A non-resident general insurer is subject to certain special rules also applying to other non- resident financial concerns, including overseas life insurance companies and banks.
As a general rule where a non-resident company holds FOTRA (Free
of Tax to Residents Abroad) securities, the interest and any
profits or loss on sale or redemption are exempt from tax. This
rule is limited, however, where the interest is part of the UK
trading or business receipts of the company - the exemption does
not apply to interest identified as non-exempt in the security
prospectus under Treasury powers in F2A31/S22, modified by
FA40/S60.
FA96/S154 made explicit the effect of the prospectuses for
tax purposes. Profits or losses remain exempt except in relation to
issues of FOTRA securities after July 1996 whose prospectus has
been recast to permit taxation of any profit (and relief for any
loss) on the sale of such securities. The interest and
profits/losses will be included in the credits and debits given by
Chapter 2 Part 4 FA 1996 for accounting periods ending after 31
March 1996 (see
GIM5090).
There remains one security, 3½% War Loan 1952 Or After,
which was issued before the modifications permitted by FA 1940, and
where the interest as well as any profit or loss on sale remain
exempt. Where a non-resident general insurer holds such stock,
FA96/S154 (6) provides that no expenses incurred in connection with
the holding of the security, or any transaction relating to it,
such as a sale or purchase, are brought into account for
corporation tax purposes, and nor is any loan relationships debit
(within Chapter 2 Part 4 FA96) brought into account in respect of
it. This rule replaced, for accounting periods ending after 31
March 1996, ICTA88/S474 (2) which disallowed expenses incurred in
connection with the holding of the security, or any transaction
relating to it.
War Loan may also give rise to an adjustment under
ICTA88/S475. Relief as a debit under Chapter 2 Part 4 FA 1996 for
interest on borrowed money may be restricted in accordance with a
formula set out in ICTA88/S475 (3) to (5).
