Finance Act 1991 (c. 31)

(The document as of February, 2008)

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PART V INTERPRETATION

19 (1) In this Schedule--

• "eligible for relief" shall be construed in accordance with sub-paragraph (2) below;

• "eligible loan" means--

(a) any loan the interest on which is eligible for relief, other than a home loan; and

(b) in a case where part of the interest on a loan is eligible for relief otherwise than by virtue of section 355(1)(a), 356(1) or 365, that proportion of the loan which that part of the interest bears to the whole of the interest;

and in determining for the purposes of this definition whether the whole or any part of the interest on a loan is so eligible for relief, it shall be assumed that interest at a uniform rate is paid on the loan, whether or not that is in fact the case;

• "excess liability" means liability to income tax over what it would be if all income tax were charged at the basic rate, to the exclusion of any higher rate;

• "home loan" means--

(a) any loan the interest on which is, or apart from section 357 would have been, eligible for relief by virtue of section 355(1)(a), 356(1) or 365; and

(b) in a case where part of the interest on a loan is or would have been so eligible for relief, that proportion of the loan which that part of the interest bears to the whole of the interest;

and in determining for the purposes of this definition whether the whole or any part of the interest on a loan is or would have been so eligible for relief, it shall be assumed that interest at a uniform rate is paid on the loan, whether or not that is in fact the case;

• "loan", except in Part I of this Schedule, shall be construed in accordance with sub-paragraphs (3) to (5) below;

• "nominal element", in relation to the employee, means the amount (if any) which, apart from paragraph 15 above, would, by virtue of section 161(1), not have been charged to tax under section 160 in that year in his case.

(2) Interest is "eligible for relief" for the purposes of this Schedule if it is eligible for relief under section 353 or would be eligible for such relief apart from subsection (2) of that section.

(3) In the definitions of "eligible loan" and "home loan" in sub-paragraph (1) above, "loan" means any such loan as is mentioned in section 160(1), and for this purpose sub-paragraphs (4) and (5) below shall be disregarded.

(4) Where by virtue of sub-paragraph (1) above part of a loan constitutes a home loan or an eligible loan, the loan shall be treated for the purposes of this Schedule, apart from Part I, as if it were two or more separate loans, consisting respectively--

(a) of the part (if any) which is a home loan,

(b) of the part (if any) which is an eligible loan, and

(c) of the part (if any) which is neither a home loan nor an eligible loan,

and, subject to sub-paragraph (5) below, references in this Schedule, apart from Part I, to loans, home loans and eligible loans shall be construed accordingly.

(5) Except for home loans and eligible loans, all the loans between the same lender and borrower for which a cash equivalent falls to be ascertained and which are outstanding at any time, as to any amount, in any year are to be treated for the purposes of this Schedule, apart from Part I, as a single loan. "

Applicable rates of capital gains tax

6 (1) In section 102 of the [1988 c. 39.] Finance Act 1988 (unification of rates of tax on income and gains: special cases) after subsection (1) there shall be inserted--

" (1A) References in section 98 above to income tax chargeable at the higher rate also include references to tax chargeable by virtue of section 353(4) or 369(3A) of that Act (restriction to basic rate of relief on certain interest etc) in respect of excess liability; and where for any year of assessment a deduction is by virtue of either of those provisions not allowed in computing the total income of a person for the purposes of excess liability then, whether or not he is chargeable to tax otherwise than at the basic rate, that deduction shall not be allowed for the purposes of section 98(4) above. "

(2) In subsection (4) of that section (deductions in respect of personal reliefs not to be affected), after the words "subsection (1)" there shall be inserted the words "or (1A)".

Section 48.

SCHEDULE 7 Basic Life Assurance and General Annuity Business

Management expenses

1 In section 76 of the Taxes Act 1988 (expenses of management of insurance companies) in subsection (1)--

(a) in paragraphs (ca) and (e), for the words "basic life assurance business" there shall be substituted in each place the words "basic life assurance and general annuity business";

(b) in paragraph (d), the words "general annuity business" shall cease to have effect.

