Finance Bill (HC Bill 47)

(5) For the purposes of subsection (3), where a company has an accounting period
beginning before 1 April 2016 and ending on or after that date (“the straddling
period”)—

(a) so much of the straddling period as falls before 1 April 2016, and so
10much of that period as falls on or after that date, are treated as separate
accounting periods, and

(b) any amounts brought into account for the purposes of calculating for
corporation tax purposes the profits of a property business for the
straddling period are apportioned to the two separate accounting
15periods in accordance with section 1172 of CTA 2010 (time basis) or, if
that method produces a result that is unjust or unreasonable, on a just
and reasonable basis.

Transfer pricing

74 Transfer pricing: application of OECD principles

(1) 20In section 164(4) of TIOPA 2010 (Part to be interpreted in accordance with
OECD principles)—

(a) in paragraph (a) after “2010” insert “as revised by the report, Aligning
Transfer Pricing Outcomes with Value Creation, Actions 8-10 - 2015
Final Reports, published by the OECD on 5 October 2015”, and

(b) 25in the words after paragraph (b)—

(i) for “such material” substitute “material which is”, and

(ii) for “as may be so designated” substitute “and which is
designated for the time being by order made by the Treasury”.

(2) In section 357GE(1) of CTA 2010 (other interpretation), in the definition of “the
30OECD transfer pricing guidelines”, for the words from “means” to the end
substitute “has the same meaning as “the transfer pricing guidelines” in section
164 of TIOPA 2010”.

(3) The amendments made by subsection (1) have effect (in relation to provision
made or imposed at any time)—

(a) 35for corporation tax purposes, in relation to accounting periods
beginning on or after 1 April 2016, and

(b) for income tax purposes, in relation to the tax year 2016-17 and
subsequent tax years.

(4) The amendment made by subsection (2) has effect in relation to accounting
40periods beginning on or after 1 April 2016.

Transactions in UK land

75 Corporation tax: territorial scope etc

(1) Section 5 of CTA 2009 (territorial scope of charge) is amended in accordance
with subsections (2) to (4).

(2) 5For subsection (2) substitute—

“(2) A non-UK resident company is within the charge to corporation tax
only if—

(a) it carries on a trade of dealing in or developing UK land (see
section 5B), or

(b) 10it carries on a trade in the United Kingdom (other than a trade
of dealing in or developing UK land) through a permanent
establishment in the United Kingdom.””

(3) After subsection (2) insert—

“(2A) A non-UK resident company which carries on a trade of dealing in or
15developing UK land is chargeable to corporation tax on all its profits
wherever arising that are profits of that trade.””

(4) In subsection (4), after “(1)” insert “, (2A)”.

(5) After section 5 of CTA 2009 insert—

“5A Arrangements for avoiding tax

(1) 20Subsection (3) applies if a company has entered into an arrangement
the main purpose or one of the main purposes of which is to obtain a
relevant tax advantage for the company.

(2) In subsection (1) the reference to obtaining a relevant tax advantage
includes obtaining a relevant tax advantage by virtue of any provisions
25of double taxation arrangements, but only in a case where the relevant
tax advantage is contrary to the object and purpose of the provisions of
the double taxation arrangements (and subsection (3) has effect
accordingly, regardless of section 6(1) of TIOPA 2010).

(3) The relevant tax advantage is to be counteracted by means of
30adjustments.

(4) For this purpose adjustments may be made (whether by an officer of
Revenue and Customs or by the company) by way of an assessment,
the modification of an assessment, amendment or disallowance of a
claim, or otherwise.

(5) 35In this section “relevant tax advantage” means a tax advantage in
relation to corporation tax to which the company is chargeable (or
would without the tax advantage be chargeable) by virtue of section
5(2A).

(6) In this section—

• 40“arrangement” (except in the phrase “double taxation
  arrangements”) includes any agreement, understanding,
  scheme, transaction or series of transactions, whether or not
  legally enforceable;

Finance BillPage 142

• “double taxation arrangements” means arrangements which have
  effect under section 2(1) of TIOPA 2010 (double taxation relief
  by agreement with territories outside the United Kingdom);

• “tax advantage” has the meaning given by section 1139 of CTA
  52010.

