
1 

(1) These Regulations may be cited as the Friendly Societies (Provisional Repayments for Exempt Business) Regulations 1999 and shall come into force on 30th March 1999.
(2) These Regulations shall have effect in relation to accounting periods of friendly societies ending on or after 1st July 1999.
2 
In these Regulations unless the context otherwise requires–
 “exempt business” means any business of a friendly society the profits arising from which are exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1) of the Taxes Act, not being a business carried on by a friendly society all of whose profits are so exempt;
 “Schedule 3” means Schedule 3 to the Finance (No. 2) Act 1997;
 “Schedule 19AB” means Schedule 19AB to the Taxes Act;
 “the Taxes Act” means the Income and Corporation Taxes Act 1988.
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(1) Schedule 19AB shall have effect, in accordance with paragraphs (2) and (3) below, in relation to exempt business of a friendly society as it has effect in relation to the pension business of an insurance company.
(2) Schedule 19AB, as it is deemed to have effect, by virtue of paragraph 12(1) of Schedule 3 for the purposes of section 121 of the Finance Act 1993, without the amendments made by Schedule 3, shall have effect as mentioned in paragraph (1) above with the modifications and exceptions specified in regulations 4, 5 and 8 to 12.
(3) Schedule 19AB, as it has effect, by virtue of paragraph 12(2) of Schedule 3 for the purposes of section 121 of the Finance Act 1993, with the amendments made by Schedule 3, that is to say, in relation to distributions made to friendly societies on or after 6th April 2004, shall have effect as mentioned in paragraph (1) above with the modifications and exceptions specified in regulations 6 to 12.
4 

(1) Paragraph (2) substitutes the following sub-paragraph for sub-paragraph (1) of paragraph 1 of Schedule 19AB (as unamended by Schedule 3) in relation to exempt business of a friendly society.

(2) For that sub-paragraph (1) there shall be substituted–“
(1) A friendly society carrying on both tax exempt business and business other than tax exempt business shall for each provisional repayment period in an accounting period be entitled on a claim made in that behalf to a payment (in this Schedule referred to as a “provisional repayment”) of an amount equal to the aggregate of the following amounts–
(a) the appropriate portion of any income tax borne by deduction on any payment received by the society in that provisional repayment period that is referable to its tax exempt business, and either
(b) as respects any distribution made before 6th April 1999 that–
(i) is received by the society in that provisional repayment period, and
(ii) is referable to its tax exempt business,
the appropriate portion of any tax credit in respect of that distribution, or
(c) as respects any distribution made on or after 6th April 1999 and before 6th April 2004 that–
(i) is received by the society in that provisional repayment period,
(ii) is referable to its tax exempt business, and
(iii) is a distribution to which section 90(1)(b) of the Finance Act 1998 applies,
the appropriate portion of any tax credit in respect of that distribution.”.
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(1) Paragraph (2) substitutes the following sub-paragraphs for sub-paragraph (5) of paragraph 1 of Schedule 19AB in circumstances where regulation 4(2) applies.
(2) For sub-paragraph (5) there shall be substituted–“
(5) In sub-paragraph (1)(a) and (b) above “the appropriate portion” means–
(a) where the payment or distribution in question is income arising from–
(i) assets linked to tax exempt basic life assurance and general annuity business or to tax exempt class IV business, or
(ii) assets other than those of the society’s long term business fund,
the whole;
(b) where the payment or distribution in question is income arising from assets of the society’s overseas life assurance fund, the fraction whose numerator is the mean of the opening and closing liabilities to policyholders in respect of the society’s tax exempt overseas life assurance business and whose denominator is the mean of the opening and closing liabilities to policyholders in respect of the whole of the society’s overseas life assurance business;
(c) if and to the extent that the payment or distribution in question is income arising from assets of the society’s long term business fund but is not referable to a category of business by virtue of subsection (3) or (4) of section 432A, the provisional fraction;
(d) except as provided by paragraph (a), (b) or (c) above, none.