Interpretation of Chapter I of Part XII

2 In section 431 of that Act (interpretative provisions relating to insurance companies) in subsection (2), after the definition of "basic life assurance business" there shall be inserted--

" "basic life assurance and general annuity business" means life assurance business other than pension business and overseas life assurance business; " .

Apportionment of income and gains

3 (1) In section 432A of that Act (apportionment of income and gains between different categories of business) in subsection (2) (which specifies the categories) paragraphs (b) and (d) shall be omitted and at the end there shall be added--

" (e) basic life assurance and general annuity business. "

(2) In subsection (3) of that section, for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

(3) In subsection (7)(a)(iii) of that section--

(a) for the words "general annuity business or basic life assurance business" there shall be substituted the words "or basic life assurance and general annuity business", and

(b) for the words "pension business and basic life assurance business" there shall be substituted the words "those categories of business".

(4) In section 432C of that Act (apportionment: income of non-participating funds) in subsection (1), for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

(5) In subsection (5)(a)(ii) of that section--

(a) for the words "general annuity business or basic life assurance business" there shall be substituted the words "or basic life assurance and general annuity business", and

(b) for the words "pension business and basic life assurance business" there shall be substituted the words "those categories of business".

(6) In section 432D of that Act (apportionment: value of non-participating funds) in subsection (1), for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

Computation of trading profit

4 (1) In section 436 of that Act (general annuity business and pension business: separate charge on profits) in subsection (1)--

(a) the words "general annuity business or" shall cease to have effect, and

(b) in paragraph (a), for the words "the business of each such class" there shall be substituted the words "that business".

(2) In subsection (3) of that section--

(a) in paragraph (c), the words "or general annuity business", and

(b) in paragraph (e), the words "general annuity business or",

shall cease to have effect.

(3) In subsection (4) of that section, the words "general annuity business or" shall cease to have effect.

(4) In section 437 of that Act (general annuity business) subsections (2) to (5) shall cease to have effect.

Deduction for annuities referable to basic life assurance and general annuity business

5 In section 437 of that Act, for subsection (1) there shall be substituted--

" (1A) In the case of a company carrying on basic life assurance and general annuity business, the new annuities paid in any accounting period by the company shall be regarded as charges on income only to the extent that they do not exceed the income limit for that accounting period.

(1B) Subsection (1A) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business.

(1C) For the purposes of this section--

(a) "new annuity" means any annuity, so far as paid under a contract made by an insurance company in an accounting period beginning on or after 1st January 1992 and so far as referable to the company's basic life assurance and general annuity business;

(b) "the income limit" for an accounting period of an insurance company is the difference between--

(i) the total amount of the new annuities paid by the company in that accounting period; and

(ii) the total of the capital elements contained in the new annuities so paid; and

(c) the capital element contained in an annuity shall be determined in accordance with Chapter V of Part XIV, but for this purpose--

(i) it is immaterial whether or not an annuitant claims any relief to which he is entitled under that Chapter; and

(ii) where, by virtue of subsection (2) of section 657, section 656 does not apply to an annuity, the annuity shall be treated as containing the capital element that it would have contained apart from that subsection.

(1D) In any case where--

(a) a payment in respect of an annuity is made by an insurance company under a group annuity contract made in an accounting period beginning before 1st January 1992,

(b) the company's liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c) the company's liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall be treated for the purposes of this section, other than this subsection, as if the group annuity contract had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1E) In any case where--

(a) a payment in respect of an annuity is made by a reinsurer under a reinsurance treaty made in an accounting period beginning before 1st January 1992,

(b) the reinsurer's liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c) the reinsurer's liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall, as respects the reinsurer, be treated for the purposes of this section, other than this subsection, as if the reinsurance treaty had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1F) In this section--

• "group annuity contract" means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

• "reinsurance treaty" means a contract under which one insurance company is obliged to cede, and another (in this section referred to as a "reinsurer") to accept, the whole or part of a risk of a class or description to which the contract relates. "

Transfer of assets between classes of business

6 (1) In section 440 of that Act (transfers of assets etc) in subsection (4) (categories of business) for paragraph (a) there shall be substituted--

" (a) assets linked solely to basic life assurance and general annuity business; " .