5B Trade of dealing in or developing UK land

(1) A non-UK resident company’s “trade of dealing in or developing UK
land” consists of —

(a) any activities falling within subsection (2) which it carries on,
10and

(b) any activities from which profits, gains or losses arise which are
treated under Part 8ZB of CTA 2010 as profits or losses of the
company’s trade of dealing in or developing UK land.

(2) The activities within this subsection are—

(a) 15dealing in UK land;

(b) developing UK land for the purpose of disposing of it.

(3) In this section “land” includes—

(a) buildings and structures,

(b) any estate, interest or right in or over land, and

(c) 20land under the sea or otherwise covered by water.

(4) In this section—

• “disposal” is to be interpreted in accordance with section 356OQ
  of CTA 2010;

• “UK land” means land in the United Kingdom.””

(6) 25In section 3 of CTA 2009 (exclusion of charge to income tax), in subsection (1),
for paragraph (b) substitute—

“(b) the company is not UK resident and—

(i) the income is profits of a trade of dealing in or
developing UK land, or

(ii) 30the income is within its chargeable profits as defined by
section 19.””

(7) In section 18A of CTA 2009 (exemption for profits or losses of foreign
permanent establishments), after subsection (2) insert—

“(2A) But profits and losses are not to be left out of account as mentioned in
35subsection (2) so far as they are, or would if the company were non-UK
resident be, profits of the company’s trade of dealing in or developing
UK land (as defined in section 5B).””

(8) In section 19 of CTA 2009 (chargeable profits)—

(a) in subsection (2) for “company’s chargeable profits” substitute
40“company’s “chargeable profits””;

(b) after subsection (2) insert—

“(2A) But the company’s “chargeable profits” do not include profits of
a trade of dealing in or developing UK land (and accordingly
such profits are not attributable to any permanent
45establishment of the company).””

(9) In section 189 of CTA 2009 (post-cessation receipts: extent of charge to tax), in
subsection (4), at the end insert “other than a company’s trade of dealing in or
developing UK land”.

(10) In section 107 of CTA 2010 (restrictions on losses etc surrenderable by non-UK
5resident), in subsection (1), for the words from “non-UK resident” to the end
substitute “non-UK resident company—

(a) carrying on a trade of dealing in or developing UK land, or

(b) carrying on a trade in the United Kingdom through a
permanent establishment.””

(11) 10In section 1119 of CTA 2010 (definitions for purposes of Corporation Tax Acts),
at the appropriate place insert—

• “““trade of dealing in or developing UK land”, in relation to a non-
  UK resident company, has the meaning given by section 5B of
  CTA 2009,”.”

76 15Corporation tax: transactions in UK land

(1) In CTA 2010, after Part 8ZA insert—

““Part 8ZB Transactions in UK land

Introduction

356OA 20Overview of Part

This Part contains provision about the corporation tax treatment of
certain profits and gains realised from disposals concerned with land in
the United Kingdom.

Amounts treated as profits of a trade

356OB 25 Disposals of land in the United Kingdom

(1) Section 356OC(1) applies (subject to subsection (3) of that section) if—

(a) a person within subsection (2)(a), (b) or (c) realises a profit or
gain from a disposal of any land in the United Kingdom, and

(b) any of conditions A to D is met in relation to the land.

(2) 30The persons referred to in subsection (1) are—

(a) the person acquiring, holding or developing the land,

(b) a person who is associated with the person in paragraph (a) at a
relevant time, and

(c) a person who is a party to, or concerned in, an arrangement
35within subsection (3).

(3) An arrangement is within this subsection if—

(a) it is effected with respect to all or part of the land, and

(b) it enables a profit or gain to be realised—

(i) by any indirect method, or

(ii) 40by any series of transactions.

