The Principal Act is amended in Part 26 by the insertion after Chapter 3 of the following Chapters:

"Chapter 4 Taxation of Assurance Companies - New Basis

730A. Profits of life business: new basis.

(1) In this Chapter and Chapter 5 of this Part -

'assurance company' means an assurance company chargeable to corporation tax;

'new basis business' means -

(a) where an assurance company was carrying on life business on 1 April 2000, other than where the assurance company's trading operations at that time consisted solely of foreign life assurance business within the meaning of section 451(1) -

(i) all policies and contracts commenced by the assurance company on or after 1 January 2001, and

(ii) all policies and contracts commenced by the assurance company before that date in so far as they relate to -

(I) pension business and general annuity business, and

(II) permanent health insurance, in respect of which the profits arising to the assurance company were before 1 January 2001 charged to tax under Case I of Schedule D,

(b) where an assurance company was carrying on life business on 1 April 2000, and the assurance company's trading operations at that time consisted solely of foreign life assurance business within the meaning of section 451(1), all policies and contracts commenced by the assurance company on or after 1 January 2001, and