(2) In section 440A of that Act (securities treated as one holding) in subsection (2)(a)--

(a) after the word "policies" there shall be inserted the words "or annuity contracts"; and

(b) for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

(3) Immediately before the commencement of the first accounting period of an insurance company beginning on or after 1st January 1992--

(a) all the assets held by the company and falling within the category set out in paragraph (a) of subsection (4) of section 440 of that Act (basic life assurance business),

(b) so much of the assets held by the company and falling within the category set out in paragraph (d) of that subsection (assets not falling within any other category) as are linked solely to general annuity business, and

(c) so much of the assets held by the company and falling within that category as, although not falling within paragraph (b) above, would be regarded as linked solely to the company's basic life assurance business were its general annuity business treated as forming part of its basic life assurance business and as not being a separate category of business,

shall be taken to have been transferred from the category in question to the category set out in the paragraph (a) inserted by sub-paragraph (1) above.

(4) Neither section 440(1) nor section 724(1A) of that Act shall have effect in relation to the transfer of assets from one category to another by sub-paragraph (3) above.

United Kingdom branches of overseas life assurance companies

7 (1) In section 446 of that Act (computation under section 436 of profits arising to an overseas life assurance company)--

(a) in subsection (1), the words "and general annuity business", and

(b) subsections (2) and (3),

shall cease to have effect.

(2) In section 447 of that Act (set-off of income tax and tax credits against corporation tax) in subsection (1), for the words "(2) to (4)" there shall be substituted the words "(2) and (4)".

(3) Subsection (3) of that section (proportion of profits arising from general annuity business for purposes of section 446) shall cease to have effect.

(4) In subsection (4) of that section (which refers to section 446 and to subsection (3))--

(a) the words "or 446" shall cease to have effect; and

(b) for the words "subsections (2) and (3)" there shall be substituted the words "subsection (2)".

(5) In section 448 of that Act (qualifying distributions and tax credits) in subsection (3), paragraph (a) (limit on amounts that may be set against profits from general annuity business) shall cease to have effect.

Treatment of tax-free income

8 In section 474 of that Act, in subsection (1)(b) (certain tax-free income to be included in computing profits or loss from pension business and general annuity business) the words "and general annuity business" shall cease to have effect.

Life annuity contracts: taxation of gain on chargeable event

9 (1) In section 547 of that Act (method of charging gain on surrender etc to tax) after subsection (5) there shall be inserted--

" (5A) Where a gain is to be treated under section 543 as arising in connection with a contract for a life annuity made--

(a) after 26th March 1974, and

(b) unless the contract falls, or has at any time fallen, to be regarded as not forming part of any insurance company or friendly society's basic life assurance and general annuity business the income and gains of which are subject to corporation tax, in an accounting period of the insurance company or friendly society beginning before 1st January 1992,

subsection (6) below shall apply in relation to the gain unless subsection (7) below applies in relation to it. "

(2) In subsection (6) of that section (income constituted by gains on life annuity contracts made after 26th March 1974 not to be treated as if paid after deduction of tax at the basic rate etc) for the words from the beginning to "26th March 1974" there shall be substituted the words "Where this subsection applies in relation to such a gain as is mentioned in subsection (5A) above".

(3) After subsection (8) of that section there shall be inserted--

" (9) In this section "basic life assurance and general annuity business" has the same meaning as in Chapter I of Part XII. "

(4) In section 549 of that Act, in subsection (2) (which limits the deduction that may be made under that section to the purposes of excess liability, except where the contract was made after 26th March 1974) after the words "after 26th March 1974" there shall be inserted the words "but in an accounting period of the insurance company or friendly society beginning before 1st January 1992,".