(4) Condition A is that the main purpose, or one of the main purposes, of
acquiring the land was to realise a profit or gain from disposing of the
land.

(5) Condition B is that the main purpose, or one of the main purposes, of
5acquiring any property deriving its value from the land was to realise
a profit or gain from disposing of the land.

(6) Condition C is that the land is held as trading stock.

(7) Condition D is that (in a case where the land has been developed) the
main purpose, or one of the main purposes, of developing the land was
10to realise a profit or gain from disposing of the land when developed.

(8) In this section “relevant time” means any time in the period beginning
when the activities of the project begin and ending 6 months after the
disposal mentioned in subsection (1).

(9) In this section “the project” means all activities carried out for any of the
15following purposes—

(a) the purposes of dealing in or developing the land, and

(b) any other purposes mentioned in Conditions A to D.

(10) For the purposes of this section a person (“A”) is associated with
another person (“B”) if—

(a) 20A is connected with B by virtue of any of subsections (5) to (7)
of section 1122 (read in accordance with section 1123), or

(b) A is related to B (see section 356OT).

356OC Disposals of land: profits treated as trading profits

(1) The profit or gain is to be treated for corporation tax purposes as profits
25of a trade carried on by the chargeable company (see section 356OG).

(2) If the chargeable company is non-UK resident, that trade is the
company’s trade of dealing in or developing UK land (as defined in
section 5B of CTA 2009).

(3) But subsection (1) does not apply to a profit or gain so far as it would
30(apart from this section) be brought into account as income in
calculating profits (of any person)—

(a) for corporation tax purposes, or

(b) for income tax purposes.

(4) The profits are treated as arising in the accounting period of the
35chargeable company in which the profit or gain is realised.

(5) This section applies in relation to gains which are capital in nature as it
applies in relation to other gains.

356OD Disposals of property deriving its value from land in the United
Kingdom

(1) 40Section 356OE applies (subject to subsection (3) of that section) if—

(a) a person realises a profit or gain from a disposal of any property
which (at the time of the disposal) derives at least 50% of its
value from land in the United Kingdom,

(b) the person is a party to, or concerned in, an arrangement
concerning some or all of the land mentioned in paragraph (a)
(“the project land”), and

(c) the arrangement meets the condition in subsection (2).

(2) 5The condition is that the main purpose, or one of the main purposes, of
the arrangement is to—

(a) deal in or develop the project land, and

(b) realise a profit or gain from a disposal of property deriving the
whole or part of its value from that land.

356OE 10 Disposals within section 356OD: profits treated as trading profits

(1) The relevant amount is to be treated for corporation tax purposes as
profits of a trade carried on by the chargeable company.

(2) If the chargeable company is non-UK resident, that trade is the
company’s trade of dealing in or developing UK land.

(3) 15But subsection (1) does not apply to an amount so far as it would (apart
from this section) be brought into account as income in calculating
profits (of any person)—

(a) for corporation tax purposes, or

(b) for income tax purposes.

(4) 20The profits are treated as arising in the accounting period of the
chargeable company in which the profit or gain is realised.

(5) In this section the “relevant amount” means so much (if any) of the
profit or gain mentioned in section 356OD(1) as is attributable, on a just
and reasonable apportionment, to the relevant UK assets.

(6) 25In this section “the relevant UK assets” means any land in the United
Kingdom from which the property mentioned in section 356OD(1)
derives any of its value (at the time of the disposal mentioned in that
subsection).

(7) This section applies in relation to gains which are capital in nature as it
30applies in relation to other gains.

356OF Profits and losses

(1) Sections 356OB to 356OE have effect as if they included provision about
losses corresponding to the provision they make about profits and
gains.

(2) 35Accordingly, in the following sections of this Part references to a “profit
or gain” include a loss.

Person to whom profits attributed

356OG The chargeable company

(1) For the purposes of sections 356OC and 356OE the general rule is that
40the “chargeable company” is the company (“C”) that realises the profit
or gain (as mentioned in section 356OB(1) or 356OD(1)).

