from this subsection) be the chargeable amount for the event in question (or the aggregate found under paragraph (a) above, if there is one) exceeds the deductible amount, the chargeable amount for the event in question shall be the amount it would be apart from this subsection less an amount equal to the excess, and

(3) For the purposes of subsection (2) above the deductible amount (as regards the event in question) is an amount equal to the total of the sums falling within subsection (4) below.

(4) A sum falls within this subsection if it has been received by the trustees before the occurrence of the event in question and--

(a) it has been deducted as mentioned in section 67(2)(a) above, or treated as mentioned in section 67(2)(b) above, before the occurrence of that event, or

(b) it would fall to be so deducted or treated if a claim for relief under section 67 above had been made immediately before the occurrence of that event.

73 Information

(1) An inspector may by notice in writing require a return to be made by the trustees of an employee share ownership trust if they have at any time received a sum which has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

(2) Where he requires such a return to be made the inspector shall specify the information to be contained in it.

(3) The information which may be specified is information the inspector needs for the purposes of sections 68 to 72 above, and may include information about--

(a) sums received (including sums borrowed) by the trustees;

(b) expenditure incurred by them;

(d) transfers of assets made by them.

(4) The information which may be required under subsection (3)(a) above may include the persons from whom the sums were received.

(5) The information which may be required under subsection (3)(b) above may include the purpose of the expenditure and the persons receiving any sums.

(6) The information which may be specified under subsection (3)(c) above may include the persons from whom the assets were acquired and the consideration furnished by the trustees.

(7) The information which may be included under subsection (3)(d) above may include the persons to whom assets were transferred and the consideration furnished by them.

(8) In a case where a sum has been deducted as mentioned in section 67(2)(a) above, or treated as mentioned in section 67(2)(b) above, the inspector shall send to the trustees to whom the payment was made a certificate stating--

(a) that a sum has been so deducted or so treated, and

(b) what sum has been so deducted or so treated.

(9) In the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to comply with notices etc.) at the end of the first column there shall be inserted--

"Section 73 of the Finance Act 1989".

74 Interpretation

Schedule 5 to this Act shall have effect to determine whether, for the purposes of sections 67 to 73 above, a trust is at a particular time--

(a) an employee share ownership trust;

(b) a qualifying employee share ownership trust.

Pensions etc.

75 Retirement benefits schemes

Schedule 6 to this Act (which relates to retirement benefits schemes) shall have effect.

76 Non-approved retirement benefits schemes

(1) In computing the amount of the profits or gains to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of any expenses falling within subsection (2) or (3) below; and no expenses falling within either of those subsections shall be treated for the purposes of section 75 of the Taxes Act 1988 (investment companies) as expenses of management.

(2) Expenses fall within this subsection if--

(a) they are expenses of providing benefits pursuant to a relevant retirement benefits scheme, and

(b) the benefits are not ones in respect of which a person is on receipt chargeable to income tax.

(3) Expenses fall within this subsection if--

(a) they are expenses of paying any sum pursuant to a relevant retirement benefits scheme with a view to the provision of any benefits, and

(b) the sum is not one which when paid is treated as the income of a person by virtue of section 595(1) of the Taxes Act 1988 (sum paid with a view to the provision of any relevant benefits for an employee).

(4) No sum shall be deducted in respect of any expenses falling within subsection (5) or (6) below--

(a) in computing the amount of the profits or gains to be charged under Case I or Case II of Schedule D, or

(b) by virtue of section 75 of the Taxes Act 1988,

unless the sum has actually been expended.

(5) Expenses fall within this subsection if--

(a) they are expenses of providing benefits pursuant to a relevant retirement benefits scheme, and

(b) the benefits are ones in respect of which a person is on receipt chargeable to income tax.

(6) Expenses fall within this subsection if--

(a) they are expenses of paying any sum pursuant to a relevant retirement benefits scheme with a view to the provision of any benefits, and

(b) the sum is one which when paid is treated as the income of a person by virtue of section 595(1) of the Taxes Act 1988.

(7) In this section--

"retirement benefits scheme" has the same meaning as in Chapter I of Part XIV of the Taxes Act 1988, and
references to a relevant retirement benefits scheme are references to a retirement benefits scheme which is not of a description mentioned in section 596(1)(a), (b) or (c) of the Taxes Act 1988.

(8) This section has effect in relation to expenses incurred on or after the day on which this Act is passed.

77 Personal pension schemes

Schedule 7 to this Act (which relates to personal pension schemes) shall have effect.

Unit trusts etc.

78 Certified unit trusts

The following sections shall be inserted after section 468 of the Taxes Act 1988--

" 468A Certified unit trusts

(1) For the purposes of sections 468B and 468C "certified unit trust" means, as respects an accounting period, a unit trust scheme in the case of which--

(a) an order under section 78 of the [1986 c. 60.] Financial Services Act 1986 is in force during the whole or part of that accounting period, and

(b) a certificate under section 78(8) of that Act, certifying that the scheme complies with the conditions necessary for it to enjoy the rights conferred by the UCITS directive, has been issued before or at any time during that accounting period.

