Commentary

D7.5160 Taxing the transferor — General

Corporate tax
Corporate tax | Commentary

D7.5160 Taxing the transferor — General

Corporate tax | Commentary

D7.5160 Taxing the transferor — General

The rules in this division apply for accounting periods beginning before 1 January 2013. For accounting periods beginning on or after 1 January 2013 see Division D7.4.

As noted in D7.5157 above, the general presumption is that transfers of assets from the long-term insurance fund of the transferor to the long-term insurance fund of the transferee(s) should be tax neutral. The legislation needs to ensure however that the transferor cannot escape tax on assets that do not end up in the long-term insurance fund of the transferee(s) either because they are transferred to a company that does not write long-term business or because the transferor retains them and itself ceases to write long-term business.

This legislative aim is achieved by defining three conditions (A, AA and B) which, if met (whether individually or in any combination) as a result of an insurance business transfer scheme, give rise to additional taxable income being brought into the computation of the transferor's profits on a life assurance trade profits basis1.

Condition A is met whenever assets of the transferor which are transferred as part of the transfer scheme are not immediately after the transfer:

  1.  

    (a)     either in the long-term insurance fund of an insurance company or insurance special purpose vehicle; or

  2.  

    (b)     if the transferee is not an insurance company, insurance special purpose vehicle or a friendly society, assets of a fund which would be a long-term fund if the transferee were an insurance company2.

Assets meeting either condition

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