(2) The general rule in subsection (1) is subject to the special rules in
subsections (4) to (6).

(3) But those special rules do not apply in relation to a profit or gain to
which section 356OH(3) (fragmented activities) applies.

(4) If all or any part of the profit or gain accruing to C is derived from value
provided directly or indirectly by another person (“B”) which is a
5company, B is the “chargeable company”.

(5) Subsection (4) applies whether or not the value is put at the disposal of
C.

(6) If all or any part of the profit or gain accruing to C is derived from an
opportunity of realising a profit or gain provided directly or indirectly
10by another person (“D”) which is a company, D is “the chargeable
company” (unless the case falls within subsection (4)).

(7) For the meaning of “another person” see section 356OO.

Anti-fragmentation

356OH Fragmented activities

(1) 15Subsection (3) applies if—

(a) a company (“C”) disposes of any land in the United Kingdom,

(b) any of conditions A to D in section 356OB is met in relation to
the land, and

(c) a person (“R”) who is associated with C at a relevant time has
20made a relevant contribution to activities falling within
subsection (2).

(2) The following activities fall within this subsection—

(a) the development of the land,

(b) any other activities directed towards realising a profit or gain
25from the disposal of the land.

(3) For the purposes of this Part, the profit or gain (if any) realised by C
from the disposal is to be taken to be what that profit or gain would be
if R were not a distinct person from C (and, accordingly, as if
everything done by or in relation to R had been done by or in relation
30to C).

(4) Subsection (5) applies to any amount which is paid (directly or
indirectly) by R to C for the purposes of meeting or reimbursing the cost
of corporation tax which C is liable to pay as a result of the application
of subsection (3) in relation to R and C.

(5) 35The amount—

(a) is not to be taken into account in calculating profits or losses of
either R or C for the purposes of income tax or corporation tax,
and

(b) is not for any purpose of the Corporation Tax Acts to be
40regarded as a distribution.

(6) In subsection (1) “relevant time” means any time in the period
beginning when the activities of the project begin and ending 6 months
after the disposal.

(7) For the purposes of this section any contribution made by R to activities
falling within subsection (2) is a “relevant contribution” unless the
profit made or to be made by R in respect of the contribution is
insignificant having regard to the size of the project.

(8) 5In this section “contribution” means any kind of contribution,
including, for example—

(a) the provision of professional or other services, or

(b) a financial contribution (including the assumption of a risk).

(9) For the purposes of this section R is “associated” with C if—

(a) 10R is connected with C by virtue of any of subsections (5) to (7)
of section 1122 (read in accordance with section 1123), or

(b) R is related to C (see section 356OT).

(10) In this section “the project” means all activities carried out for any of the
following purposes—

(a) 15the purposes of dealing in or developing the land, and

(b) any other purposes mentioned in Conditions A to D in section
356OB.

Calculation of profit or gain on disposal

356OI Calculation of profit or gain on disposal

20For the purposes of this Part, the profit or gain (if any) from a disposal
of any property is to be calculated according to the principles
applicable for calculating the profits of a trade under Part 3 of CTA
2009, subject to any modifications that may be appropriate (and for this
purpose the same rules are to apply in calculating losses from a
25disposal as apply in calculating profits).

356OJ Apportionments

Any apportionment (whether of expenditure, consideration or any
other amount) that is required to be made for the purposes of this Part
is to be made on a just and reasonable basis.

Arrangements for avoiding tax

356OK 30Arrangements for avoiding tax

(1) Subsection (3) applies if an arrangement has been entered into the main
purpose or one of the main purposes of which is to enable a company
to obtain a relevant tax advantage.

(2) 35In subsection (1) the reference to obtaining a relevant tax advantage
includes obtaining a relevant tax advantage by virtue of any provisions
of double taxation arrangements, but only in a case where the relevant
tax advantage is contrary to the object and purpose of the provisions of
the double taxation arrangements (and subsection (3) has effect
40accordingly, regardless of anything in section 6(1) of TIOPA 2010).

(3) The tax advantage is to be counteracted by means of adjustments.

