House of Commons Amendments

Session 2012 - 13
Internet Publications
Other Bills before Parliament

67

House of Commons

Notices of Amendments

given on

Thursday 24 May 2012

For other Amendment(s) see the following page(s):

Finance Bill Committee 55-65

Public Bill Committee

Finance Bill

(Except Clauses 1, 4, 8, 189 and 209, Schedules 1, 23 and 33,

and any new Clauses and new Schedules first appearing on the Order Paper not later than

Tuesday 17 April 2012 and relating to value added tax)

David Gauke

46

Schedule  20,  page  428,  line  15,  leave out ‘section’ and insert ‘sections 371BG

and’.

David Gauke

47

Schedule  20,  page  428,  line  46,  leave out ‘to 371BG’ and insert ‘and 371BF’.

David Gauke

48

Schedule  20,  page  430,  line  2,  leave out from beginning to end of line 3 on page

431 and insert—

‘(1)
Subsection (2) applies if conditions A to C are met in relation to a

relevant interest, or a part of a relevant interest, which a chargeable

company (“CC”) has in the CFC at all times during the CFC’s

accounting period.

(2)
Step 5 in section 371BC(1) is to be taken in relation to CC on the

following basis.

(3)
That basis is—

(a)
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 is to be left out of P%, and

(b)
so much of Q% as is so attributable is to be left out of Q%.

Notices of Amendments: 24 May 2012
68

Finance Bill, continued

(4)
Condition A 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).

(5)
Condition B is that any increase in the value of the relevant shares at

any time during the relevant corporation tax accounting period is (or

would be) income, or brought into account in determining any income,

of CC chargeable to corporation tax for that period.

(6)
Condition C is that any dividend or other distribution received at any

time during the relevant corporation tax accounting period by CC from

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

shares is (or would be) income, or brought into account in determining

any income, of CC chargeable to corporation tax for that period.

(7)
Subsection (8) applies if—

(a)
CC has the relevant interest, or the part of a relevant interest,

by virtue of section 371OB(3) or (4),

(b)
the CFC is an offshore fund (as defined in section 355) which

does not meet the qualifying investments test in section 493 of

CTA 2009, and

(c)
conditions B and C would be met but for the offshore fund not

meeting that test.

(8)
Conditions B and C are to be taken to be met.

(9)
This section is subject to section 371BH.

371BH
Companies carrying on BLAGAB

(1)
Subsection (2) applies in relation to a chargeable company (“CC”)

if—

(a)
CC carries on basic life assurance and general annuity

business during the relevant corporation tax accounting

period,

(b)
the I-E rules apply to CC for the relevant corporation tax

accounting period, and

(c)
the following are met in relation to a relevant interest, or a part

of a relevant interest, which CC has in the CFC at all times

during the CFC’s accounting period—

(i)
condition D,

(ii)
condition E or F (or both), and

(iii)
condition G.

(2)
An additional sum is charged on CC at step 5 in section 371BC(1) and,

for this purpose, step 5 is to be taken on the following basis.

(2A)
That basis is—

(a)
in paragraph (a) at step 5, the reference to the appropriate rate

is to be read as a reference to—

(i)
the policyholders’ rate of tax under section 102 of FA

2012 applicable to the I-E profit for the relevant

corporation tax accounting period, or

(ii)
if there is more than one such rate, the average rate

over the whole of the relevant corporation tax

accounting period, and

Notices of Amendments: 24 May 2012
69

Finance Bill, continued

(b)
any reduction of P% or Q% under section 371BG(3) by

reference to any relevant interest of CC is to be ignored, but—

(i)
P% is to be reduced so that it represents only the

policyholders’ share of the BLAGAB component of

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,’.

Notices of Amendments: 24 May 2012
70

Finance Bill, continued

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).’.

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

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

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

Notices of Amendments: 24 May 2012
71

Finance Bill, continued

(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

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—

(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.

Notices of Amendments: 24 May 2012
72

Finance Bill, continued

(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)’.

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—

Notices of Amendments: 24 May 2012
73

Finance Bill, continued

(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 ‘—

(a)
a loan to another person, or

(b)
so far as not covered by paragraph (a), an arrangement

intended to produce for any person a return in relation to any

amount which it is reasonable to suppose would be a return by

reference to the time value of that amount of money.

(5A)
Subsection (5) does not apply if—

(a)
the main business of the ultimate debtor is banking business

or insurance business, and

(b)
the funding for the loan or arrangement would be provided in

the ordinary course of the ultimate debtor’s banking business

or insurance business (as the case may be).

(5B)
A creditor relationship of the CFC cannot be a qualifying loan

relationship if—

(a)
the main business of the ultimate debtor in relation to the

creditor relationship is banking business or insurance

business, and



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