Computation of offshore income gains

10 In Schedule 28 to that Act, in paragraph 3(4), paragraph (a) (computation of unindexed gain in case of certain profits arising from general annuity business and falling to be taken into account under section 436) shall cease to have effect.

Interpretation of sections 85 to 89 of Finance Act 1989

11 In section 84 of the [1989 c. 26.] Finance Act 1989, for subsection (1) (meaning of "basic life assurance business" in sections 85 to 89) there shall be substituted--

" (1) In sections 85 to 89 below "basic life assurance and general annuity business" has the same meaning as in Chapter I of Part XII of the Taxes Act 1988. "

Miscellaneous receipts

12 In section 85 of the [1989 c. 26.] Finance Act 1989 (charge of certain receipts of basic life assurance business) in subsection (1), for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

Spreading of relief for acquisition expenses

13 (1) In section 86 of the Finance Act 1989 (spreading of relief for acquisition expenses) in subsections (1) and (5), for the words "basic life assurance business" there shall be substituted in each place the words "basic life assurance and general annuity business".

(2) After subsection (3) of that section there shall be inserted--

" (3A) Nothing in subsection (1), (2) or (3) above applies to commissions (however described) in respect of annuity contracts made in accounting periods beginning before 1st January 1992, but without prejudice to the application of subsections (1) and (2) above to any commission attributable to a variation, in an accounting period beginning on or after that date, of an annuity contract so made; and for this purpose the exercise of any rights conferred by an annuity contract shall be regarded as a variation of it. "

(3) In subsection (4) of that section (meaning of "the acquisition of business") after the word "includes" there shall be inserted "(a)" and at the end there shall be added the words " and

(b) the securing, in an accounting period beginning on or after 1st January 1992, of the payment of increased or additional consideration in respect of an annuity contract already made (whether in an accounting period beginning before, or on or after, that date). "

Deemed disposal of unit trusts etc

14 (1) In section 46 of the [1990 c. 29.] Finance Act 1990 (annual deemed disposal of holdings of unit trusts etc) in subsection (2) (subsection (1) to apply only to relevant chargeable fraction except in the case of assets linked solely to basic life assurance business) for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

(2) In subsection (3)(a) of that section (denominator of the relevant chargeable fraction) for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business".

Exemptions and exclusions from charges by virtue of section 46

15 (1) Schedule 8 to that Act (which provides certain exemptions and exclusions from charges by virtue of section 46 of that Act) shall have effect, and be deemed always to have had effect, with the following amendments.

(2) In paragraph 1, at the beginning there shall be inserted "(1)" and in paragraph (c) (definition of "relevant linked liabilities")--

(a) for the words "basic life assurance business" there shall be substituted the words "basic life assurance and general annuity business"; and

(b) after the words "pre-commencement policies" there shall be inserted the words "or contracts".

(3) For paragraph (d) of that paragraph (definition of "pre-commencement policies") there shall be substituted--

" (d) "pre-commencement policies or contracts" means--

(i) policies issued in respect of insurances made before 1st April 1990, and

(ii) annuity contracts made before that date,

but excluding policies or annuity contracts varied on or after that date so as to increase the benefits secured or to extend the term of the insurance or annuity (any exercise of rights conferred by a policy or annuity contract being regarded for this purpose as a variation);

(e) "basic life assurance and general annuity business" means life assurance business, other than pension business and overseas life assurance business. "

(4) At the end of that paragraph there shall be added--

" (2) The assets which are to be regarded for the purposes of this Schedule as linked solely to an insurance company's basic life assurance and general annuity business at any time before the first accounting period of the company which begins on or after 1st January 1992 are all the assets which at that time--

(a) are or were linked solely to the company's basic life assurance business or general annuity business, or

(b) although not falling within paragraph (a) above, would be, or would have been, regarded as linked solely to the company's basic life assurance business, were its general annuity business treated as forming, or having at all times formed, part of its basic life assurance business and as not being a separate category of business. "

(5) In paragraph 3 (roll-over relief on replacement of assets) in sub-paragraph (1)(c), for the words "basic life assurance business" in both places where they occur there shall be substituted the words "basic life assurance and general annuity business".