(4) For this purpose adjustments may be made (whether by an officer of
Revenue and Customs or by the company) by way of an assessment,

the modification of an assessment, amendment or disallowance of a
claim, or otherwise.

(5) In this section “relevant tax advantage” means a tax advantage in
relation to corporation tax charged (or which would, if the tax
5advantage were not obtained, be charged) in respect of amounts treated
as profits of a trade by virtue of this Part.

(6) In this section—

• “double taxation arrangements” means arrangements which have
  effect under section 2(1) of TIOPA 2010 (double taxation relief
  10by agreement with territories outside the United Kingdom);

• “tax advantage” has the meaning given by section 1139.

Exemption

356OL Profits attributable to period before relevant activities etc began

(1) Subsection (2) applies if—

(a) 15subsection (1) of section 356OC applies because Condition D in
section 356OB is met (land developed with purpose of realising
a gain from its disposal when developed), and

(b) part of the profit or gain mentioned in that subsection is fairly
attributable to a period before the intention to develop was
20formed.

(2) Section 356OC(1) has effect as if the person mentioned in section
356OB(1) had not realised that part of the profit or gain.

(3) Subsection (4) applies if—

(a) section 356OE(1) applies, and

(b) 25part of the profit or gain mentioned in section 356OE(5) is fairly
attributable to a period before the person mentioned in section
356OD(1) was a party to, or concerned in, the arrangement in
question.

(4) Section 356OE has effect as if the person had not realised that part of the
30profit or gain.

(5) In applying this section account must be taken of the treatment under
Part 3 of CTA 2009 (trading income) of a company which appropriates
land as trading stock.

Other supplementary provisions

356OM 35 Tracing value

(1) This section applies if it is necessary to determine the extent to which
the value of any property or right is derived from any other property or
right for the purposes of this Part.

(2) Value may be traced through any number of companies, partnerships,
40trusts and other entities or arrangements.

(3) The property held by a company, partnership or trust must be
attributed to the shareholders, partners, beneficiaries or other

participants at each stage in whatever way is appropriate in the
circumstances.

(4) In this section—

• “partnership” includes an entity established under the law of a
  5country or territory outside the United Kingdom of a similar
  nature to a partnership; and “partners”, in relation to such
  arrangements, is to be construed accordingly;

• “trust” includes arrangements—

  (a)

  which have effect under the law of a country or territory
  10outside the United Kingdom; and

  (b)

  under which persons acting in a fiduciary capacity hold
  and administer property on behalf of other persons,

  and “beneficiaries”, in relation to such arrangements, is to be
  construed accordingly.

356ON 15Relevance of transactions, arrangements, etc

(1) In determining whether section 356OC(1) or 356OE(1) applies, account
is to be taken of any method, however indirect, by which—

(a) any property or right is transferred or transmitted, or

(b) the value of any property or right is enhanced or diminished.

(2) 20Accordingly—

(a) the occasion of the transfer or transmission of any property or
right, however indirect, and

(b) the occasion when the value of any property or right is
enhanced,

25may be an occasion on which section 356OC(1) or 356OE(1) applies.

(3) Subsections (1) and (2) apply in particular—

(a) to sales, contracts and other transactions made otherwise than
for full consideration or for more than full consideration,

(b) to any method by which any property or right, or the control of
30any property or right, is transferred or transmitted by
assigning—

(i) share capital or other rights in a company,

(ii) rights in a partnership, or

(iii) an interest in settled property,

(c)
35to the creation of an option affecting the disposition of any
property or right and the giving of consideration for granting it,

(d) to the creation of a requirement for consent affecting such a
disposition and the giving of consideration for granting it,

(e) to the creation of an embargo affecting such a disposition and
40the giving of consideration for releasing it, and

(f) to the disposal of any property or right on the winding up,
dissolution or termination of a company, partnership or trust.

Interpretation

356OO “Another person”

(1) 45In this Part references to “other” persons are to be interpreted in
accordance with subsections (2) to (4).