Session 2012 - 13
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Other Bills before Parliament


 
 

Public Bill Committee: 12 June 2012                     

116

 

Finance Bill, continued

 
 

the apportioned profit (see subsections (2H) to (4)),

 

and

 

(ii)    

Q% is to be reduced by the same proportion as P% is

 

reduced under sub-paragraph (i).

 

(2B)    

Condition D is that, at all times during the CFC’s accounting period,

 

CC has the relevant interest, or the part of a relevant interest, by virtue

 

of its holding shares (“the relevant shares”) in the CFC (directly or

 

indirectly).

 

(2C)    

Condition E is met if the following requirement is met in relation to a

 

time during the relevant corporation tax accounting period.

 

(2D)    

The requirement is that any increase (or any part of any increase) in

 

the value of the relevant shares which occurs at that time is not (or

 

would not be) brought into account at step 1 in section 73 of FA 2012

 

in determining whether CC has an I-E profit for the relevant

 

corporation tax accounting period.

 

(2E)    

Condition F is met if the following requirement is met in relation to a

 

time during the relevant corporation tax accounting period.

 

(2F)    

The requirement is that any dividend or other distribution (or any part

 

of any dividend or other distribution) received at that time by CC from

 

the CFC (directly or indirectly) by virtue of its holding the relevant

 

shares is not (or would not be) brought into account at step 1 in section

 

73 of FA 2012 in determining whether CC has an I-E profit for the

 

relevant corporation tax accounting period.

 

(2G)    

Condition G is that the assets which represent the relevant interest, or

 

the part of a relevant interest, during the CFC’s accounting period are

 

(to any extent) assets held by CC for the purposes of CC’s long-term

 

business.

 

(2H)    

“The apportioned profit” means so much of P% as is attributable to CC

 

having the relevant interest, or the part of a relevant interest, during the

 

CFC’s accounting period.’.

 

David Gauke

 

49

 

Schedule  20,  page  433,  line  14,  leave out from ‘under’ to end of line 15 and insert

 

‘—

 

(i)    

the law of the territory in which the CFC is

 

incorporated or formed,

 

(ii)    

the articles of association or other document

 

regulating the CFC, or

 

(iii)    

any arrangement entered into by or in relation to the

 

CFC,’.

 

David Gauke

 

50

 

Schedule  20,  page  435,  line  33,  at end insert—

 

‘(2A)    

Profits treated as non-trading finance profits under subsection (2) are

 

not to be taken to fall within section 371CB(3) or (4).’.


 
 

Public Bill Committee: 12 June 2012                     

117

 

Finance Bill, continued

 
 

David Gauke

 

51

 

Schedule  20,  page  435,  line  36,  at end insert—

 

‘(3A)    

For this purpose, section 337(1) (definition of “the worldwide group”)

 

applies with the omission of paragraph (a).’.

 

David Gauke

 

146

 

Schedule  20,  page  436,  leave out lines 36 and 37 and insert ‘by a UK connected

 

company.

 

(3)    

In subsection (2)(b)(ii)—

 

“services” does not include services provided as part of insurance

 

business, and

 

“UK connected company” means—

 

(a)    

a UK resident company connected with the CFC, or

 

(b)    

a non-UK resident company connected with the CFC acting

 

through a UK permanent establishment.’.

 

David Gauke

 

52

 

Schedule  20,  page  447,  line  1,  leave out ‘derive (directly or indirectly) from’ and

 

insert ‘represent, or derive (directly or indirectly) from,’.

 

David Gauke

 

53

 

Schedule  20,  page  449,  line  14,  leave out ‘section 371FB’ and insert ‘sections

 

371FB and 371FBA’.

 

David Gauke

 

54

 

Schedule  20,  page  449,  line  39,  leave out from ‘CFC”)’ to end of line 40.

 

David Gauke

 

55

 

Schedule  20,  page  450,  line  41,  leave out ‘371BC(3))’ and insert ‘371BC(3),

 

ignoring sections 371BG(3)(a) and 371BH(2A)(b))’.

 

David Gauke

 

56

 

Schedule  20,  page  450,  line  41,  at end insert—

 

‘371FBA 

Loans from foreign permanent establishments of UK resident

 

companies

 

(1)    

Subsection (2) applies if—

 

(a)    

there is a company (“C”) which has made an election under

 

section 18A of CTA 2009 (exemption for profits or losses of

 

foreign permanent establishments),

 

(b)    

during a relevant accounting period of C which begins on or

 

after 1 January 2013, C has a creditor relationship which,

 

applying the assumptions set out in section 18H(3) of CTA

 

2009 in relation to C for the relevant accounting period, would

 

be a qualifying loan relationship (within the meaning of


 
 

Public Bill Committee: 12 June 2012                     

118

 

Finance Bill, continued

 
 

Chapter 9 of this Part) of C in relation to which the CFC would

 

be the ultimate debtor,

 

(c)    

in the application of section 18H(2) of CTA 2009 for the

 

relevant accounting period, C makes a claim under Chapter 9

 

of this Part (as applied by section 18H(2)), and

 

(d)    

the relevant accounting period falls wholly or partly in the

 

CFC’s accounting period.

 

(2)    

75% of the principal outstanding during the CFC’s accounting period

 

on the loan which is the subject of the qualifying loan relationship is

 

to be added to the CFC’s free capital or free assets (as the case may

 

be).

 

(3)    

Terms used in this section which are defined in section 18A of CTA

 

2009 have the meaning given by that section.’.

 

David Gauke

 

147

 

Schedule  20,  page  451,  leave out lines 43 and 44 and insert ‘by a UK connected

 

company.

