The Supreme Court Televised Coverage

The appeal is from the Court of Session

The issues are obviously quite technical but centre around the following two questions:-

1. What is an “increase in value” of assets in an insurance company’s long term business fund for the purposes of section 83(2)(b) Finance Act 1989? Did amounts described by the Appellant as transfers from its capital reserve to its long term business fund in 2000, 2001 and 2002 constitute such an increase?

2. What constitutes the addition of an amount to an insurance company’s long term business fund for the purposes of section 83(3) Finance Act 1989? Were any such additions made to the Appellant’s long term business fund in the 2000, 2001 and 2002 accounting periods? If so, when did any such additions occur, when were they taken into account & were any in connection with the transfer of business to the Appellant?

The facts are generally as follows:-

The Appellant is a life assurance company. It is the company that was used by the Lloyds TSB Group to acquire the business of the Scottish Widows’ Fund and Life Assurance Society in 2000. The demutualisation scheme provided for the Appellant to establish and maintain a “Long Term Fund” to fund its long-term insurance business and for there to be a memorandum account within the Long Term Fund, called the “Capital Reserve”. This represented the amount of shareholder’s capital held within the Long Term Fund. In the years following demutualisation, the Appellant sustained trading losses. In its statutory FSA returns in respect of the Long Term Business Fund for accounting periods 2000, 2001 and 2002, the Appellant brought into account amounts (‘the relevant amounts’) from the Capital Reserve in order to cover losses and to allow for distributions. These were described in the returns as ‘transfers from the Capital Reserve’. The Respondent maintains that the relevant amounts are to be brought into account as receipts for the computation of profits or losses for taxation. Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business. As in force at the relevant time, section 83(2)(b) provided that any increase in value of the assets of such a company’s long term business fund shall be taken into account as a receipt. Section 83(3)(a) made provision for ascertaining whether or to what extent a company has incurred a loss in respect of that business where an amount is added to an insurance company’s long term business fund as part of or in connection with a transfer of business to that company. That amount shall be taken into account as an increase in value of the assets of the fund within section 83(2)(b). The parties agreed to refer to the Special Commissioners the question whether in computing the Case I profit or loss of the Appellant for the accounting periods ending in 2000, 2001 and 2002, the relevant amounts fall to be taken into account as receipts.

Anyway, we understand that there have been some technical issues with vision and/or sound on some computers, but the dryness of the issues aside, you might find it a fascinating insight into how The Supreme Court works. 

Inksters’ litigation department deals with a wide variety of civil cases throughout Scotland, and is currently involved in Supreme Court proceedings.

Should you wish to discuss case or if you wish to instruct us, please get in touch with our Gus Macaulay on 0141 229 080 or by e-mail at gus@inksters.com