The Financing-Arrangement-Funded Transfers to Shareholders Regulations 2008
Sections 83YC and 83YD of the Finance Act 1989 (inserted by paragraph 1(3) of Schedule 17 to the Finance Act 2008) provide a revised tax treatment for a type of financing arrangement where a loan or advance made to an insurance company or a financial reinsurance arrangement made by an insurance company has the initial effect of increasing the company’s surplus which is used to make a transfer to the shareholders of the company. This type of transfer is known as a “financing-arrangement-funded transfer to shareholders”, sometimes abbreviated to “FAFTS”. The new section 83YC imposes a charge to tax if an insurance company makes a FAFTS in relation to a non-profit fund; and the new section 83YD provides for corresponding adjustments to be made if a loan or advance is repaid or if liabilities reinsured under a financial reinsurance arrangement are recaptured.