Finance (No. 3) Bill (HC Bill 282)
SCHEDULE 1 continued PART 1 continued
Contents page 1-9 10-19 20-29 30-37 40-49 50-59 60-69 70-79 80-89 90-99 100-109 110-119 120-129 130-139 140-156 157-159 160-169 170-179 180-189 Last page
Finance (No. 3) BillPage 80
2A Company’s total profits to include chargeable gains
(1)
The amount of chargeable gains to be included in a company’s total
profits for an accounting period is the total amount of chargeable
gains accruing to the company in the period after deducting—
(a)
5any allowable losses accruing to the company in the period,
and
(b)
so far as not previously deducted under this subsection, any
allowable losses previously accruing to the company while it
was within the charge to corporation tax.
(2)
10For the purposes of corporation tax on gains “allowable loss” does
not include a loss accruing to a company if, had a gain accrued, the
company would not have been chargeable to corporation tax on the
gain.
Territorial scope
2B 15Territorial scope of charge to corporation tax on chargeable gains
(1)
A company which is resident in the United Kingdom in an
accounting period is chargeable to corporation tax on chargeable
gains accruing to the company in the period on the disposal of assets
wherever situated.
(2)
20This is subject to Chapter 3A of Part 2 of CTA 2009 (exemption from
charge in respect of profits of foreign permanent establishments).
(3)
A company which is not resident in the United Kingdom is
chargeable to corporation tax on chargeable gains that—
(a)
accrue to the company on the disposal of assets situated in
25the United Kingdom that have a relevant connection to the
company’s UK permanent establishment (see section 2C),
(b)
accrue at a time when it has that permanent establishment,
and
(c)
are, in accordance with sections 20 to 32 of CTA 2009,
30attributable to that permanent establishment.
(4)
In addition, a company which is not resident in the United Kingdom
is chargeable to corporation tax on chargeable gains accruing to the
company on the disposal of assets not within subsection (3) that
are—
(a) 35interests in UK land, or
(b)
assets (wherever situated) not within paragraph (a) that
derive at least 75% of their value from UK land where the
company has a substantial indirect interest in that land.
(5)
Section 1C applies for the purposes of subsection (4)(a) as it applies
40for the purposes of section 1A(3)(b) (disposing of interests in UK
land).
(6)
The reference in subsection (4)(b) to assets deriving at least 75% of
their value from UK land where the company has a substantial
indirect interest in that land is to be read in accordance with Schedule
451A.
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2C Non-UK resident company with UK permanent establishment
(1)
For the purposes of section 2B(3) a company has a UK permanent
establishment at any time if, at that time, the company carries on a
trade in the United Kingdom through a permanent establishment
5there.
(2)
For the purposes of section 2B(3) an asset has a relevant connection
to a company’s UK permanent establishment if—
(a)
it is, or was, used in or for the purposes of the trade at or
before the time of the disposal,
(b)
10it is, or was, used or held for the purposes of the permanent
establishment at or before that time, or
(c)
it is acquired for use by or for the purposes of the permanent
establishment.
(3)
Section 2B(3) does not apply to a company which, as a result of Part
152 of TIOPA 2010 (double taxation arrangements), is exempt from
corporation tax for the accounting period in respect of the profits of
the permanent establishment.
(4)
In the case of the long-term business of an overseas life insurance
company, subsection (2) has effect as if for paragraph (b) there were
20substituted—
“(b)
it is, or was, used or held for the purposes of the permanent
establishment at or before that time (irrespective of where it is
situated at that time),”.
(5)
In this section references to a trade include an office and references
25to carrying on a trade include holding an office.
Application of CGT principles etc
2D Application of CGT principles in calculating gains and losses
(1)
The total amount of chargeable gains to be included in a company’s
total profits for an accounting period is calculated for corporation tax
30purposes in accordance with capital gains tax principles.
(2)
All of the following questions are determined in accordance with the
enactments relating to capital gains tax as if accounting periods were
tax years—
(a)
any question as to the amounts to be, or not to be, taken into
35account as chargeable gains or allowable losses,
(b)
any question as to the amounts to be, or not to be, taken into
account in calculating gains or losses,
(c)
any question as to the amounts charged to tax as a company’s
gains, and
(d)
40any question as to the time when any amount is treated as
accruing.
(3)
This section is subject to any provision made elsewhere by the
Corporation Tax Acts.
2E References to income tax or Income Tax Acts in case of companies
(1) 45If the CGT enactments contain any reference to—
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(a) income tax, or
(b) the Income Tax Acts,
the reference is, in relation to a company, to be read as a reference to
corporation tax or the Corporation Tax Acts.
(2) 5But—
(a)
this does not affect references to income tax in section 39(2),
and
(b)
so far as the CGT enactments operate by reference to matters
of any specified description, account is to be taken for
10corporation tax purposes of matters of that description
confined to companies but not of any confined to individuals.
(3)
In this section “the CGT enactments” means the enactments relating
to capital gains tax.
2F Interaction of capital gains tax and corporation tax
(1)
15This Act as it has effect in accordance with this Chapter is not to be
affected in its operation by the fact that capital gains tax and
corporation tax are distinct taxes.
