D7.444 Annual deemed disposals of unit trusts and offshore funds
If an insurance company holds rights or units in an authorised unit trust, interests in an offshore fund, units in an authorised contractual scheme which is a co-ownership scheme or shares in a company to which the Real Estate Investment Trust rules in CTA 2010, Pt 12 apply (collectively 'section 212 assets') for the purposes of its long-term business at the end of an accounting period, then for the purposes of corporation tax on capital gains, the company is deemed to have disposed of and immediately re-acquired those assets at their market value at that time1. These rules do not apply to such assets if they are subject to tax as loan relationships under CTA 2009, Pt 6 Ch 3.
The aim of the legislation is to tax or allow, as capital gains or capital losses, the increases and decreases in the value of the company's section 212 assets. Since the legislation applies only for the purposes of corporation tax on capital gains, the provisions apply only to BLAGAB including all section 212 assets which are matched to the liabilities of such business2.
For assets which are not excluded, the company's commercial allocation method is applied in order to determine the amount of the deemed gains to be charged in respect of the company's BLAGAB. The deemed disposal rules are first applied to all section 212 assets other than those already identified as being wholly within or wholly excluded from the charge