LAM13070 | Transfers of long-term business: Transfers between non-group companies: FA12/S130

In the case of transfers between non-group companies, or with-profit fund transfers, the accounting profit or loss arising to the parties is calculated according to the normal rules, by following the statutory accounts. The assumption is that such transfers will occur at fair value. There is an exception to this general approach in FA12/S130.

Where, as a consequence of a Part VII scheme, a transferee creates an asset in respect of the present value of in-force business ‘PVIF’ then debits and credits arising in respect of that asset are taken into account in calculating the company’s trade profits. In effect the company will obtain relief for the amortisation of any PVIF acquired as a result of a Part VII transfer at arm’s length. However no account will be taken of debits and credits arising from internally generated PVIF or PVIF acquired before 1 January 2013.

FA12/S130 can only apply where the asset is one to which the intangible asset regime in CTA09/Part 8 does not apply. However PVIF will not qualify for intangibles relief as CTA09/S806(3)(ca) confirms that Part 8 does not apply to assets so far as they are derived from, or are referable to, contracts or policies of insurance.