(5A) In sub-paragraph (1)(c) above “the appropriate portion” means–
(a) where the distribution in question is income arising from assets linked to tax exempt basic life assurance and general annuity business or to tax exempt class IV business the profits of which are exempt from tax by virtue of section 460(1) (“section 460(1) exempt business”), the whole;
(b) where the distribution in question is income arising from assets of the society’s overseas life assurance fund, the fraction whose numerator is the mean of the opening and closing liabilities to policyholders in respect of the society’s tax exempt overseas life assurance business and whose denominator is the opening and closing liabilities to policyholders in respect of the whole of the society’s overseas life assurance business;
(c) if and to the extent that the distribution in question is income arising from assets of the society’s long term business fund but, on the assumption that section 460(1) exempt business were a separate category of business within section 432A, is not referable to a category of business by virtue of subsection (3) or (4) of that section, the provisional fraction;
(d) except as provided by paragraph (a), (b) or (c) above, none.
(5B) In determining the provisional fraction for the purposes of sub-paragraph (5)(c) above, tax exempt basic life assurance and general annuity business and tax exempt class IV business shall be taken to be a single category of business for the purposes of section 432A(5).
(5C) In determining the provisional fraction for the purposes of sub-paragraph (5A)(c) above, tax exempt basic life assurance and general annuity business and section 460(1) exempt business shall be taken to be a single category for the purposes of section 432A(5).
(5D) In sub-paragraphs (5) and (5A) above references to assets of the society’s long term business fund–
(a) as respects societies to which regulation 13(1) of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 applies, shall be construed in accordance with the definition in subsection (11) of section 432A, read with subsections (12) to (14) of that section, as those subsections are added by regulation 13(5) of those Regulations;
(b) as respects other societies, shall be construed in accordance with the definitions of “long term business” (as substituted by regulation 6(4) of those Regulations) and “long term business fund” in section 431(2).
(5E) In sub-paragraphs (5) to (5C) above–
 “tax exempt basic life assurance and general annuity business” shall be construed in accordance with the definition inserted in section 431(2) by regulation 6(2) of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997;
 “tax exempt class IV business” shall be construed in accordance with the definition inserted in section 431(2) by regulation 7(2) of those Regulations;
 “tax exempt overseas life assurance business” shall be construed in accordance with section 441(4D).”
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(1) Paragraph (2) substitutes sub-paragraph (1) of paragraph 1 of Schedule 19AB (as amended by Schedule 3) in relation to exempt business of a friendly society.
(2) For that sub-paragraph (1) there shall be substituted–“
(1) A friendly society carrying on both tax exempt business and business other than tax exempt business shall for each provisional repayment period in an accounting period be entitled on a claim made in that behalf to a payment (in this Schedule referred to as a “provisional repayment”) of an amount equal to the appropriate portion of any income tax borne by deduction on any payment received by the society in that provisional repayment period that is referable to its tax exempt business.”
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(1) Paragraph (2) substitutes the following sub-paragraphs for sub-paragraph (5) of paragraph 1 of Schedule 19AB in circumstances where regulation 6(2) applies.
(2) For that sub-paragraph (5) there shall be substituted–“
(5) In sub-paragraph (1) above “the appropriate portion” means–
(a) where the payment in question is income arising from–
(i) assets linked to tax exempt basic life assurance and general annuity business or to tax exempt class IV business, or
(ii) assets other than those of the society’s long term business fund,
the whole;
(b) where the payment in question is income arising from assets of the society’s overseas life assurance fund, the fraction whose numerator is the mean of the opening and closing liabilities to policyholders in respect of the society’s tax exempt overseas life assurance business and whose denominator is the mean of the opening and closing liabilities to policyholders in respect of the whole of the society’s overseas life assurance business;
(c) if and to the extent that the payment in question is income arising from assets of the society’s long term business fund but is not referable to a category of business by virtue of subsection (3) or (4) of section 432A, the provisional fraction;
(d) except as provided by paragraph (a), (b) or (c) above, none.
(5A) In determining the provisional fraction for the purposes of sub-paragraph (5)(c) above, tax exempt basic life assurance and general annuity business and tax exempt class IV business shall be taken to be a single category for the purposes of section 432A(5).
(5B) In sub-paragraph (5) above references to assets of the society’s long term business fund–
(a) as respects societies to which regulation 13(1) of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 applies, shall be construed in accordance with the definition in subsection (11) of section 432A, read with subsections (12) to (14) of that section, as those subsections are added by regulation 13(5) of those Regulations;
(b) as respects other societies, shall be construed in accordance with the definitions of “long term business” (as substituted by regulation 6(4) of those Regulations) and “long term business fund” in section 431(2).
