Commentary

D7.5176 Accounting periods and periodical returns

Corporate tax
Corporate tax | Commentary

D7.5176 Accounting periods and periodical returns

Corporate tax | Commentary

D7.5176 Accounting periods and periodical returns

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.

An accounting period of a transferor company is treated as having come to an end on the day of the transfer, with all the normal consequences, whenever there is a transfer of the whole or part of its long-term business under an insurance business transfer scheme1.

A transfer scheme often occurs in a way that does not lend itself to simple application of the normal rules for taxing life insurance business. For example the transferor may transfer only part of its business or may not prepare a regulatory return to the date on which its accounting period is deemed to end. HMRC believed that there was scope for companies to extract accumulated profits free of tax for the benefit of shareholders by manipulating the mismatch between the tax and regulatory rules as they related to transfers of insurance business. To counter this, two complementary measures were introduced.

First, whenever a company transfers its business the legislation prescribes a method for determining what proportion of its liabilities, assets, free asset amounts and shareholders' excess assets move to the transferee2. If the scheme takes effect otherwise than on the last day of a period of account, references in the legislation to the opening liabilities, values (or net values) of assets, free asset amounts and shareholders' excess assets of the transferor (or

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