Session 2013 - 14
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Finance Bill


Finance Bill
Schedule 44 — Ordinary residence
Part 4 — Other amendments

578

 

129        

In section 237B (liability of scheme administrator), in subsection (8), omit “,

ordinarily resident”.

130        

In section 239 (scheme sanction charge), in subsection (4), omit “, ordinarily

resident”.

131        

In section 242 (de-registration charge), in subsection (3), omit “, ordinarily

5

resident”.

132        

The amendments of Part 4 of FA 2004 made by this Part of this Schedule

have effect in relation to the tax year 2013-14 and any subsequent tax year.

FA 2005

133   (1)  

In section 30 of FA 2005 (qualifying trust gains: special capital gains tax

10

treatment), in subsection (1), for paragraph (c) substitute—

“(c)   

the trustees are resident in the United Kingdom during any

part of the tax year, and”.

      (2)  

The amendment made by this paragraph has effect in relation to the tax year

2013-14 and any subsequent tax year.

15

F(No.2)A 2005

134        

F(No.2)A 2005 is amended as follows.

135   (1)  

In section 7 (charge to income tax on lump sum), in subsection (3), omit “,

ordinarily resident”.

      (2)  

The amendment made by this paragraph has effect in relation to the tax year

20

2013-14 and any subsequent tax year.

136        

In section 18 (section 17(3): specific powers), in subsection (1)(f) and (g), omit

“ordinarily”.

CTA 2009

137        

CTA 2009 is amended as follows.

25

138   (1)  

In section 900 (which relates to roll-over relief for disposals of pre-FA 2002

assets), in subsection (2), omit “or ordinarily UK resident”.

      (2)  

The amendment made by this paragraph applies in relation to gains

accruing or treated as accruing on or after 6 April 2013.

139   (1)  

In section 936 (meaning of “UK estate” and “foreign estate”), in subsection

30

(3), omit “or not ordinarily UK resident”.

      (2)  

The amendment made by this paragraph applies if the tax year in question

begins on or after 6 April 2013.

140   (1)  

In section 947 (aggregate income of the estate), in subsection (2)(b)(i), omit

“who was ordinarily UK resident”.

35

      (2)  

The amendment made by this paragraph applies if the tax year in question

begins on or after 6 April 2013.

141   (1)  

In section 1009 (conditions relating to employee’s income tax position), in

subsection (5)(a), omit “and ordinarily UK resident”.

 
 

Finance Bill
Schedule 44 — Ordinary residence
Part 4 — Other amendments

579

 

      (2)  

The amendment made by this paragraph applies in relation to shares

acquired on or after 6 April 2013.

142   (1)  

In section 1017 (condition relating to employee’s income tax position), in

subsection (4)(a), omit “and ordinarily UK resident”.

      (2)  

The amendment made by this paragraph applies in relation to options

5

obtained on or after 6 April 2013.

143   (1)  

In section 1025 (additional relief available if shares acquired are restricted

shares), in subsection (5)(a), omit “and ordinarily UK resident”.

      (2)  

The amendment made by this paragraph applies in relation to restricted

shares acquired on or after 6 April 2013.

10

144   (1)  

In section 1032 (meaning of “chargeable event”), in subsection (5)(a), omit

“and ordinarily UK resident”.

      (2)  

The amendment made by this paragraph applies in relation to convertible

shares acquired on or after 6 April 2013.

CTA 2010

15

145   (1)  

Section 1034 of CTA 2010 (purchase by unquoted trading company of own

shares: requirements as to residence) is amended as follows.

      (2)  

In subsections (1) and (2), omit “and ordinarily resident”.

      (3)  

In subsection (3), omit “and ordinary residence” in both places.

      (4)  

Omit subsection (4).

20

      (5)  

The amendments made by this paragraph do not apply in relation to a

purchase by an unquoted trading company of its own shares if the purchase

takes place before 6 April 2013.

