House of Commons Public Bill Committee Proceedings

Session 2012 - 13
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Other Bills before Parliament

Public Bill Committee Proceedings: 19 June 2012
36

Finance Bill, continued

(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

Agreed to  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

Agreed to  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

Agreed to  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

Agreed to  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

Public Bill Committee Proceedings: 19 June 2012
37

Finance Bill, continued

(b)
a non-UK resident company connected with the CFC acting

through a UK permanent establishment.’.

David Gauke

Agreed to  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

Agreed to  53

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

371FB and 371FBA’.

David Gauke

Agreed to  54

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

David Gauke

Agreed to  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

Agreed to  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

(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.’.

Public Bill Committee Proceedings: 19 June 2012
38

Finance Bill, continued

David Gauke

Agreed to  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

Agreed to  57

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

David Gauke

Agreed to  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

Agreed to  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

Agreed to  187

Schedule  20,  page  457,  line  10,  leave out ‘and’ and insert—

‘(ba)
the CFC’s accounting period ends in that period of account,

and’.

David Gauke

Agreed to  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.’.

Public Bill Committee Proceedings: 19 June 2012
39

Finance Bill, continued

David Gauke

Agreed to  61

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

section 314A’.

David Gauke

Agreed to  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

Agreed to  63

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

David Gauke

Agreed to  64

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

credits)’.

David Gauke

Agreed to  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

Agreed to  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

Public Bill Committee Proceedings: 19 June 2012
40

Finance Bill, continued

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

Agreed to  67

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

case may be),’.

David Gauke

Agreed to  68

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

David Gauke

Agreed to  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—

Public Bill Committee Proceedings: 19 June 2012
41

Finance Bill, continued

(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

(b)
the creditor relationship is, or is connected (directly or

indirectly) to, an arrangement the main purpose, or one of the

main purposes, of which is for the ultimate debtor to provide

(directly or indirectly) funding for a loan or arrangement as

mentioned in subsection (5)(a) or (b) in order to obtain a tax

advantage for the ultimate debtor.’.

David Gauke

Agreed to  70

Schedule  20,  page  460,  line  42,  leave out from ‘relationship’ to ‘an’ in line 48 and

insert ‘if the loan which is the subject of the creditor relationship is made to any extent

(other than a negligible one) out of funds received by the CFC (directly or indirectly)—

(a)
from a relevant UK connected company other than by way of

a loan, or

(b)
as a result of’.

David Gauke

Agreed to  71

Schedule  20,  page  461,  leave out lines 3 to 5 and insert—

‘(7)
For the purposes of subsection (6) a company is “relevant UK

connected” if—

(a)
the company is a UK resident company connected with the

CFC,

(b)
the company’s main business is banking business or insurance

business, and

(c)
the company’s banking business or insurance business (as the

case may be) is a trade.’.

David Gauke

Agreed to  72

Schedule  20,  page  461,  line  13,  leave out ‘company,’ and insert ‘company by—

(i)
a non-UK resident person, or

(ii)
a UK resident person who is not connected with the

CFC,’.

David Gauke

Agreed to  73

Schedule  20,  page  461,  line  41,  leave out from ‘relationship”’ to end of line 42 and

insert ‘or “ultimate debtor” for the purposes of this Chapter.’.

Public Bill Committee Proceedings: 19 June 2012
42

Finance Bill, continued

David Gauke

Agreed to  74

Schedule  20,  page  462,  line  2,  at end insert—

‘(2A)
The claim may be amended or withdrawn by company C only by

amending the return.’.

David Gauke

Agreed to  75

Schedule  20,  page  462,  line  14,  leave out ‘assessment’ and insert ‘amendment’.

David Gauke

Agreed to  76

Schedule  20,  page  473,  line  42,  leave out ‘by the CFC’.

David Gauke

Agreed to  77

Schedule  20,  page  473,  line  46,  leave out ‘a person other than the CFC,’ and insert

‘any person,’.

David Gauke

Agreed to  78

Schedule  20,  page  479,  line  43,  at end insert—

‘371QG
Anti-avoidance

(1)
This section applies in relation to an accounting period (“the relevant

accounting period”) of a CFC if—

(a)
at any time an arrangement is entered into, and

(b)
the main purpose, or one of the main purposes, of the

arrangement is to obtain for any person a tax advantage within

section 1139(2)(da) of CTA 2010 in relation to—

(i)
the relevant accounting period, or

(ii)
that period and one or more other accounting periods

of the CFC.

(2)
The CFC’s chargeable profits and creditable tax for the relevant

accounting period are to be apportioned in accordance with section

371QC(2) (and not section 371QD if that section would otherwise

apply).

(3)
The apportionments must (in particular) be made in a way which, so

far as practicable, counteracts the effects of the arrangement

mentioned in subsection (1)(a) so far as those effects are referable to

the purpose mentioned in subsection (1)(b).’.

David Gauke

Agreed to  79

Schedule  20,  page  480,  line  7,  leave out ‘Sections 371RC and 371RG set out

circumstances’ and insert ‘Section 371RC sets out certain cases’.

David Gauke

Agreed to  80

Schedule  20,  page  483,  line  30,  at end insert—



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