Commentary

D7.542 Annual deemed disposals of unit trusts and offshore funds

Corporate tax
Corporate tax | Commentary

D7.542 Annual deemed disposals of unit trusts and offshore funds

Corporate tax | Commentary

D7.542 Annual deemed disposals of unit trusts and offshore funds

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.

If an insurance company's long-term insurance fund includes rights or units in an authorised unit trust1 (including an OEIC2), interests in an offshore fund within the meaning of FA 2008, s 40A3 or shares in a company to which the Real Estate Investment Trust rules in FA 2006, Pt 4 apply (collectively 'section 212 assets') 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 time4.

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 BLAGAB5 including all section 212 assets which are solely linked to such business. The legislation does not apply to assets which are solely linked to gross roll up business (pension business, life reinsurance business or to the designated assets of the overseas life assurance fund for accounting periods beginning before 1 January 2007)6. Nor does it apply to company holdings in unit trusts which are treated as creditor relationships

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