Transitional relief for old general annuity contracts

16 (1) In computing for the purposes of corporation tax the profits of an insurance company for any accounting period beginning on or after 1st January 1992, there shall be treated as a charge on income an amount equal to the lesser of--

(a) A, and

(b) A − (R1 − R2 + C − SV − DB),

and if the result of the formula in paragraph (b) above is a negative amount, it shall be taken to be nil.

(2) For the purposes of sub-paragraph (1) above--

• A is the gross amount of any annuities paid in the accounting period so far as referable to old annuity contracts;

• R1 is the amount of the company's opening liabilities for the accounting period in respect of old annuity contracts;

• R2 is the amount of the company's closing liabilities for the accounting period in respect of old annuity contracts;

• C is the amount of any consideration received in the accounting period in respect of old annuity contracts;

• SV is the amount of any sums paid in the accounting period by reason of the surrender of rights conferred by old annuity contracts;

• DB is the amount of any death benefits paid in the accounting period in respect of old annuity contracts.

(3) An annuity paid in an accounting period beginning on or after 1st January 1992, so far as referable to an old annuity contract, shall not to any extent be regarded as constituting a charge on income except as provided by sub-paragraph (1) above.

(4) Neither sub-paragraph (1) nor sub-paragraph (3) above shall apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business.

(5) If, in the case of an annuity under a group annuity contract made by an insurance company in an accounting period beginning before 1st January 1992--

(a) the company's liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(b) the company's liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the group annuity contract, so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

(6) If, in the case of an annuity which is subject to a reinsurance treaty made by the reinsurer in an accounting period beginning before 1st January 1992--

(a) the reinsurer's liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(b) the reinsurer's liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the reinsurance treaty, as respects the reinsurer and so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

(7) In this paragraph--

• "general annuity contract" means an annuity contract so far as referable to general annuity business;

• "group annuity contract" means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

• "old annuity contract" means a general annuity contract made by an insurance company in an accounting period beginning before 1st January 1992;

• "reinsurance treaty" means a contract under which one insurance company is obliged to cede, and another (in this paragraph referred to as a "reinsurer") to accept, the whole or part of a risk of a class or description to which the contract relates;

and, subject to that, expressions used in this paragraph and in Chapter I of Part XII of the Taxes Act 1988 have the same meaning in this paragraph as they have in that Chapter.

Transitional provisions for chargeable gains and unrelieved general annuity losses

17 (1) An insurance company's unrelieved general annuity losses shall be relieved under this paragraph by setting them against the relevant part of any chargeable gains arising to the company in accounting periods beginning on or after 1st January 1992.

(2) Any relief under this paragraph shall be given as far as possible for the first accounting period of the company beginning on or after 1st January 1992 and, so far as it cannot be so given, for the next accounting period, and so on.

(3) For the purposes of this paragraph an insurance company's "unrelieved general annuity losses" are so much of any losses--

(a) arising from the company's general annuity business in an accounting period or year of assessment beginning before 1st January 1992, and

(b) computed as mentioned in paragraph (c) of subsection (3) of section 436 of the Taxes Act 1988 as it applied in relation to such accounting periods,

as, by virtue only of an insufficiency of profits, cannot be relieved under that subsection (or any previous enactment which it re-enacts) by setting them off against the profits of such an accounting period or year of assessment.

(4) For the purposes of this paragraph the relevant part of the chargeable gains arising to a company in an accounting period shall be determined by the application of the following formula--

---

where--

• X is so much of the chargeable gains arising to the company in the accounting period as are referable to its basic life assurance and general annuity business;

• Y is the mean of the company's opening and closing liabilities for the accounting period in respect of old annuity contracts; and

• Z is the mean of the company's opening and closing liabilities for the accounting period in respect of its basic life assurance and general annuity business.

