Finance Bill

Session 2013 - 14
Internet Publications
Other Bills before Parliament

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—
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
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
      (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