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(a) after the definition of "free assets amount"[5] insert—

" "General Prudential Sourcebook" means the General Prudential Sourcebook made by the Financial Services Authority under the Financial Services and Markets Act 2000[6];";

(b) in the definition of "insurance company" at the end add "but does not include an insurance special purpose vehicle;";

(c) after the definition of "insurance company" insert—

" "the Insurance Prudential Sourcebook" means the Prudential Sourcebook for Insurers made by the Financial Services Authority under the Financial Services and Markets Act 2000;
"insurance special purpose vehicle" means any undertaking which assumes risks from insurance or reinsurance undertakings and which fully funds its exposure to such risks through the proceeds of a debt issue or some other financing mechanism where the repayment rights of the providers of such debt or other financing mechanism are subordinated to the reinsurance obligations of the undertaking;";

(d) omit the definition of "the Integrated Prudential Sourcebook";

(e) in the definition of "liabilities"—


(i) in paragraph (a) for "chapter 7.3 of the Integrated Prudential Sourcebook" substitute "section 1.2 of the Insurance Prudential Sourcebook";

(ii) in paragraph (b) for "chapter 1.3 of that Sourcebook" substitute "section 1.3 of the General Prudential Sourcebook"; and



(f) in the definition of "value" for "chapter 1.3," onwards substitute—

" section 1.3 of the General Prudential Sourcebook, as read with section 2.1 of the Insurance Prudential Sourcebook;".

    (3) In subsection (2ZC)(d)[7]—

(a) for "shareholder's" substitute "shareholders'"; and

(b) for "transferor" substitute "transferee".

     5. In section 432A(8B) (apportionment of income and gains)[8] in the definition of "inherited estate" for "Integrated Prudential Sourcebook" substitute "Insurance Prudential Sourcebook".

     6. In section 444AC (transfer of business: excess of assets or liabilities)[9]—

(a) in subsections (2), (2A) and (5) for "the element of the transferee's line 31 figure representing the transferor's long-term insurance fund" substitute "the transferee's line 31 amount in relation to the transfer"; and

(b) omit subsection (3).

     7. In section 444AD(4)(b) (transfer of business: modification of section 83(2B))[10] for "the element of the transferee's line 31 figure" substitute "the transferee's line 31 amount in relation to the transfer".

     8. In section 755A (treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business)[11]—

(a) after subsection (4) insert—

    " (4A) In any case where—


(a) paragraph 4 of Schedule 26 to this Act applies to a dividend received by the UK company, and

(b) but for this subsection, subsection (4) of section 804B of this Act would apply to that dividend,



the amount of credit for foreign tax in respect of that dividend shall be treated, for the purposes of that section, as wholly attributable to basic life assurance and general annuity business.";

(b) in subsection (8) omit "or 2"; and

(c) omit subsection (9).

Amendment of the Finance Act 1989
     9. In the Finance Act 1989[12]—

(a) in section 83YA(11) (changes in value of assets brought into account: non-profit companies)[13] in the definition of "with-profits fund", and in section 83A(6)[14], for "Integrated Prudential Sourcebook" substitute "Insurance Prudential Sourcebook"; and

(b) in section 88(3) for "section 76(5)" substitute "section 76(7)".

Amendment of the Finance Act 1998
     10. In section 42(5) of the Finance Act 1998[15] (which concerns the computation of profits of insurance companies chargeable to Case I or II of Schedule D) for "companies carrying on life insurance" substitute—

" insurance companies (within the meaning of Chapter 1 of Part 12 of the Taxes Act 1988) in relation to their life assurance business".

Amendment of the Finance Act 2002
     11. In Schedule 26 to the Finance Act 2002 (loan relationships and derivative contracts) [16]—

(a) in paragraph 4(2A)(b)[17] for "Rule 4.3.5 of the Integrated Prudential Sourcebook" substitute “Rule 3.2.5 of the Insurance Prudential Sourcebook;

(b) in paragraph 12(1)[18]—


(i) after the entry relating to a hedging relationship between a relevant contract and an asset or liability insert—


     " Insurance Prudential Sourcebook (see sub-paragraph (15));" and


(ii) omit the entry relating to the Integrated Prudential Sourcebook;



(c) for paragraph 12(15) substitute—

    " (15) "Insurance Prudential Sourcebook" means the Prudential Sourcebook for Insurers made by the Financial Services Authority under the Financial Services and Markets Act 2000.".

Dave Watts

Frank Roy
Two of the Lords Commissioners of Her Majesty's Treasury

7th December 2006

[2] 2004 c. 12.back

[3] Paragraph (c) of subsection (8) was inserted by section 42 of, and paragraphs 1(1) and (2) of Schedule 9 to, the Finance (No.2) Act 2005 (c. 22).back

[4] The definitions of "liabilities" and "value" were inserted by section 42 of, and paragraphs 2(1), (3) and (5) of Schedule 9 to, the Finance (No.2) Act 2005.back

[5] This definition was inserted by article 3(2)(a) of S.I. 2005/3465 and re-enacted by paragraph 1 of Schedule 11 to the Finance Act 2006 (c. 25).back

[6] 2000 c. 8.back

[7] Subsection (2ZC) was inserted by section 170 and paragraph 22 of Schedule 33 to the Finance Act 2003 (c. 14), relevantly amended (for periods of account beginning on or after 1^st January 2005 and ending before 1^st October 2006) by .article 3(4) of S.I. 2005/3465: the amendment made by article 3(4) was re-enacted (with permanent effect) by paragraph 1(1) of Schedule 11 to the Finance Act 2006.back

[8] Subsection (8B) was substituted (with new subsections (8) and (8A)) for the previous subsection (8) by article 5(5) (for periods of account beginning on or after 1^st January 2005 and ending before 1^st October 2006) by .article 3(4) of S.I. 2005/3465: the amendment made by article 5(5) was re-enacted (with permanent effect) by paragraph 1(1) of Schedule 11 to the Finance Act 2006.back

[9] Section 444AC was inserted by paragraph 20 of Schedule 33 to the Finance Act 2003, and relevantly amended by article 5(1) of S.I. 2004/3266, paragraph 7 of Schedule 9 to the Finance Act 2005 (c. 7) and paragraph 3 of Schedule 11 to the Finance Act 2006.back

[10] Section 444AD was inserted by paragraph 20 of Schedule 33 to the Finance Act 2003 and relevantly amended by article 6 of S.I. 2004/3266.back

[11] Section 755A was inserted by section 113 and paragraph 13 of Schedule 17 to the Finance Act 1998 (c. 36).back

[12] 1989 c. 26.back

[13] This section was inserted by section 86 and paragraph 7(1) of Schedule 11 to the Finance Act 2006.back

[14] This subsection was inserted by section 42 and paragraph 13(1) and (5) of Schedule 9 to the Finance (No. 2) Act 2005.back

[15] 1998 c. 36.back

[16] 2002 c. 23.back

[17] Paragraph 4(2A) was lastly substituted by article 6(3) of S.I. 2006/3269.back

[18] Paragraph 12(1) is substituted by article 9(3) of S.I. 2006/3269.back

 © Crown copyright 2006