(5C) In sub-paragraphs (5) and (5A) above–
 “tax exempt basic life assurance and general annuity business” shall be construed in accordance with the definition inserted in section 431(2) by regulation 6(2) of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997;
 “tax exempt class IV business” shall be construed in accordance with the definition inserted in section 431(2) by regulation 7(2) of those Regulations;
 “tax exempt overseas life assurance business” shall be construed in accordance with section 441(4D).”
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(1) Paragraphs (2) to (7) specify modifications of sub-paragraphs (2) to (4), (7), (10) and (11) of paragraph 1 of Schedule 19AB in relation to exempt business of a friendly society.
(2) In sub-paragraph (2)–
(a) for the words “a company” there shall be substituted the words “a society”;
(b) for paragraph (a) there shall be substituted–“
(a) shall begin whenever–
(i) the society begins, at a time when it is carrying on only tax exempt business, to carry on business other than tax exempt business;
(ii) the society begins, at a time when it is carrying on only business other than tax exempt business, to carry on tax exempt business;
(iii) an accounting period of the society begins at a time when the society is carrying on both tax exempt business and business other than tax exempt business; or
(iv) a provisional repayment period of the society ends, at a time when the society is carrying on both tax exempt business and business other than tax exempt business; and”;
(c) in paragraph (b)(ii) for the word “company” there shall be substituted the word “society”.
(3) In sub-paragraph (3) for the word “company” (wherever occurring) there shall be substituted the word “society”.
(4) In sub-paragraph (4)(a)–
(a) for the word “company” there shall be substituted the word “society”;
(b) for the word “company's” there shall be substituted the word “society's”.
(5) In sub-paragraph (7)–
(a) for the words “pension business” (wherever occurring) there shall be substituted the words “tax exempt business”;
(b) for the word “company” (wherever occurring) there shall be substituted the word “society”.
(6) In sub-paragraph (10) for the word “company” (wherever occurring) there shall be substituted the word “society”.
(7) In sub-paragraph (11)(a) for the word “company” there shall be substituted the word “society”.
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(1) Paragraph (2) specifies modifications of paragraph 2 of Schedule 19AB in relation to exempt business of a friendly society.
(2) In sub-paragraphs (1) to (3) for the word “company” (wherever occurring) there shall be substituted the word “society”.
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(1) Paragraphs (2) to (7) specify modifications of paragraph 3 of Schedule 19AB in relation to exempt business of a friendly society.
(2) In sub-paragraph (1)–
(a) for the words “an insurance company's” there shall be substituted the words “a friendly society's”;
(b) for the words “the company” there shall be substituted the words “the society”;
(c) for the words “the insurance company” there shall be substituted the words “the friendly society”.
(3) In sub-paragraph (1A)–
(a) for the word “company” (wherever occurring) there shall be substituted the word “society”;
(b) for the words “pension business” (wherever occurring) there shall be substituted the words “tax exempt business”.
(4) In sub-paragraph (1B)–
(a) for the words “the company” there shall be substituted the words “the society”;
(b) for the words “the company's” there shall be substituted the words “the society's”.
(5) In sub-paragraph (1C) for the words “pension business” (wherever occurring) there shall be substituted the words “tax exempt business”.
(6) In sub-paragraph (5) for the word “company” there shall be substituted the word “society”.
(7) In sub-paragraph (8) for the word “company” (wherever occurring) there shall be substituted the word “society”.
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Paragraphs 4 and 5 of Schedule 19AB shall not apply to exempt business of a friendly society.
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(1) Paragraphs (2) and (3) specify modifications of paragraph 6 of Schedule 19AB in relation to exempt business of a friendly society.
(2) In sub-paragraph (1) after the definition of “provisional repayment period” there shall be added the following definition–“
 “tax exempt business” means any business of a friendly society the profits arising from which are exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1).”
(3) In sub-paragraph (4) for the words “an insurance company” there shall be substituted the words “a friendly society”.
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The Friendly Societies (Provisional Repayments for Exempt Business) Regulations 1993 and the Friendly Societies (Provisional Repayments for Exempt Business) (Amendment) Regulations 1997 are hereby revoked as respects accounting periods in relation to which, by virtue of regulation 1(2), these Regulations have effect.
David Jamieson
Jim Dowd
Two of the Lords Commissioners of Her Majesty’s Treasury
9th March 1999