Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
592

      (2)
The company may defer payment of some or all of the qualifying
corporation tax if it enters into an exit charge payment plan in
respect of it in accordance with this Schedule.
      (3)
The company may enter into an exit charge payment plan only if
conditions A to C are met.
5
      (4)
Condition A is that before the end of the period of 9 months
beginning immediately after the migration accounting period—
(a)
an application to enter into the exit charge payment plan is
made to Her Majesty’s Revenue and Customs, and
(b)
the application contains details of all the matters which are
10
required by Part 3 of this Schedule to be specified in the
plan.
      (5)
Condition B is that on ceasing to be resident in the United
Kingdom, the company carries on a business in an EEA state.
      (6)
Condition C is that, on becoming resident in the other EEA state,
15
the company is not treated as resident in a territory outside the
European Economic Area for the purposes of any double taxation
arrangements.
      (7)
In this paragraph—
“double taxation arrangements” means arrangements which
20
are made by two or more territories with a view to
affording relief from double taxation and which have
effect at the time when the company ceases to be resident
in the United Kingdom;
“eligible company” means a company that has a right to
25
freedom of establishment protected by Article 49 of the
Treaty on the functioning of the European Union or
established by Article 31 of the Agreement on the
European Economic Area.
      (8)
In this Part of this Schedule—
30
(a)
references to the migration accounting period are to—
(i)
in a case where an accounting period comes to an
end on the company ceasing to be resident in the
United Kingdom, that accounting period, and
(ii)
in a case not falling within sub-paragraph (i), the
35
accounting period during which the company
ceases to be resident in the United Kingdom,
(b)
references to a Part 1 company are to a company in relation
to which this Part of this Schedule applies, and
(c)
references to Part 3 of this Schedule are to Part 3 of this
40
Schedule as it applies to a Part 1 company.
Qualifying corporation tax
2     (1)
The company is liable to pay qualifying corporation tax in respect
of the migration accounting period if CT1 is greater than CT2
where—
45
CT1 is the corporation tax which the company is liable to pay
for the accounting period, and

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
593

CT2 is the corporation tax which the company would be
liable to pay for the accounting period if any income,
profits, gains, losses or debits arising only by virtue of the
exit charge provisions were ignored,

(CT2 will be zero if the company would not be liable to pay any
5
corporation tax for the period).
      (2)
The amount of qualifying corporation tax which the company is
liable to pay is the difference between CT1 and CT2.
      (3)
“Exit charge provisions” means—
(a)
section 185 of the 1992 Act,
10
(b)
section 187(4) of that Act, where that subsection applies by
virtue of section 187(4)(c),
(c)
section 162 of CTA 2009, where that section applies by
virtue of section 41(2)(b) of that Act,
(d)
section 333 of that Act,
15
(e)
section 609 of that Act,
(f)
section 859 of that Act, where that section applies by virtue
of section 859(2)(a), and
(g)
section 862 of that Act, where that section applies by virtue
of section 862(1)(c).
20
      (4)
References in this Part of this Schedule and Part 3 of this Schedule
to qualifying corporation tax are to be read in accordance with this
paragraph.
Interpretation: exit charge assets and liabilities
3     (1)
This paragraph applies for the purposes of this Part of this
25
Schedule and Part 3 of this Schedule.
      (2)
“Exit charge assets” and “exit charge liabilities” means assets or
liabilities (as the case may be) in respect of which income, profits
or gains arise in the migration accounting period by virtue of the
exit charge provisions, and in particular—
30
(a)
“TCGA or trading stock exit charge assets” means those
exit charge assets, other than pre-FA 2002 intangible fixed
assets, in respect of which income, profits or gains arise by
virtue of the exit charge provision mentioned in paragraph
2(3)(a), (b) or (c),
35
(b)
“financial exit charge assets or liabilities” means those exit
charge assets or liabilities in respect of which income,
profits or gains arise by virtue of the exit charge provision
mentioned in paragraph 2(3)(d) or (e),
(c)
“intangible exit charge assets” means—
40
(i)
those exit charge assets in respect of which income,
profits or gains arise by virtue of the exit charge
provision mentioned in paragraph 2(3)(f) or (g),
and
(ii)
those exit charge assets which are pre-FA 2002
45
intangible fixed assets in respect of which income,
profits or gains arise by virtue of the exit charge
provision mentioned in paragraph 2(3)(a) or (b).

