Finance Bill

House of Commons

Session 2013 - 14
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 27 — Manufactured payments
Part 3 — Consequential etc amendments
372

substitute—
“(5)
Subsections (6) to (10) apply for the purposes of sections 656 and 657
and this section.
(6)
“UK shares” means shares in a UK resident company.
(7)
“UK securities” means securities of—
5
(a)
the government of the United Kingdom,
(b)
a local authority in the United Kingdom,
(c)
another public authority in the United Kingdom, or
(d)
a UK resident company or other UK resident body.
(8)
But “UK securities” does not include UK shares.
10
(9)
“Overseas securities” means shares, stock or other securities issued
by—
(a)
a government, local authority or other public authority of a
territory outside the United Kingdom, or
(b)
another non-UK resident body of persons.
15
(10)
“Overseas securities” includes shares in a non-UK resident
company.”
21
In section 918(1) (manufactured dividends on UK shares: REITs), for
paragraph (a) substitute—
“(a)
a person pays a manufactured payment as mentioned in
20
section 614ZC(1) and the amount payable is representative of
a dividend (a “manufactured dividend”), and”.
22
In section 919 (manufactured interest on UK securities)—
(a)
for subsection (1) substitute—
“(1)
This section applies if—
25
(a)
a person pays a manufactured payment as mentioned
in section 614ZC(1),
(b)
the amount payable is representative of interest on
UK securities (“manufactured interest”), and
(c)
the person —
30
(i)
is UK resident, or
(ii)
pays the manufactured interest in the course
of a trade carried on in the United Kingdom
through a branch or agency.”,
(b)
in subsection (4), omit the words from “section 583” to “special
35
cases)”, and
(c)
after subsection (5) insert—
“(6)
In subsection (1) “UK securities” means securities of—
(a)
the government of the United Kingdom,
(b)
a local authority in the United Kingdom,
40
(c)
another public authority in the United Kingdom, or
(d)
a UK resident company or other UK resident body.
(7)
But “UK securities” does not include shares in a UK resident
company.

Finance Bill
Schedule 27 — Manufactured payments
Part 3 — Consequential etc amendments
373

(8)
In this section “securities” includes loan stock or any similar
security.”
23
Omit section 920 (foreign payers of manufactured interest: the reverse
charge).
24
In section 921 (cases where interest on underlying securities paid gross), in
5
subsection (3), for the words from ““securities”” to the end substitute
““manufactured interest” has the same meaning as in section 919.”
25
Omit sections 922 to 925 (manufactured overseas dividends).
26
In section 925A(2) (creditor repos), for “to 925” substitute “, 919 and 921”.
27
Omit section 925B (debtor repos).
10
28
In section 925C (actual payments ignored)—
(a)
in the heading, omit “or 925B”,
(b)
omit “or 925B(2)”, and
(c)
for “to 925” substitute “, 919 and 921”.
29
In section 926 (interpretation of Chapter 9 of Part 15), omit subsections (1)
15
and (1A).
30
In Schedule 1 (minor and consequential amendments), omit paragraph
335(1) to (4) and (6) to (8).
31
In Schedule 2 (transitionals and savings), omit paragraphs 108 to 111 (and
the headings “Part 12”, “Manufactured payments and repos” and “Tax
20
credits: stock lending arrangements and repos” immediately preceding
paragraph 108).
32
In Schedule 4 (index of defined expressions), omit the entries for—
“buying back securities, in the context of a repo (in Part 11)”,
“company UK REIT (in Chapter 2 of Part 11)”,
25
“gross amount (in Chapter 2 of Part 11)”,
“group (in Chapter 2 of Part 11)”,
“group UK REIT (in Chapter 2 of Part 11)”,
“manufactured dividend (in Chapter 2 of Part 11)”,
“manufactured dividend (in Chapter 3 of Part 11)”,
30
“manufactured interest (in Chapter 2 of Part 11)”,
“manufactured overseas dividend (in Chapter 2 of Part 11)”,
“overseas dividend (in Part 11)”,
“overseas dividend (in Chapter 9 of Part 15)”,
“overseas securities (in Part 11)”,
35
“overseas tax (in Chapter 2 of Part 11)”,
“overseas tax (in Chapter 9 of Part 15)”,
“overseas tax credit (in Chapter 2 of Part 11)”,
“prescribed (in Chapter 2 of Part 11)”,
“principal company (in Chapter 2 of Part 11)”,
40
“principal company (in Chapter 9 of Part 15)”,
“property rental business (in Chapter 2 of Part 11)”,
“property rental business (in Chapter 9 of Part 15)”,
“related agreements (in Part 11)”,

Finance Bill
Schedule 27 — Manufactured payments
Part 3 — Consequential etc amendments
374

