Taxes Consolidation Act 1997 section 720

Gains or losses arising by virtue of section 719

Section 720 provides for the spreading over seven years of chargeable gains and allowable losses arising on the annual deemed disposal and re-acquisition of a life company's assets under section 719.

• The net gains or losses from deemed disposals under section 719 are not taxed in the period they arise but are instead spread in equal instalments of one-seventh over seven accounting periods, beginning with the period of the deemed disposal.
• Transitional phasing applied to reinsurance contract rights: for the year ended 31 December 1997, three-sevenths of the gains and losses were excluded from spreading; for 1998, two-sevenths were excluded; and for 1999, one-seventh was excluded.
• If an accounting period is shorter than one year, the one-seventh instalment is proportionately reduced; if the company ceases to carry on life business before the full seven-year spread is complete, the entire unaccounted balance is brought into charge in the cessation period.
• Where a loss arises on the actual disposal of an asset whose earlier deemed disposal gains or losses were being spread, the portion of the loss attributable to the revaluation element must itself be spread forward over seven years rather than being available for immediate offset.