(2) In this section--

"the UCITS directive" means the directive of the Council of the European Communities, dated 20th December 1985, on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (no. 85/611/EEC), and
"unit trust scheme" has the same meaning as in section 469.

468B Certified unit trusts: corporation tax

(1) This section has effect as regards an accounting period of the trustees of a certified unit trust ending after 31st December 1989.

(2) Subject to subsection (3) below, the rate of corporation tax for a financial year shall be deemed to be the rate at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in the financial year concerned.

(3) Where the period begins before 1st January 1990, subsection (2) above shall only apply for the purpose of computing corporation tax chargeable for so much of the period as falls in the financial year 1990 and subsection (4) below shall apply for the purpose of computing corporation tax chargeable for so much of the period as falls in the financial year 1989.

(4) So much of the period as falls after 31st December 1989 and before 1st April 1990 shall be deemed to fall in a financial year for which the rate of corporation tax is the rate at which income tax at the basic rate is charged for the year 1989-90.

(5) Where the period begins after 31st December 1989, section 338 shall have effect as if any reference to interest of any description were a reference to interest of that description on borrowing of a relevant description.

(6) For the purposes of subsection (5) above borrowing is of a relevant description if it is borrowing in respect of which there has been no breach during the accounting period of the duties imposed on the manager of the scheme by regulations under section 81 of the [1986 c. 60.] Financial Services Act 1986 with respect to borrowing by the trustees of the scheme.

(7) The Treasury may by regulations provide that for subsection (6) above (as it has effect for the time being) there shall be substituted a subsection containing a different definition of what constitutes borrowing of a relevant description for the purposes of subsection (5) above.

(8) Regulations under subsection (7) above may contain such supplementary, incidental, consequential or transitional provision as the Treasury think fit.

(9) In this section "certified unit trust" has the meaning given by section 468A.

468C Certified unit trusts: distributions

(1) Subsection (2) below applies where--

(a) as regards a distribution period ending after 31st December 1989 a dividend is treated by virtue of section 468(2) as paid to a unit holder (whether or not income is in fact paid to the unit holder),

(b) the dividend is treated as paid by the trustees of a unit trust scheme which is a certified unit trust as respects the accounting period in which the distribution period falls, and

(2) For the purpose of computing corporation tax chargeable in the case of the unit holder the payment shall be deemed--

(a) to be an annual payment, and not a dividend or other distribution, and

(b) to have been received by the unit holder after deduction of income tax at the basic rate, for the year of assessment in which the date of payment falls, from a corresponding gross amount.

(3) Subsection (2) above shall not apply where the rights in respect of which the dividend is treated as paid are held by the trustees of a unit trust scheme which on the date of payment is a fund of funds.

(4) Where the unit holder is on the date of payment the manager of the scheme, subsection (2) above shall not apply in so far as the rights in respect of which the dividend is treated as paid are rights held by him in the ordinary course of his business as manager of the scheme.

(5) Subsection (2) above shall not apply to so much of the payment as is attributable to income of the trustees arising before 1st January 1990.

(6) In this section--

"certified unit trust" has the meaning given by section 468A,
"distribution period" has the same meaning as in section 468,
"dual resident" means a person who is resident in the United Kingdom and falls to be regarded for the purposes of any arrangements having effect by virtue of section 788 as resident in a territory outside the United Kingdom,
"fund of funds" means a unit trust scheme the sole object of which is to enable the unit holders to participate in or receive profits or income arising from the acquisition, holding, management or disposal of units in unit trust schemes, and
"unit trust scheme" has the same meaning as in section 469. "

79. Funds of funds.

The following section shall be inserted after section 468C of the Taxes Act 1988--

" 468D Funds of funds: distributions

(1) Subsection (2) below applies where--

(b) the dividend is treated as paid by the trustees of a unit trust scheme which on the date of payment is a fund of funds, and

(2) For the purpose of computing corporation tax chargeable in the case of the unit holder the payment shall be deemed--

(a) to be an annual payment, and not a dividend or other distribution, and

(b) to have been received by the unit holder after deduction of income tax at the basic rate, for the year of assessment in which the date of payment falls, from a corresponding gross amount.

(3) Where the unit holder is on the date of payment the manager of the scheme, subsection (2) above shall not apply in so far as the rights in respect of which the dividend is treated as paid are rights held by him in the ordinary course of his business as manager of the scheme.

(4) Subsection (2) above shall not apply to so much of the payment as is attributable to income of the trustees arising before 1st January 1990.

(5) In this section--

"distribution period" has the same meaning as in section 468,
"dual resident" and "fund of funds" have the same meanings as in section 468C,
"unit trust scheme" has the same meaning as in section 469. "

80 Gilt unit trusts

(1) Where, in the case of a certified unit trust and apart from this subsection, section 468(5) of the Taxes Act 1988 would apply as regards a distribution period beginning after 31st December 1989, section 468(5) shall not apply in the case of the trust as regards that period.