TIOPA 2010

146        

In section 363A of TIOPA 2010 (residence of offshore funds which are

25

undertakings for collective investment in transferable securities), in

subsection (3), for “neither resident nor ordinarily resident” substitute “not

resident”.

Constitutional Reform and Governance Act 2010

147   (1)  

In section 41 of the Constitutional Reform and Governance Act 2010 (tax

30

status of MPs and members of the House of Lords), in subsection (2), omit “,

ordinarily resident”.

      (2)  

The amendment made by this paragraph has effect for the purposes of a

member’s liability to income tax or capital gains tax for the tax year 2013-14

or any subsequent tax year.

35

 
 

Finance Bill
Schedule 45 — Controlled foreign companies

580

 

Schedule 45

Section 217

 

Controlled foreign companies

Relevant finance leases etc

1          

Part 9A of TIOPA 2010 (controlled foreign companies) is amended as

follows.

5

2          

Chapter 5 (the CFC charge gateway: non-trading finance profits) is amended

as follows.

3          

In section 371ED (arrangements in lieu of dividends) in subsection (1) omit

“(other than a relevant finance lease)”.

4     (1)  

Section 371EE (leases to UK resident companies etc) is amended as follows.

10

      (2)  

In subsection (2)(b)(i) for “which is the subject of the lease” substitute “(“the

relevant asset”) which is the subject of the lease or making (directly or

indirectly) an arrangement which would fall within subsection (3)”.

      (3)  

After subsection (2) insert—

“(3)   

An arrangement would fall within this subsection if—

15

(a)   

the arrangement would meet one or both of the following

requirements—

(i)   

it would not be a relevant finance lease;

(ii)   

it would not involve the CFC, and

(b)   

under the arrangement the other company would (directly or

20

indirectly) purchase rights to use the relevant asset.”

5          

Chapter 22 (supplementary provision) is amended as follows.

6          

In section 371VA (definitions) for the definition of “relevant finance lease”

substitute—

““relevant finance lease” is to be read in accordance with section

25

371VIA,”.

7     (1)  

Section 371VG (finance profits) is amended as follows.

      (2)  

In subsection (1) for paragraph (b) substitute—

“(b)   

which are included in the CFC’s assumed total profits for the

accounting period in question and which—

30

(i)   

arise from a relevant finance lease, but

(ii)   

are not trading profits.”

      (3)  

In subsection (4)(b) omit “an arrangement which would be”.

8     (1)  

Section 371VH (interests in companies) is amended as follows.

      (2)  

In subsection (9) omit the second sentence.

35

      (3)  

After subsection (10) insert—

“(10A)   

For the purposes of subsection (9), if for any relevant period accounts

for a loan creditor are not prepared in accordance with international

accounting standards or UK generally accepted accounting practice,

any question relating to generally accepted accounting practice is to

40

be determined in relation to the loan creditor for that period by

 
 

Finance Bill
Schedule 45 — Controlled foreign companies

581

 

reference to generally accepted accounting practice in relation to

accounts prepared in accordance with international accounting

standards.”

9          

After section 371VI insert—

“371VIA 

Relevant finance leases

5

(1)   

In this Part “relevant finance lease” means an arrangement falling

within subsection (2) or (3).

   

(An arrangement which is a loan relationship of any company does

not fall within either of those subsections.)

(2)   

An arrangement falls within this subsection if—

10

(a)   

it provides for an asset to be leased or otherwise made

available by a person (“the lessor”) to another person, and

(b)   

in accordance with generally accepted accounting practice, it

falls (or would fall) to be treated in the accounts of the lessor,

or of a person connected with the lessor, as a finance lease or

15

a loan.

(3)   

A hire-purchase, conditional sale or other arrangement relating to an

asset falls within this subsection if it does not fall within subsection

(2) but is of a similar character to an arrangement which would fall

within that subsection.

