Schedule 1: Consequential Amendments Part 1: Income and Corporation Taxes Act 1988 Paragraphs 209 to 228: sections 539 to 554 of ICTA
3450.The amendments for these sections do three things. First, they ensure that any liability arising under Chapter 2 of Part 13 of ICTA is chargeable to corporation tax only (see, in particular, the amendments of sections 539 and 547 of ICTA). Second, sections 552 to 552B of ICTA (information: duty of insurers) are amended to reflect the fact that the same event will be a chargeable event under both Chapter 2 of Part 13 of ICTA and Chapter 9 of Part 4 of this Act, and the gain produced by the event is treated as arising under both Chapters. (But the gain, or a part of the gain, is only charged on any taxpayer under or by virtue of one of those Chapters according to that taxpayer’s liability for tax.) Third, the redundant section 554 of ICTA is repealed.
3451.The amendment of the definition of a life annuity in section 539 of ICTA recognises that the determination of what is, or is not, a purchased life annuity depends on whether the annuitant is within the corporation tax or income tax charge. The annuitant may be subject to one tax charge and the person who is liable for a gain arising on a chargeable event in respect of the annuity contract may be subject to the other. Both provisions for determining an annuity have to be mentioned here to avoid restricting the scope of the charge under section 547(1)(b) of ICTA. The amendment of section 543 of ICTA is made for the same reasons as regards the calculation of the gain.
3452.A new section, section 539ZA (policies and contracts in which persons other than companies are interested), is inserted in ICTA. This section deals with the circumstance where the application of Chapter 2 of Part 13 of ICTA (and related provisions) – that is, whether there is a chargeable event and what the amount of the gain is – has to take into account anything that occurred (or may yet occur) in respect of the policy or contract at a time when any liability may, wholly or in part, arise or have arisen under Chapter 9 of Part 4 of this Act. It mirrors section 544 of this Act.
3453.The section makes clear that Chapter 2 of Part 13 of ICTA and related provisions, “the corporation tax provisions”, apply in respect of any other circumstance regardless of any application of Chapter 9 of Part 4 of this Act at that time. For example, if there has been a chargeable event under section 540(1)(a)(v) of ICTA (so that there was also a chargeable event under section 509) at a time when liability on the gain arose wholly or in part under Chapter 9 of Part 4 of this Act, that event is still to be taken into account in the later application of the corporation tax provisions to that policy or contract.
3454.This new section therefore recognises that both the corporation tax provisions and the provisions in Chapter 9 of Part 4 of this Act apply to a policy or contract. There is a chargeable event under each, but the two sets of provisions apply separately as regards liability. (There are a number of reliefs and other rules that affect income tax liability only.)
3455.As a consequence of the repeal of section 547(1)(a) of ICTA (rewritten in section 465) and section 547(1)(e) of ICTA (rewritten in section 468), the subsections in section 547 of ICTA interpreting the meaning of trusts created by an individual and providing the definition of a “foreign institution” have been relocated to section 547A of ICTA.
3456.The amendments of sections 552 to 552B of ICTA provide for a single certificate to be given to each relevant policy holder (and, where required, to the Inland Revenue) in respect of an event and the gain which it produces, notwithstanding that the event is a chargeable event under both Chapter 2 of Part 13 of ICTA and Chapter 9 of Part 4 of this Act, and the gain is treated as arising under both Chapters. The amendments also reflect the different language in the two Chapters and the fact that certain provisions of Chapter 9 of Part 4 of this Act have no equivalent in the amended Chapter 2 of Part 13 of ICTA.
3457.Section 553C of ICTA is amended so that it is a corporation tax provision, as the income tax application of the section and the related parts of the Personal Portfolio Bonds (Tax) Regulations 1999 (SI 1999/1029, as amended by SI 2001/2724 and SI 2002/455) are rewritten in Chapter 9 of Part 4 of this Act.
3458.Section 553C(9A) to (9E) of ICTA enables regulations under that section to provide for a chargeable event gain to arise in relation to a policy or contract which is a personal portfolio bond despite the fact that, at the time, rights in the policy or contract are so held that liability on a gain would be charged under, or by virtue of, Chapter 9 of Part 4 of this Act. The power is limited so that the regulations may make provisions only for the purposes of enabling the gain to be taken into account on the later application of Chapter 2 of Part 13 of ICTA to the policy or contract.
3459.Section 554 of ICTA is omitted. It is spent.