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
594

      (3)
In sub-paragraph (2)—
(a)
“exit charge provisions” has the meaning given in
paragraph 2(3);
(b)
“pre-FA 2002 intangible fixed asset” means an intangible
fixed asset which is a pre-FA 2002 asset (as defined in
5
section 881 of CTA 2009).
Part 2
Non-UK resident companies with UK permanent establishments
Circumstances in which exit charge payment plan may be entered into
4     (1)
This Part of this Schedule and Part 3 of this Schedule apply
10
where—
(a)
at any time during an accounting period (“the migration
accounting period”) an eligible company which is not
resident in the United Kingdom carries on a trade in the
United Kingdom through a permanent establishment
15
there,
(b)
one or more PE qualifying events occurs in respect of any
assets or liabilities of the company as mentioned in sub-
paragraph (4), and
(c)
the company is liable to pay qualifying corporation tax in
20
respect of the migration accounting period.
      (2)
The company may defer payment of some or all of the qualifying
corporation tax if it enters into an exit charge payment plan in
respect of it in accordance with this Schedule.
      (3)
The company may enter into an exit charge payment plan only if
25
before the end of the period of 9 months beginning immediately
after the migration accounting period—
(a)
an application to enter into the exit charge payment plan is
made to Her Majesty’s Revenue and Customs, and
(b)
the application contains details of all the matters which are
30
required by Part 3 of this Schedule to be specified in the
plan.
      (4)
For the purposes of this Part of this Schedule, a “PE qualifying
event” occurs in respect of an asset or liability of a company if—
(a)
an event occurs which triggers—
35
(i)
a deemed disposal and reacquisition of the asset or
liability under the exit charge provision mentioned
in paragraph 5(3)(a), (c), (d) or (e), or
(ii)
a valuation of the asset under the exit charge
provision mentioned in paragraph 5(3)(b),
40
(b)
the event—
(i)
occurs during the migration accounting period, or
(ii)
causes the migration accounting period to come to
an end, and
(c)
at the time of the event, the company is not treated as
45
resident in a territory outside the European Economic Area
for the purposes of any double taxation arrangements.

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
595

      (5)
In this Part of this Schedule, references to a PE qualifying asset or
liability are to an asset or liability in respect of which a PE
qualifying event occurs.
      (6)
In this paragraph “double taxation arrangements” and “eligible
company” have the meanings given in paragraph 1(7).
5
      (7)
In this Part of this Schedule—
(a)
references to the migration accounting period are to be
read in accordance with this paragraph;
(b)
references to a Part 2 company are to a company in relation
to which this Part of this Schedule applies,
10
(c)
references to Part 3 of this Schedule are to Part 3 of this
Schedule as it applies to a Part 2 company, and
(d)
“permanent establishment”, in relation to a company, is to
be read in accordance with Chapter 2 of Part 24 of CTA
2010.
15
Qualifying corporation tax
5     (1)
The company is liable to pay qualifying corporation tax in respect
of the migration accounting period if CT1 is greater than CT2
where—
CT1 is the corporation tax which the company is liable to pay
20
for the accounting period, and
CT2 is the corporation tax which the company would be
liable to pay for the accounting period if any income,
profits, gains, losses or debits arising as a result of any PE
qualifying events, and arising only by virtue of the exit
25
charge provisions, were ignored,

(CT2 will be zero if the company would not be liable to pay any
corporation tax for the period).
      (2)
The amount of qualifying corporation tax which the company is
liable to pay is the difference between CT1 and CT2.
30
      (3)
Exit charge provisions means—
(a)
section 25 of the 1992 Act,
(b)
section 162 of CTA 2009, where that section applies by
virtue of section 41(2)(b) of that Act,
(c)
section 334 of that Act,
35
(d)
section 610 of that Act, and
(e)
section 859 of that Act, where that section applies by virtue
of section 859(2)(b).
      (4)
References in this Part of this Schedule and Part 3 of this Schedule
to qualifying corporation tax are to be read in accordance with this
40
paragraph.
Interpretation: exit charge assets and liabilities
6     (1)
This paragraph applies for the purposes of this Part of this
Schedule and Part 3 of this Schedule.

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
596

      (2)
“Exit charge assets” and “exit charge liabilities” means any PE
qualifying assets or liabilities (as the case may be) in respect of
which income, profits or gains arise in the migration accounting
period by virtue of the exit charge provisions, and in particular—
(a)
“TCGA or trading stock exit charge assets” means those
5
exit charge assets, other than pre-FA 2002 intangible fixed
assets, in respect of which income, profits or gains arise by
virtue of the exit charge provision mentioned in paragraph
5(3)(a) or (b);
(b)
“financial exit charge assets or liabilities” means those exit
10
charge assets or liabilities in respect of which income,
profits or gains arise by virtue of the exit charge provision
mentioned in paragraph 5(3)(c) or (d);
(c)
“intangible exit charge assets” means—
(i)
those exit charge assets in respect of which income,
15
profits or gains arise by virtue of the exit charge
provision mentioned in paragraph 5(3)(e), and
(ii)
those exit charge assets which are pre-FA 2002
intangible fixed assets in respect of which income,
profits or gains arise by virtue of the exit charge
20
provision mentioned in paragraph 5(3)(a).
      (3)
In sub-paragraph (2)—
(a)
“exit charge provisions” has the meaning given in
paragraph 5(3);
(b)
“pre-FA 2002 intangible fixed asset” means an intangible
25
fixed asset which is a pre-FA 2002 asset (as defined in
section 881 of CTA 2009).
Part 3
Entering into an exit charge payment plan
Introduction
30
7     (1)
As to when this Part of this Schedule applies, see—
(a)
Part 1 of this Schedule (companies ceasing to be resident in
the United Kingdom), and
(b)
Part 2 of this Schedule (companies with permanent
establishments in the United Kingdom).
35
      (2)
In this Part of this Schedule, as it applies to a company in relation
to which Part 1 of this Schedule applies, terms and expressions
which are used in this Part and in that Part have the same
meanings in this Part as in that Part.
      (3)
In this Part of this Schedule, as it applies to a company in relation
40
to which Part 2 of this Schedule applies, terms and expressions
which are used in this Part and in that Part have the same
meanings in this Part as in that Part.

