Life Tax Destination Table

Something I have been working on recently is a destination table for FA 89 / ICTA 88 to the new life tax legislation in FA 2012.  I've done it as an excel doc so I can search for section numbers and key words and I'm hoping its going to cut down on the frustration when I know there's a section - I just can't find it.

The link below is where I have saved the document on google docs. 

https://docs.google.com/file/d/0B2l-XIOPFJ-2UmFpU2lhZlZmVDQ/edit?usp=sharing

I think you should be able to see the document by highlighting the link, right clicking and opening once opened it should be possible to download it as an excel file but if there any problems please email me at

richard.bentley@bentleyforbesconsulting.co.uk and I'll send you a copy.

If anybody knows a good way to attach an excel file to a blog  - the way you would with an outlook message please let me know.

Although producing the table was a bit of a slog it's good to see how much of the most complicated legislation, FAFTs, contingent loans etc is done away with now that we have taxable profit based on  accounting profit.

Double Taxation Agreements

Double taxation conventions between the UK and Spain and the UK and Norway were signed on the 14^th March 2013.  The treaties can be viewed here

http://www.hmrc.gov.uk/taxtreaties/signed.htm 

Both treaties provide for a 0% rate of withholding on dividends paid to pension schemes.  This raises the issue of whether a UK insurance company with pension business will be able to access this 0% rate?

In my opinion for linked pension business the answer should be yes, 0% withholding should be available for UK insurance companies both for Spanish and for Norwegian dividends.

Starting with Norway the definition section of the treaty includes the following wording

“The term “pension scheme” means any scheme or other entity established in a

Contracting State which operates to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements; and in the case of the United Kingdom, is generally exempt from income taxation and is a pension scheme (other than a social security scheme) registered under Part 4 of the Finance Act 2004, including pension funds or pension schemes arranged through insurance companies and unit trusts where the unit holders are exclusively pension schemes.”

A UK insurance company with linked pension retail investors will be administering a registered pension scheme and therefore should be able to access the 0% withholding rate for that linked business.  In the case of institutional pension business the insurance company is unlikely to be a registered pension scheme but its policyholders will be (probably) registered pension schemes.  Insurance companies with linked institutional pension business should be able to access the 0% rate for that business on the basis that it is in a pension fund arranged through an insurance company where the unit holders are exclusively pension schemes.

The analysis for Spain is very similar although the definition of pension scheme is more restrictive

“In the United Kingdom: any plan, scheme, fund, trust or other arrangement established in the United Kingdom which is generally exempt from income taxation; and operates principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements.”

Then the protocol to the treaty provides some clarification on the position of UK pension companies with identical wording to the definition section of the Norwegian treaty.

“in the case of the United Kingdom, pension schemes (other than a social security

scheme) registered under Part 4 of the Finance Act 2004, including pension funds or

pension schemes arranged through insurance companies and unit trusts where the unit holders are exclusively pension schemes.”

Although both treaties are positive developments in moving towards withholding tax free pension investment in the EU it does need to borne in mind that local revenue authorities are sometimes reluctant to allow gross payment even when it is clearly provided for in a double taxation agreement.  (Switzerland is a good example of this that I’m hoping to come back to.)  Accordingly I would suggest insurance companies do everything possible to ensure they are in a good position if a foreign jurisdiction does question their right to a preferential withholding rate available for pension schemes.  Examples would include identifying any non - UK pension schemes in an institutional pension company and the impact they might have on treaty access, whether there is any shareholder seed capital in policyholder funds and any implications from limitation of benefits clauses in double taxation treaties.

Additionally neither treaty comes in to force until the necessary legislative procedures have been completed and the necessary legislative procedures can take a long time.  In the case of the UK and Belgium a protocol was signed on the 24th June 2009.  Clearly the necessary legislative procedures weren’t rushed as the protocol became operative on 1 January 2013.  

Budget 2013

The budget day letter from HMRC for the financial services sector is here.

https://docs.google.com/file/d/0B2l-XIOPFJ-2cFJwN1d0T1lORUE/edit?usp=sharing

Trying to get a top down feel for what was going on I found this table quite useful.

http://www.hm-treasury.gov.uk/budget2013_policy_decisions.htm

As it shows there are sixty five separate measures but few if any with large impacts on revenues or spending.  It’s also interesting to note that from 2014 - 2015 the government is hoping to raise a billion pounds a year from anti avoidance measures and the pressure will be on HMRC to deliver the expected savings.

For life assurance companies the most significant move is the introduction of a twenty per cent tax rate from 1 April 2015 is welcome.  For companies with accounting periods ending on 31 December corporation tax rates will be as follows for 2013  - 2016.

 https://docs.google.com/file/d/0B2l-XIOPFJ-2c2tfR0tsVk1ibGM/edit?usp=sharing

 As per the HMRC press release legislation will be introduced in Finance Bill 2013 both for the 21% rate applying from 1 April 2014 and the 20% rate applying from 1 April 2015.  Accordingly when the Finance Bill receives its 3rd reading in the House of Commons the rate changes will have been substantively enacted and applicable for deferred tax calculations for periods ending after that date.

In 2012 the Finance Bill received its 3rd reading in the House of Commons on the 3rd July so it is not clear whether the reduced rates will be used in deferred tax calculations for the six months ended 30 June 2013.

For accounting periods ended 31 December 2016 onwards the rate of tax on both the shareholder and policyholder share of I-E profits will be 20%, assuming of course that income tax rates remain unchanged.

The LifeTax Blog

Welcome to the LifeTax Blog.  The blog covers tax issues that are of relevance to life assurance companies.  The aim of the blog is to provide a one stop shop for technical bits and pieces that are spread across primary and secondary legislation, the LAM and HMRC’s website.  Additionally there will be some coverage of other taxation issues that are relevant to life assurance companies, particularly those that relate to assets that insurance companies will invest in.

What I’m hoping to get out of the blog initially is a raised profile for Bentley Forbes Consulting and a handy data base of work that might be applicable to more than one client.  My intention is to add two items a week to the blog for a year – then I’ll take a look at the level of traffic and see if it’s worthwhile carrying on.  Long term I’d like to raise some revenue from the blog but for year one at least it will be free to access and free of advertising.

I’ll make every effort to ensure that anything going on the blog is correct but the items on the blog are not technical advice and neither Bentley Forbes Consulting nor I are responsible for any errors or omissions in the free of charge material.

I’m very keen for other people to add items to the blog; if you have anything that you would like to go on LifeTax Blog then please email me at richard.bentley@bentleyforbesconsulting.co.uk.  As you’ll appreciate I can’t pay anything for items initially but I’ll ensure that if are any revenues at any time that these are divided amongst all contributors on a fair basis.

Comments and feedback on the blog are priceless.

Richard