(2) Where by virtue of subsection (1) above the last distribution period as regards which section 468(5) applies in the case of a certified unit trust is one beginning on or before, and ending after, 31st December 1989, the trustees' liability to income tax in respect of any source of income chargeable under Case III of Schedule D shall be assessed as if they had ceased to possess the source of income on the last day of that distribution period.

(3) But where section 67 of the Taxes Act 1988 applies by virtue of subsection (2) above, it shall apply with the omission from subsection (1)(b) of the words from "and shall" to "this provision".

(4) For the purposes of this section "certified unit trust" means, as respects a distribution period, a unit trust scheme in the case of which--

(a) an order under section 78 of the [1986 c. 60.] Financial Services Act 1986 is in force during the whole or part of the accounting period in which the distribution period falls, and

(5) In this section--

"distribution period" has the same meaning as in section 468 of the Taxes Act 1988,
"the UCITS directive" means the directive of the Council of the European Communities, dated 20th December 1985, on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (No. 85/611/EEC), and
"unit trust scheme" has the same meaning as in section 469 of the Taxes Act 1988.

81 Offshore funds operating equalisation arrangements

(1) In section 758 of the Taxes Act 1988 (offshore funds operating equalisation arrangements) in subsection (6) (reference to section 78 of the [1979 c. 14.] Capital Gains Tax Act 1979 not to include reference to it as applied by section 82) for the words "but not" there shall be substituted the words "and a reference to section 78".

(2) This section shall apply where a conversion of securities occurs on or after 14th March 1989; and "conversion of securities" here has the same meaning as in section 82 of the Capital Gains Tax Act 1979.

Life assurance

82 Calculation of profits

(1) Where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D, then, in calculating the profits for any period of account,--

(a) there shall be taken into account as an expense (so far as not so taken into account apart from this section) any amounts which, in respect of the period, are allocated to or expended on behalf of policy holders or annuitants; and

(b) if, at the end of the period, the company has an unappropriated surplus on valuation, as shown in its return for the purposes of the [1982 c. 50.] Insurance Companies Act 1982, then, subject to subsection (3) below, the closing liabilities of the period may include such amount, forming part of that surplus, as is required to meet the reasonable expectations of policy holders or annuitants with regard to bonuses or other additions to benefit of a discretionary nature.

(2) For the purposes of this section an amount is allocated to policy holders or annuitants if, and only if,--

(a) bonus payments are made to them; or

(b) reversionary bonuses are declared in their favour or a reduction is made in the premiums payable by them;

and the amount of the allocation is, in a case within paragraph (a) above, the amount of the payments and, in a case within paragraph (b) above, the amount of the liabilities assumed by the company in consequence of the declaration or reduction.

(3) The amount which, apart from this subsection, would be included in the closing liabilities of a period of account by virtue of subsection (1)(b) above shall be reduced or, as the case may be, extinguished by deducting therefrom the total of the amounts which--

(a) for periods of account ending before 14th March 1989 have been excluded, by virtue of section 433 of the Taxes Act 1988, as being reserved for policy holders or annuitants, and

(b) have not before that date either been allocated to or expended on behalf of policy holders or annuitants or been treated as profits of an accounting period on ceasing to be so reserved.

(4) Where the closing liabilities of a period of account include an amount by virtue of subsection (1)(b) above, the like amount shall be included in the opening liabilities of the next following period of account.

(5) This section has effect with respect to periods of account ending on or after 14th March 1989; and the following provisions of this section shall apply for the purposes of the application of this section to any such period which begins before that date (in this section referred to as a "straddling period").

(6) For the purposes referred to in subsection (5) above, it shall be assumed that the straddling period consists of two separate periods of account,--

(a) the first beginning at the beginning of the straddling period and ending on 13th March 1989 (in this section referred to as "the first notional period"); and

(b) the second beginning on 14th March 1989 and ending at the end of the straddling period (in this section referred to as "the second notional period");

and any reference in subsection (7) or subsection (8) below to a time apportionment is a reference to an apportionment made by reference to the respective lengths of the two notional periods.

(7) To determine the profits of the first notional period and the amount excluded from the profits of that period by virtue of section 433 of the Taxes Act 1988 as being reserved for policy holders or annuitants,--

(a) in the first instance the profits of the straddling period and the amount so excluded from those profits shall be computed as if subsections (1) to (4) above did not apply with respect to any part of the straddling period; and

(b) there shall then be determined that part of the profits and the amount computed under paragraph (a) above which, on a time apportionment, is properly attributable to the first notional period.

(8) To determine the profits of the second notional period,--

(a) in the first instance the profits of the straddling period shall be computed as if subsections (1) to (4) above applied to the whole of the straddling period; and

(b) there shall then be determined that part of the profits computed under paragraph (a) above which, on a time apportionment, is properly attributable to the second notional period.

83 Receipts to be brought into account

(1) Where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D, then, so far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), namely,--

(a) the company's investment income from the assets of its long-term business fund, and

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