“relevant withholding tax (in Chapter 2 of Part 11)”,
“repo (in Part 11)”,
“the rules about manufactured payments (in Chapter 4 of Part 11)”,
“stock lending arrangement (in Part 11)”,
“trade carried on through a branch or agency (in Chapter 2 of Part 11)”,
5
“transfer (in Chapter 2 of Part 11)”,
“UK securities (in Part 11)”, and
“UK shares (in Part 11)”.
FA 2008
33    (1)
FA 2008 is amended as follows.
10
      (2)
In Schedule 12 (tax credit for certain foreign distributions), omit paragraphs
26, 27(2)(a) and (c) and (3), 28(2)(a) and (c) and (3), 29(2)(a), (c)(i) and (d) and
(3) and 30.
      (3)
In Schedule 23 (manufactured payments: anti avoidance), omit paragraphs
1 to 4, 6, 7 and 9 to 11.
15
CTA 2009
34
CTA 2009 is amended as follows.
35
In section 539 (introduction to Chapter about manufactured interest), omit
subsection (7).
36
In section 540(3) (manufactured interest treated as interest under loan
20
relationship), omit “and to section 799 of CTA 2010”.
37
In section 550 (which makes provision about the effect of the sale of
securities on a borrower)—
(a)
in subsection (4), for “(6)” substitute “(5C)”,
(b)
after subsection (5A) insert—
25
“(5B)
Nothing in subsection (3) entitles the borrower to double
taxation relief in respect of any income payable in respect of
overseas securities.
(5C)
But nothing in subsection (3) affects the entitlement of the
borrower to double taxation relief in respect of any overseas
30
tax deducted from any amount representative of income
payable in respect of overseas securities.
(5D)
In subsection (5C) “overseas tax” means tax under the law of
a territory outside the United Kingdom.”, and
(c)
omit subsection (6).
35
38
In section 1221(1) (amounts treated as expenses of management), for
paragraph (i) substitute—
“(i)
section 814C(5) of CTA 2010 (treatment of payer of
manufactured dividend),”.
39
In section 1248 (expenses in connection with arrangements for securing a tax
40
advantage)—
(a)
omit subsection (3), and

Finance Bill
Schedule 27 — Manufactured payments
Part 3 — Consequential etc amendments
375

(b)
in subsection (5), omit the definition of “relevant tax relief”.
FA 2009
40
In Schedule 19 to FA 2009 (income tax credits for foreign distributions), omit
paragraphs 4 and 13(b).
CTA 2010
5
41
CTA 2010 is amended as follows.
42
In section 1 (overview of Act), in subsection (4)—
(a)
omit paragraph (d), and
(b)
before paragraph (e) insert—
“(da)
manufactured dividends (see Part 17A),”.
10
43
Omit Part 17 (manufactured payments and repos).
44    (1)
Section 1109(5) (provisions to which section 1109 is subject) is amended as
follows.
      (2)
Omit paragraphs (a) to (c) (and the word “and” at the end of paragraph (c)).
      (3)
Immediately before subsection (5)(d) insert—
15
“(ca)
section 814D (no tax credits for recipient of manufactured
dividend), and”.
45
In Schedule 1 (minor and consequential amendments), omit paragraphs 259,
537, 538, 539(b) and (c), 635, 636 and 689(a) and (b)(i).
46
In Schedule 2 (transitionals and savings), omit Part 17 (manufactured
20
payments and repos).
47
In Schedule 4 (index of defined expressions), omit the entries for—
“creditor quasi-repo (in Chapter 5 of Part 17)”,
“creditor repo (in Chapter 5 of Part 17)”,
“debtor quasi-repo (in Chapter 5 of Part 17)”,
25
“debtor repo (in Chapter 5 of Part 17)”,
“manufactured dividend (in Part 17)”,
“manufactured overseas dividend (in Part 17)”,
“overseas dividend (in Part 17)”,
“overseas securities (in Part 17)”,
30
“overseas tax (in Part 17)”,
“prescribed (in Chapter 4 of Part 17)”,
“stock lending arrangement (in Chapter 5 of Part 17)”, and
“UK shares (in Part 17)”.
TIOPA 2010
35
48    (1)
TIOPA 2010 is amended as follows.
      (2)
In section 85A(4) (schemes involving deemed foreign tax), omit paragraph
(b) of the definition of “real foreign tax”.
      (3)
In Schedule 7 (miscellaneous relocations), omit paragraph 113.

