Section EY 29 — Income Tax Act 2007: Shareholder base other profit: profit participation policies that are new business

EY 29 Shareholder base other profit: profit participation policies that are new business Calculation of income (1) For an income year, a life insurer has an amount, for profit participation policies that are new business, that is calculated using the formula— other profit × gate − previous negative amount. (1 + gate) Definition of items in formula (2) In the formula in subsection (1),— (a) other profit is the amount calculated for the income year under subsections (5) to (9): (b) gate is the proportion of a policyholder's share of profits from the asset base that is used in the formula that calculates a transfer to the benefit of the life insurer's shareholders from the profits of the asset base, as described in paragraph (a)(iii) of the definition of profit participation policy : (c) previous negative amount is the amount from the previous year described in subsections (3) and (4). Formula: negative amounts and positive amounts (3) If, for an income year, the formula in subsection (1) calculates a positive amount, that amount is included as income in the life insurer’s shareholder base income. If it is a negative amount, then that amount is not included as a deduction in the life insurer’s shareholder base allowable deductions, but see subsection (4). Negative amounts: carry forward (4) The amount by which the amount calculated using the formula in subsection (1) is less than zero is carried forward to the next income year, to be used under this section in the formula as the item previous negative amount in that next year. Other profit (5) For the purposes of the item other profit in subsection (2), an amount is calculated, for the income year (the current year ) for profit participation policies that are new business, using the following formula: (premiums − premiums estimate) − (claims − claims estimate) − (closing policy liabilities − estimated closing policy liabilities). Definition of items in formula (6) In the formula in subsection (5),— (a) premiums is the amount of premiums for policies for the current year, but subtracting relevant life reinsurance premiums: (b) premiums estimate is the amount of valuation premiums that the life insurer expected, using best estimate assumptions, to receive in the current year for policies that are in force at the start of the current year, or are first entered into in the current year, after subtracting the present value (net) of relevant life reinsurance premiums: (c) claims is the amount of claims for the current year, after subtracting relevant life reinsurance claims: (d) claims estimate is the actuarially determined amount of claims that the life insurer expected, using best estimate assumptions, to receive in the current year for policies that are in force at the start of the current year, or are first entered into in the current year, ignoring surrenders and after subtracting the present value (net) of relevant life reinsurance claims: (e) closing policy liabilities is the amount of policy liabilities for policies determined at the end of the current year for vested benefits after the previous year's bonus declaration: (f) estimated closing policy liabilities is the estimated policy liabilities at the end of the current year for policies in force at the start of the current year and expected to be in force at the end of the current year, taking into account vested benefits after the previous year's bonus. The estimated policy liabilities must not take into account any future bonus declarations, and must use best estimate assumptions. Meaning of valuation premiums (7) In this section, valuation premiums means the amount of premiums payable for a policy, actuarially determined by reference to the premium formula used when the policy was first entered into, or, if the premium formula is unavailable, by reference to mortality, expense, and other assumptions applicable to premiums for similar policies at the beginning of the income year in which the policy was first entered into. The valuation premiums must not include any allowance for future bonus declarations or future shareholder profits. The amount of the valuation premium for a policy must not change, unless significant changes to the policy justify changing the valuation premium. Meaning of policy liabilities (8) In this section, policy liabilities means, for a policy, an actuarially determined amount that is the present value (net) of future mortality and maturity claims, plus the present value (net) of future expenditure or loss, plus the present value (net) of future tax payments, less the present value (net) of future valuation premiums. The amount of policy liabilities must not include any allowance for surrenders or the payment of surrender values and relevant life reinsurance premiums and claims must be subtracted. The minimum amount of policy liabilities for a policy is the current surrender value of the policy. Basis of best estimate assumptions in actuarially determining items (9) The same best estimate assumptions must be used for actuarially determining the items premiums estimate , claims estimate, and policy liabilities in this section. The assumptions may be appropriate for the start of the year, or for the end of the year, but once the choice is made between start of the year and end of the year, the assumptions must not be changed. Meaning of new business (10) For the purposes of this section, new business means, for a policy, that it is not existing business under section EY 28 . Defined in this Act: actuarially determined , amount , best estimate assumptions , claim , existing business , income year , life insurance policy , life insurer , life reinsurance , new business , premium , present value (net) , profit participation policy , valuation premiums Section EY 29: substituted, on 1 July 2010, by section 190(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).