20

(4)   

If for any relevant period accounts for a person are not prepared in

accordance with international accounting standards or UK generally

accepted accounting practice, any question relating to generally

accepted accounting practice is to be determined for the purposes of

this section in relation to that person for that period by reference to

25

generally accepted accounting practice in relation to accounts

prepared in accordance with international accounting standards.

(5)   

In this section “accounts”, in relation to a company, includes

accounts relating to two or more companies of which that company

is one.”

30

Limit on double taxation relief in cases involving qualifying loan relationships of CFCs

10         

Part 2 of TIOPA 2010 (double taxation relief) is amended as follows.

11         

Chapter 2 (double taxation relief by way of credit) is amended as follows.

12         

In section 42 (limit on credit against corporation tax) after subsection (4)

insert—

35

“(5)   

See also section 49A which contains an additional limit on credit

allowed in certain cases involving CFCs.”

13         

After section 49 insert—

“49A    

Limit on credit in cases involving qualifying loan relationships of

CFCs

40

(1)   

This section applies if—

(a)   

a claim is made under Chapter 9 of Part 9A (controlled

foreign companies: exemptions for profits from qualifying

 
 

Finance Bill
Schedule 45 — Controlled foreign companies

582

 

loan relationships) in relation to an accounting period (“the

relevant period”) of a CFC (“the creditor CFC”),

(b)   

in the relevant period, the creditor CFC has a qualifying loan

relationship in relation to which another CFC is the ultimate

debtor by virtue of section 371IG(4) or (5), and

5

(c)   

a UK resident company (“the relevant UK company”) has

loan relationship credits which arise in the relevant period

from—

(i)   

loan B (see section 371IG(3)(b)), or

(ii)   

loans out of which loan B is wholly or partly funded

10

(directly or indirectly).

(2)   

So far as any credit allowed under section 18(2) to the relevant UK

company is referable to loan relationship credits falling within

subsection (1)(c) which arise in an accounting period of the relevant

UK company, the credit must not exceed—equation: cross[char[R],char[S]]

15

   

where—

R has the same meaning as in section 42(2), and

S is—

(a)   

the relevant UK company’s share of the relevant

profit amount (see subsection (4)), or

20

(b)   

if only X% of the total amount of the loan relationship

credits falling within subsection (1)(c) arises in the

accounting period, X% of the relevant UK company’s

share of the relevant profit amount.

   

(If the amount given by the formula above is nil, no credit is

25

allowed.)

(3)   

The limit on credit contained in subsection (2) is in addition to the

limit given by section 42(2).

(4)   

Take the following steps to determine the relevant profit amount and

the relevant UK company’s share of that amount.

30

   

Step 1

   

Determine the total amount of the loan relationship credits which

arise in the relevant period from loan B to the person who made loan

B.

   

Step 2

35

   

Deduct from the amount determined at step 1 above the credits from

the creditor CFC’s qualifying loan relationship determined at step 1

in section 371IF for the relevant period.

   

The result is the relevant profit amount.

   

Step 3

40

   

On a just and reasonable basis, apportion the relevant profit amount

amongst all the persons falling within subsection (5) (although the

amount apportioned to a person may be nil).

   

The relevant UK company’s share of the relevant profit amount is the

amount apportioned to it (and is nil if no amount is apportioned to

45

it).

 
 

Finance Bill
Schedule 45 — Controlled foreign companies

583

 

(5)   

The following persons (apart from the creditor CFC) fall within this

subsection—

(a)   

the person who made loan B, and

(b)   

any person who has made or received a loan out of which

loan B is wholly or partly funded (directly or indirectly).

5

(6)   

In this section—

(a)   

references to loan B do not include any part of loan B—

(i)   

which loan A (see section 371IG(3)(a)) is not made

and used to fund, or

(ii)   

in relation to which the requirement of section

10

371IG(3)(c) is not met,

(b)   

“loan relationship credit” means, in relation to a person, a

credit which the person has under Part 5 of CTA 2009 or

would have were the person a UK resident company within

the charge to corporation tax, and

15

(c)   

“loan” has the same meaning as it has in Chapter 9 of Part

9A.”