Finance Bill
Schedule 28 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
376

      (4)
In Schedule 8 (minor and consequential amendments), omit paragraph 82.
FA 2011
49
In Schedule 13 to FA 2011 (profits of foreign permanent establishments),
omit paragraphs 22 to 24.
FA 2012
5
50    (1)
FA 2012 is amended as follows.
      (2)
Omit section 22 (treatment of the receipt of manufactured overseas
dividends).
      (3)
In section 78(3) (amounts which are deemed BLAGAB management expense
for accounting period), for “783(6), 785(4) or 791(6)” substitute “814C(7)”.
10
      (4)
In Schedule 16 (minor and consequential amendments), omit paragraphs
220 to 223.
Part 4
Commencement
51
The amendments made by Parts 1 and 2 of this Schedule have effect in
15
relation to any payment representative of a dividend or interest which is
made on or after 1 January 2014.
52
The amendments made by Part 3 of this Schedule come into force on that
date.
Schedule 28
20
Section 77

Close companies
Part 1
Amendments of Part 10 of CTA 2010
1
Part 10 of CTA 2010 (close companies) is amended as follows.
2     (1)
In section 438 (overview), after subsection (2) insert—
25
“(2A)
Chapter 3A imposes a charge to tax in connection with other
arrangements involving close companies and participators.
(2B)
Chapter 3B makes provision about the treatment of certain
repayments and return payments made in respect of loans, advances
and other arrangements.”
30
      (2)
The amendment made by this paragraph is treated as having come into force
on 20 March 2013.
3     (1)
In section 455 (charge to tax in case of loan to participator), for subsection (1)

Finance Bill
Schedule 28 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
377

substitute—
“(1)
This section applies if a close company makes a loan or advances
money to—
(a)
a relevant person who is a participator in the company or an
associate of such a participator,
5
(b)
the trustees of a settlement one or more of the trustees or
actual or potential beneficiaries of which is a participator in
the company or an associate of such a participator, or
(c)
a limited liability partnership or other partnership one or
more of the partners in which is an individual who is—
10
(i)
a participator in the company, or
(ii)
an associate of an individual who is such a
participator.”
      (2)
The amendment made by this paragraph has effect in relation to a loan or
advance made on or after 20 March 2013.
15
4     (1)
In section 459(2) (application of other provisions where loan treated as made
to participator), after “458” insert “and 464C and 464D”.
      (2)
The amendment made by this paragraph is treated as having come into force
on 20 March 2013.
5     (1)
After Chapter 3 insert—
20
“Chapter 3A
Charge to tax: other arrangements
464A
Charge to tax: arrangements conferring benefit on participator
(1)
This section applies if—
(a)
a close company is at any time a party to tax avoidance
25
arrangements, and
(b)
as a result of those arrangements, a benefit is conferred
(whether directly or indirectly) on an individual who is—
(i)
a participator in the company, or
(ii)
an associate of such a participator.
30
(2)
But this section does not apply if, or to the extent that, the conferral
of the benefit gives rise to—
(a)
a charge to tax on the company under section 455, or
(b)
a charge to income tax on the participator or associate.
(3)
There is due from the company, as if it were an amount of
35
corporation tax chargeable on the company for the accounting
period in which the benefit is conferred on the participator or
associate, an amount equal to 25% of the value of the benefit
conferred.
(4)
Tax due under this section in relation to a benefit conferred on a
40
participator or associate is due and payable in accordance with
section 59D of TMA 1970 on the day following the end of the period
of 9 months from the end of the accounting period in which the
benefit was conferred.

Finance Bill
Schedule 28 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
378

(5)
If a company (C) controls another company (D), a participator in C is
to be treated for the purposes of this section as being also a
participator in D.
(6)
For the purposes of this section, arrangements are “tax avoidance
arrangements” if the main purpose, or one of the main purposes, of
5
the arrangements is—
(a)
to avoid or reduce, or obtain a relief or increased relief from,
a charge to tax on the company under section 455, or
(b)
to obtain a tax advantage for the participator or associate.
(7)
In this section—
10
“arrangements” includes any arrangements, scheme or
understanding of any kind, whether or not legally
enforceable, involving a single transaction or two or more
transactions, and
“tax advantage” has the meaning given in section 1139, reading
15
references to tax in that section as references to income tax.
464B
Relief in case of return payment to company
(1)
Subsection (2) applies if a benefit has been conferred which gave rise
to a charge to tax on the company under section 464A.
(2)
Relief is to be given from that tax, or a proportionate part of it, if—
20
(a)
a payment (“the return payment”) is made to the company in
respect of the benefit, and
(b)
no consideration is given for the return payment.
(3)
Relief under this section is to be given on a claim, which must be
made within 4 years from the end of the financial year in which the
25
return payment is made to the company.
(4)
Subsection (5) applies if the return payment is made on or after the
day on which tax under section 464A becomes due and payable in
relation to the benefit.
(5)
Relief in respect of the return payment may not be given under this
30
section at any time before the end of the period of 9 months from the
end of the accounting period in which the return payment was made.
(6)
Schedule 1A to TMA 1970 (claims and elections not included in
return) applies to a claim for relief under this section unless—
(a)
the claim is included (by amendment or otherwise) in the
35
return for the period in which the benefit was conferred, and
(b)
the relief may be given at the time the claim is made.”
      (2)
The amendment made by this paragraph has effect in relation to
arrangements to which a close company becomes a party on or after 20
March 2013.
40