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
597

Entering into an exit charge payment plan
8     (1)
A Part 1 company or a Part 2 company enters into an exit charge
payment plan in respect of qualifying corporation tax in
accordance with this Schedule if—
(a)
the company agrees to pay, and an officer of Revenue and
5
Customs agrees to accept payment of, the tax in
accordance with the standard instalment method (see
paragraph 13) or the realisation method (see paragraphs 14
to 17) or a combination of the two methods,
(b)
the company agrees to pay interest on the tax in
10
accordance with paragraph 9(3), and
(c)
the plan meets the requirements set out in paragraphs 10
to 12 as to the matters that must be specified in it.
      (2)
The exit charge payment plan may, in the circumstances
mentioned in sub-paragraph (3), contain appropriate provision
15
regarding security for Her Majesty’s Revenue and Customs in
respect of the deferred payment of the tax.
      (3)
Those circumstances are where an officer of Her Majesty’s
Revenue and Customs considers that agreeing to accept payment
of qualifying corporation tax in accordance with the plan would
20
present a serious risk as to collection of the tax in the absence of
provision regarding security in respect of that tax.
      (4)
An exit charge payment plan is void if any information furnished
by the company in connection with the plan does not fully and
accurately disclose all facts and considerations material to the
25
decision of the officer of Revenue and Customs to accept payment
of qualifying corporation tax in accordance with the plan.
Effect of exit charge payment plan
9     (1)
This paragraph applies where an exit charge payment plan is
entered into by a company in respect of qualifying corporation tax
30
in accordance with this Schedule.
      (2)
As regards when the tax is payable—
(a)
the plan does not prevent the tax becoming due and
payable under section 59D or 59E, but
(b)
the Commissioners for Her Majesty’s Revenue and
35
Customs—
(i)
may not seek payment of the tax otherwise than in
accordance with the plan;
(ii)
may make repayments in respect of any amount of
the tax paid, or any amount paid on account of the
40
tax, before the plan is entered into.
      (3)
As regards interest—
(a)
the tax carries interest in accordance with Part 9 as if the
plan had not been entered into, and
(b)
each time a payment is made under the plan, it is to be paid
45
together with any interest payable on it.

Finance (No. 2) Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge
598

      (4)
As regards penalties, the company will be liable to penalties for
late payment of the tax only if it fails to make payments in
accordance with the plan (see item 6ZA of the Table at the end of
paragraph 1 of Schedule 56 to the Finance Act 2009).
      (5)
Qualifying corporation tax payable in accordance with an exit
5
charge payment plan which is for the time being unpaid may be
paid at any time before it becomes payable under the plan together
with interest payable on it to the date of payment.
Content of exit charge payment plan
10    (1)
An exit charge payment plan entered into by a Part 1 company
10
must specify—
(a)
the date on which the company ceased to be resident in the
United Kingdom, and
(b)
the EEA state in which the company has become resident.
      (2)
An exit charge payment plan entered into by a Part 2 company
15
must specify—
(a)
the EEA state in which the company is resident, and
(b)
if the company has ceased to carry on a trade in the United
Kingdom through a permanent establishment there, the
date on which it ceased to do so.
20
      (3)
In either case an exit charge payment plan entered into by a
company must also specify—
(a)
the amount of qualifying corporation tax which, in the
company’s opinion, is payable by it in respect of the
migration accounting period,
25
(b)
the amount of that qualifying corporation tax which the
company wishes to defer paying under the exit charge
payment plan (“ECPP tax”), and
(c)
whether the ECPP tax is to be paid in accordance with—
(i)
the standard instalment method (see paragraph
30
13),
(ii)
the realisation method (see paragraphs 14 to 17), or
(iii)
a combination of the two methods.
      (4)
If the ECPP tax is to be paid in accordance with a combination of
the two methods, the exit charge payment plan must also
35
specify—
(a)
in the case of each of the company’s exit charge assets or
liabilities (see paragraphs 3(2) or 6(2), as the case may be),
the method in accordance with which the amount of ECPP
tax attributable to the asset or liability (see sub-paragraph
40
(6)) is to be paid, and
(b)
the amount of the ECPP tax specified under sub-paragraph
(3)(b) that is to be paid in accordance with each method.
      (5)
But an exit charge payment plan may specify that any ECPP tax is
to be paid in accordance with the standard instalment method
45
only if—
(a)
in the case of a plan entered into by a Part 1 company, the
company’s ceasing to be resident in the United Kingdom is