(5) Sub-paragraphs (5) to (7) of paragraph 16 above shall apply for the purposes of this paragraph as they apply for the purposes of that paragraph.

Application of this Schedule

18 Paragraphs 1, 3, 4, 5, 6(1) and (2), 7, 8, 10 to 14, 16 and 17 above have effect with respect only to accounting periods beginning on or after 1st January 1992.

Section 49.

SCHEDULE 8 Pension business: payments on account of tax credits and deducted tax

After Schedule 19AA to the Taxes Act 1988 there shall be inserted--

Section 438A.

" Schedule 19AB Pension business: payments on account of tax credits and deducted tax

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 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, the reference in subsection (5) to "the relevant fraction" shall be taken as a reference to a fraction determined in accordance with subsections (6) to (9)--

(a) for the latest preceding accounting period of the company for which an inspector is satisfied that the company has supplied him with such information as would enable the relevant fraction for that accounting period to be estimated with reasonable accuracy, and

(b) by reference to that information,

and, subject to sub-paragraph (4)(b) below, any reference in this paragraph to "the provisional fraction" is a reference to the fraction so determined.

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

(a) "information" means any information, accounts, statements or reports delivered under section 11 of the Management Act; and

(b) unless and until an inspector is satisfied as mentioned in paragraph (a) of that sub-paragraph, the provisional fraction shall be taken to be nil.

(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 solely to pension business, the whole; and

(ii) in any other case, the provisional fraction.

(6) An inspector shall not give effect to any claim under this paragraph unless and until he is satisfied that the claimant has supplied to him in connection with the claim such information as will enable the inspector to determine that the amount claimed has been computed in accordance with the provisions of this paragraph.

(7) A provisional repayment for a provisional repayment period shall be regarded as a payment on account of the amount (if any) which, disregarding any pension business repayments, the company would be entitled to be paid or repaid in respect of its pension business by the Board 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, and

(b) tax credits in respect of distributions received by the company in that accounting period and referable to its pension business,

when the assessment to corporation tax for that accounting period is finally determined or when effect is given to a claim such as is mentioned in section 7(6) or in section 42(5A) of the Management Act made in respect of that accounting period.

(8) Where a company makes an election under section 438(6) as respects all or any part of its franked investment income arising in an accounting period, that franked investment income or, as the case may be, that part of it, and the tax credits in respect thereof, shall be left out of account in making with respect to that accounting period any determination for the purposes of this paragraph or of paragraph 2 or 3 below of the amount referred to in sub-paragraph (7) above.

(9) Where an overseas life insurance company makes a claim under subsection (2) of section 448 in respect of any income represented by a distribution, that income, and the tax credit to which the company is deemed to be entitled in respect thereof by subsection (1) of that section for the purposes there mentioned, shall be left out of account in making any determination for the purposes of this paragraph or of paragraph 2 or 3 below of the amount referred to in sub-paragraph (7) above.

(10) In this paragraph "pension business repayments" means--

(a) provisional repayments; and

(b) repayments of income tax, and payments of tax credits, on any claim such as is mentioned in section 7(6) or in section 42(5A) of the Management Act.

Changes in the provisional fraction

2 (1) This paragraph applies in any case where, after a claim has been made for a provisional repayment in respect of a provisional repayment period falling within an accounting period, the provisional fraction falling to be applied in the case of that accounting period is varied as a result of a determination such as is mentioned in paragraph 1(3) above being made in consequence of the delivery of a return under section 11 of the Management Act.

(2) Where this paragraph applies, the amount of any provisional repayment to which the company is entitled--

(a) for the first provisional repayment period falling within that accounting period for which a claim is made by reference to the later (or, if there has been more than one such determination, the latest) provisional fraction, or

(b) for any subsequent provisional repayment period in that accounting period for which a claim is made,

shall be an amount determined in accordance with sub-paragraph (3) below or such lesser amount as may be specified in the claim.

(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--

(a) the provisional repayment period to which the claim relates, and

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