 

(2A)    

In subsection (2)(b)(ii)—

 

“services” does not include services provided as part of insurance

 

business, and

 

“UK connected company” means—

 

(c)    

a UK resident company connected with the CFC, or

 

(d)    

a non-UK resident company connected with the CFC acting

 

through a UK permanent establishment.’.

 

David Gauke

 

57

 

Schedule  20,  page  452,  leave out lines 9 to 11.

 

David Gauke

 

58

 

Schedule  20,  page  452,  line  27,  at end insert—

 

‘(8)    

In this section “original contract of insurance”, in relation to a contract

 

of reinsurance which is one in a chain of contracts of reinsurance,

 

means the original contract of insurance reinsured by the first contract

 

in the chain; and in subsection (6)(b) the reference to the original

 

insured is to be read accordingly.’.

 

David Gauke

 

59

 

Schedule  20,  page  455,  line  3,  leave out from ‘which’ to end of line 4 and insert ‘a

 

member of the CFC group incurs a debt in the United Kingdom to—

 

(a)    

a non-UK resident person, or

 

(b)    

a UK resident person who is not a member of the CFC group.’.

 

David Gauke

 

60

 

Schedule  20,  page  457,  line  11,  leave out from ‘this’ to end of line 15 and insert

 

‘section—


 
 

Public Bill Committee: 12 June 2012                     

119

 

Finance Bill, continued

 
 

(i)    

the charging of a sum on company C at step 5 in

 

section 371BC(1) would cause section 314A (finance

 

income amounts of chargeable companies) to apply in

 

the case of company C, and

 

(ii)    

the relevant finance profits (see section 314A(1)(c))

 

would include the leftover profits.’.

 

David Gauke

 

61

 

Schedule  20,  page  457,  line  33,  after ‘have’ insert ‘as a result of the application of

 

section 314A’.

 

David Gauke

 

62

 

Schedule  20,  page  457,  leave out lines 39 to 41 and insert—

 

‘(6)    

For the purposes of subsection (5)(a) assume that company C’s

 

finance income amount would include P% of the leftover profits.

 

(6A)    

“P%” has the meaning given by section 371BC(3), subject to sections

 

371BG(3)(a) and 371BH(2A)(b).

 

(6B)    

Subject to what follows, terms used in this section which are defined

 

in Part 7 (tax treatment of financing costs and income) have the same

 

meaning as they have in Part 7.

 

(6C)    

In subsections (2) to (4) references to the tested income amount or the

 

tested expense amount are to that amount determined without regard

 

to any debits, credits or other amounts arising from UK banking

 

business or insurance business.

 

(6D)    

But subsection (6C) does not apply for the purpose of determining any

 

finance income amount under section 314A or affect the way in which

 

any such amount is to be taken into account in determining the tested

 

income amount or the tested expense amount.

 

(6E)    

“UK banking business or insurance business” means banking business

 

or insurance business carried on by—

 

(a)    

a UK resident company, or

 

(b)    

a non-UK resident company acting through a UK permanent

 

establishment.’.

 

David Gauke

 

63

 

Schedule  20,  page  458,  leave out lines 1 to 5.

 

David Gauke

 

64

 

Schedule  20,  page  458,  line  17,  leave out ‘(so far as not reflected in the step 1

 

credits)’.

 

David Gauke

 

65

 

Schedule  20,  page  458,  line  20,  leave out ‘(which is not itself a qualifying loan

 

relationship of the CFC)’ and insert ‘(other than a qualifying loan relationship)’.


 
 

Public Bill Committee: 12 June 2012                     

120

 

Finance Bill, continued

 
 

David Gauke

 

66

 

Schedule  20,  page  458,  line  30,  leave out from beginning to ‘credits’ in line 42 and

 

insert—

 

    

‘Allocate to the qualifying loan relationship a just and reasonable

 

proportion of the credits from the CFC’s relevant debtor relationships

 

which are brought into account in determining the CFC’s non-trading

 

finance profits (so far as not reflected in the step 2 credits).

 

    

Add the credits to the step 2 credits.

 

    

The result is “the step 3 credits”.

 

    

A debtor relationship of the CFC is “relevant” if the loan which is the

 

subject of it is used by the CFC to fund the loan which is the subject

 

of the qualifying loan relationship.

 

    

Step 4

 

    

Allocate to the qualifying loan relationship a just and reasonable

 

proportion of the credits and debits which are brought into account in

 

determining the CFC’s non-trading finance profits so far as they—

 

(a)    

are from any derivative contract or other arrangement (other

 

than a qualifying loan relationship or a relevant debtor

 

relationship) entered into by the CFC as a hedge of risk in

 

connection with a relevant debtor relationship, and

 

(b)    

are attributable to the hedge of risk.

 

    

If the credits exceed the debits add the excess to the step 3 credits and

 

if the debits exceed the credits subtract the deficit from the step 3

 

credits.

 

    

The result is “the step 4 credits”.

 

    

Step 5

 

    

Allocate to the qualifying loan relationship a just and reasonable

 

proportion of—

 

(a)    

the debits from the CFC’s loan relationships which are

 

brought into account in determining the CFC’s non-trading

 

finance profits (so far as not reflected in the step 4 credits),

 

and

 

(b)    

any amounts set off under Chapter 16 of Part 5 of CTA 2009

 

(non-trading deficits) against amounts which, apart from the

 

set off, would be included in the CFC’s non-trading finance

 

profits.

 

    

Reduce the step 4’.

 

David Gauke

 

67

 

Schedule  20,  page  459,  line  35,  leave out ‘business,’ and insert ‘business (as the

 

case may be),’.

 

David Gauke

 

68

 

Schedule  20,  page  459,  line  36,  leave out from ‘company’ to end of line 37.

 

David Gauke

 

69

 

Schedule  20,  page  460,  line  39,  leave out ‘a loan to another person’ and insert ‘—


 
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Revised 12 June 2012