Corporation Tax Act 2009 section 569

Restriction on debits on old contracts: non-fair value accounting cases

Section 569 restricts the tax debits that a company can recognise on an old investment life insurance contract where the company does not use fair value accounting and the contract's carrying value exceeded its fair value at the start of the first relevant accounting period.

• This section applies where the company accounts for the old contract on a basis other than fair value, and the carrying value of the contract immediately before the first accounting period exceeded its fair value at that time.
• Tax debits arising under the loan relationship rules (section 562) are restricted until they cumulatively exceed the difference between the carrying value and the fair value at the start of the first accounting period.
• The restriction prevents tax relief for declines in value that occurred before the contract first came within the loan relationship regime (i.e. before accounting periods beginning on or after 1 April 2008).
• Once cumulative debits exceed the initial excess of carrying value over fair value, further debits are brought into account for tax purposes in the normal way.