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Finance Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge

590

 

Schedule 47

Section 226

 

Corporation tax: deferral of payment of exit charge

Amendments of TMA 1970

1          

TMA 1970 is amended in accordance with paragraphs 2 to 6.

2          

After section 59F insert—

5

“59FA   

 Exit charge payment plans

(1)   

Schedule 3ZB contains provisions about exit charge payment plans

in accordance with which companies may defer payment of certain

corporation tax.

(2)   

Parts 1 and 2 of the Schedule each make provision about the

10

circumstances in which an exit charge payment plan may be entered

into, and about determining the amount of corporation tax that may

be deferred—

(a)   

see Part 1 in relation to a company which ceases to be resident

in the United Kingdom, and

15

(b)   

see Part 2 in relation to a company which is not resident in the

United Kingdom but which carries on, or has carried on, a

trade in the United Kingdom through a permanent

establishment there.

(3)   

Part 3 of the Schedule contains provision about—

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(a)   

entering into an exit charge payment plan,

(b)   

the effect of such a plan,

(c)   

the content of such a plan, and

(d)   

the methods in accordance with which tax deferred under

such a plan may be paid.”

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3          

Immediately before section 59G insert—

“Managed payment plans”.

4     (1)  

Section 109B (provision for securing payment by company of outstanding

tax) is amended as follows.

      (2)  

In subsection (1), at the end insert “, subject to subsection (5A).”

30

      (3)  

In subsection (4)(b), at the end insert “(which may include a proposal to

enter into an exit charge payment plan in accordance with Schedule 3ZB).”

      (4)  

After subsection (5) insert—

“(5A)   

Condition D does not apply to the extent that payment of the tax is

to be secured by the company entering into an exit charge payment

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plan in accordance with Schedule 3ZB.”

5     (1)  

Section 109E (liability of other persons for unpaid tax) is amended as

follows.

      (2)  

After subsection (1) insert—

“(1A)   

The reference in subsection (1)(b) to the time when tax becomes

40

payable is a reference to—

 
 

Finance Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge

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(a)   

in a case where an exit charge payment plan has been entered

into in accordance with Schedule 3ZB in respect of the tax, the

time when the tax becomes payable under the plan, and

(b)   

in any other case, the time when the tax becomes payable in

accordance with section 59D or 59E.”

5

      (3)  

In subsection (2), for “the time when the amount of the tax is finally

determined” substitute “the relevant time”.

      (4)  

After subsection (2) insert—

“(2A)   

In subsection (2) the “relevant time” means—

(a)   

in a case where an exit charge payment plan has been entered

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into in accordance with Schedule 3ZB in respect of the tax, the

later of—

(i)   

the first day after the period of 12 months beginning

immediately after the migration accounting period

(as defined in Part 1 or 2 of Schedule 3ZB, as the case

15

may be), and

(ii)   

the date on which the tax is payable under the plan,

and

(b)   

in any other case, the time when the amount of the tax is

finally determined.”

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6          

After Schedule 3ZA insert—

“Schedule 3ZB

Exit charge payment plans

Part 1

company ceasing to be resident in UK

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Circumstances in which exit charge payment plan may be entered into

1     (1)  

This Part of this Schedule and Part 3 of this Schedule apply where

an eligible company—

(a)   

ceases to be resident in the United Kingdom,

(b)   

on ceasing to be so resident, becomes resident in another

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EEA state, and

(c)   

is liable to pay qualifying corporation tax in 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

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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.

      (4)  

Condition A is that before the end of the period of 9 months

beginning immediately after the migration accounting period—

40

(a)   

an application to enter into the exit charge payment plan is

made to Her Majesty’s Revenue and Customs, and

 
 

Finance Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge

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(b)   

the application contains details of all the matters which are

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.

5

      (6)  

Condition C is that, on becoming resident in the other EEA state,

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—

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“double taxation arrangements” means arrangements which

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;

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“eligible company” means a company that has a right to

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.

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      (8)  

In this Part of this Schedule—

(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

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(ii)   

in a case not falling within sub-paragraph (i), the

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

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(c)   

references to Part 3 of this Schedule are to Part 3 of this

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

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where—

CT1 is the corporation tax which the company is liable to pay

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,

40

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

corporation tax for the period).

      (2)  

The amount of qualifying corporation tax which the company is

45

liable to pay is the difference between CT1 and CT2.

      (3)  

“Exit charge provisions” means—

 
 

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Schedule 47 — Corporation tax: deferral of payment of exit charge

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(a)   

section 185 of the 1992 Act,

(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,

5

(d)   

section 333 of that Act,

(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

10

of section 862(1)(c).

      (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

15

3     (1)  

This paragraph applies for the purposes of this Part of this

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

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exit charge provisions, and in particular—

(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

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2(3)(a), (b) or (c),

(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),

30

(c)   

“intangible exit charge assets” means—

(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

35

(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

provision mentioned in paragraph 2(3)(a) or (b).

      (3)  

In sub-paragraph (2)—

40

(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

section 881 of CTA 2009).

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Finance Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge

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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

where—

5

(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

there,

10

(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

respect of the migration accounting period.

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      (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

before the end of the period of 9 months beginning immediately

20

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

required by Part 3 of this Schedule to be specified in the

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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—

(i)   

a deemed disposal and reacquisition of the asset or

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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),

(b)   

the event—

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(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

resident in a territory outside the European Economic Area

40

for the purposes of any double taxation arrangements.

      (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

45

company” have the meanings given in paragraph 1(7).

 
 

Finance Bill
Schedule 47 — Corporation tax: deferral of payment of exit charge

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      (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,

5

(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.

10

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

15

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

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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.

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      (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,

30

(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

35

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.

      (2)  

“Exit charge assets” and “exit charge liabilities” means any PE

40

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

exit charge assets, other than pre-FA 2002 intangible fixed

45

assets, in respect of which income, profits or gains arise by

 
 

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Schedule 47 — Corporation tax: deferral of payment of exit charge

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virtue of the exit charge provision mentioned in paragraph

5(3)(a) or (b);

(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

5

mentioned in paragraph 5(3)(c) or (d);

(c)   

“intangible exit charge assets” means—

(i)   

those exit charge assets in respect of which income,

profits or gains arise by virtue of the exit charge

provision mentioned in paragraph 5(3)(e), and

10

(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

provision mentioned in paragraph 5(3)(a).

      (3)  

In sub-paragraph (2)—

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(a)   

“exit charge provisions” has the meaning given in

paragraph 5(3);

(b)   

“pre-FA 2002 intangible fixed asset” means an intangible

fixed asset which is a pre-FA 2002 asset (as defined in

section 881 of CTA 2009).

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Part 3

Entering into an exit charge payment plan

Introduction

7     (1)  

As to when this Part of this Schedule applies, see—

(a)   

Part 1 of this Schedule (companies ceasing to be resident in

25

the United Kingdom), and

(b)   

Part 2 of this Schedule (companies with permanent

establishments in the United Kingdom).

      (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

30

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

to which Part 2 of this Schedule applies, terms and expressions

which are used in this Part and in that Part have the same

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meanings in this Part as in that Part.

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—

40

(a)   

the company agrees to pay, and an officer of Revenue and

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,

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