14    (1)  

In Chapter 3 (miscellaneous provisions), section 112 (deduction from

income for foreign tax (instead of credit against UK tax)) is amended as

follows.

20

      (2)  

After subsection (3) insert—

“(3A)   

Subsection (3B) applies if—

(a)   

the requirements of section 49A(1)(a) to (c) are met,

(b)   

amounts have been paid in respect of non-UK tax on loan

relationship credits falling within section 49A(1)(c) which

25

arise in an accounting period of the relevant UK company,

and

(c)   

apart from subsection (3B), Z would exceed equation: cross[char[R],char[S]]

Z is—

(i)   

the total amount of any reductions under

30

subsection (1) for amounts paid in respect of

that non-UK tax, less

(ii)   

the total amount of any increases under

subsection (3) for payments made by

reference to that non-UK tax, and

35

R and S have the same meaning as in section 49A(2).

(3B)   

The total amount of the reductions under subsection (1) is to be

reduced so that Z equals equation: cross[char[R],char[S]]

      (3)  

In subsection (6), for “subsection (1)” substitute “this section”.

Miscellaneous

40

15         

In Part 6 of TIOPA 2010 (tax arbitrage), in section 236 (deduction schemes

involving hybrid entities) for subsection (4) substitute—

“(4)   

Condition B is not met just because the party’s profits or gains are

subject to a charge under the law of a territory outside the United

Kingdom (by whatever name known) which is similar to the CFC

45

charge (see Part 9A).”

 
 

Finance Bill
Schedule 45 — Controlled foreign companies

584

 

16         

Part 9A of TIOPA 2010 (controlled foreign companies) is amended as

follows.

17         

In Chapter 3 (the CFC charge gateway: determining which (if any) of

Chapters 4 to 8 applies) in section 371CE (does Chapter 6 apply?) for

subsections (4) and (5) substitute—

5

“(4)   

The CFC is a “group treasury company” in the accounting period if,

assuming the relevant period were the accounting period—

(a)   

the CFC would be a group treasury company in the relevant

period in accordance with section 316(2) (group treasury

companies), and

10

(b)   

throughout the relevant period, the requirements of section

316(3)(a) and (b) would be met in relation to the CFC as a

group treasury company.

(5)   

For the purpose of applying section 316 in accordance with

subsection (4)—

15

(a)   

section 316(2) applies with the omission of paragraph (d),

and

(b)   

section 337(1) (definition of “the worldwide group”) applies

with the omission of paragraph (a).”

18         

Chapter 9 (exemptions for profits from qualifying loan relationships) is

20

amended as follows.

19         

In section 371IB (loans funded out of qualifying resources) after subsection

(9) insert—

“(9A)   

Subsection (9) does not apply if the debt incurred by the member of

the CFC group as mentioned in subsection (8) represents the

25

principal on a loan made to the member to which subsection (9B) or

(9D) applies.

(9B)   

This subsection applies to a loan if the member repays it within 48

hours of the loan being made.

(9C)   

But subsection (9B) does not apply to a loan if the repayment of the

30

loan within the 48 hours occurs under, or is connected (directly or

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

main purposes, of which is to ensure that subsection (9) does not

apply because of—

(a)   

the loan, or

35

(b)   

any other debt which a member of the CFC group incurs (or

is expected to incur) in the United Kingdom.

(9D)   

This subsection applies to a loan if—

(a)   

there is an issue of shares which meets the requirements of

subsection (7)(c)(i) to (iii),

40

(b)   

the loan was made before the issue of shares but with the

expectation that it would be repaid by the member out of

funds deriving (directly or indirectly) from the issue of

shares,

(c)   

the loan is repaid by the member out of such funds within the

45

period of 6 months beginning with the day on which the loan

was made, and

 
 

 
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Revised 8 May 2013