Revenue Note for Guidance

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Revenue Note for Guidance

720 Gains or losses arising by virtue of section 719


This section provides for the spreading over 7 years of gains and losses arising in an accounting period by virtue of section 719.


(1) Gains and losses arising in an accounting period by virtue of section 719 (that is, on a deemed disposal and reacquisition of certain assets of the life business fund of an assurance company at the end of the accounting period) are treated as not arising in that accounting period but the net gain or net loss is spread in 7 equal instalments over the 7 years commencing with that accounting period.

(2) The spreading over 7 years of unrealised net gains or net losses in the case of rights under reassurance contracts (within the meaning of section 594(4)) is phased in as follows —

Year ending

Amount spread

31 December 1995


31 December 1996


31 December 1997


31 December 1998


31 December 1999


(3) For an accounting period shorter than one year the appropriate instalment of net gain or net loss is proportionately reduced. The amount of that reduction is charged (in the case of a net gain) or allowed (in the case of a net loss) in the last accounting period.

(4) If a company ceases to carry on life business in an accounting period, the balance of the net gain or net loss is charged or allowed, as the case may be, in that period.

(5) Adjustments are required where an asset is sold and the spreading approach has been applied to gains or losses arising from earlier annual increases or decreases in the value of the asset. Where a loss, computed by reference to the latest valuation, is incurred on the actual disposal of an asset, the part of the loss which is attributable to the revaluation is spread forward and is not available for immediate offset. The balance of the loss, which cannot exceed the actual loss, will be available for immediate offset.

Relevant Date: Finance Act 2019