(2)
But this Act is, so far as it is consistent with the Corporation Tax Acts,
to apply in relation to capital gains tax and corporation tax on gains
20as if they were one tax.
(3)
Accordingly, a matter which in a case involving two individuals is
relevant to both of them in relation to capital gains tax is in a similar
case involving an individual and a company—
(a) relevant to the individual in relation to capital gains tax, and
(b) 25relevant to the company in relation to corporation tax.
Supplementary
2G Assets of a company vested in a liquidator
(1) If assets of a company are vested in a liquidator—
(a) this Chapter, and
(b) 30the enactments applied by this Chapter,
apply as if the assets were vested in the company and as if the acts of
the liquidator in relation to the assets were the company’s acts.
(2)
Accordingly, acquisitions from or disposals to the liquidator by the
company are ignored.
(3)
35The assets may be vested in the liquidator under section 145 of the
Insolvency Act 1986 or Article 123 of the Insolvency (Northern
Ireland) Order 1989 or otherwise.
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CHAPTER 3 Attribution of gains of non-UK resident close companies
Gains of non-UK resident companies not otherwise chargeable
3 Gains attributed to UK resident individuals etc
(1) This section applies if—
(a)
5a chargeable gain accrues at any time to a non-UK resident
close company,
(b) the gain is connected to avoidance (see section 3A),
(c)
the gain is not connected to a foreign trade or other
economically significant foreign activities (see section 3A),
10and
(d)
apart from this section, some or all of the gain would not be
chargeable to corporation tax on the company.
(2)
So much of the gain as would not otherwise be so chargeable is
apportioned among participators, or indirect participators, in the
15company—
(a) who are resident in the United Kingdom at that time, or
(b)
who are trustees of a settlement and are not resident in the
United Kingdom at that time.
(3)
The proportion of the amount of the gain to be apportioned to each
20person corresponds to the extent of the person’s interest in the
company as a participator or indirect participator.
(4)
The amount apportioned to each person is treated as a chargeable
gain accruing to the person.
(5) No apportionment of any part of a gain is made to an individual if—
(a)
25the gain accrues in a tax year which, as respects the
individual, is a split year, and
(b) the gain accrues in the overseas part of the year.
(6)
No apportionment of any part of a gain is made to a person if the
total amount that would, apart from this subsection, be apportioned
30to—
(a) the person, and
(b) persons connected to the person,
is 25% or less of the amount of the gain falling to be apportioned.
(7) A person (“P”) is an “indirect participator” in a company (“A”) if—
(a)
35another company (“B”) which is a non-UK resident close
company is a participator in A, and
(b)
P is a participator in B or P is a participator in a third non-UK
resident close company which is participator in B,
and so on through any number of non-UK resident close companies
40that are participators in other non-UK resident close companies.
(8)
P’s interest as an indirect participator in A in the case of any gain is
determined by—
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(a)
apportioning the gain among the participators in A according
to the extent of their respective interests as participators, and
(b)
then further apportioning the gain apportioned to B among
the participators in B according to the extent of their
5respective interests as participators, and so on through other
companies.
(9)
So far as it would go to reduce or extinguish chargeable gains
accruing, as a result of this section, to a person in a chargeable period,
this section applies to a loss accruing to the company on the disposal
10of an asset in that period as it would apply if there had been a gain.
(10) But—
(a) this only applies in relation to that person, and
(b)
this section does not otherwise apply in relation to losses
accruing to the company.
(11)
15In this section “a non-UK resident close company” means a
company—
(a) which is not resident in the United Kingdom, and
(b)
which would be a close company if it were resident in the
United Kingdom.
3A 20Gains connected to avoidance or foreign activities etc
(1)
A gain accruing to a company on the disposal of an asset is taken to
be “connected to avoidance” unless it is shown that neither—
(a) the disposal of the asset by the company, nor
(b) the acquisition or holding of the asset by the company,
25formed part of a scheme or arrangements of which the main purpose,
or one of the main purposes, was avoidance of liability to capital
gains tax or corporation tax.
(2)
A gain is “connected to a foreign trade” if it accrues on the disposal
of an asset used only—
(a)
30for the purposes of a trade carried on by the company wholly
outside the United Kingdom, or
(b)
for the purposes of the foreign part of a trade carried on by
the company partly within, and partly outside, the United
Kingdom,
35and the reference here to the foreign part of a trade is to the part of
the trade carried on outside the United Kingdom.
(3)
For this purpose an asset is to be regarded as used only for the
purposes of a trade carried on by the company wholly outside the
United Kingdom if—
(a)
40the asset is accommodation, or an interest or right in
accommodation, situated outside the United Kingdom, and
(b)
the accommodation has for each relevant period been
furnished holiday accommodation of which a person has
made a commercial letting.
(4) 45Each of the following is a “relevant period”—
(a)
the period of 12 months ending with the date of the disposal
and each of the two preceding periods of 12 months, or
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(b)
if the company has beneficially owned the accommodation
(or interest or right) for more than 36 months, the period of 12
months ending with the date of the disposal and each of the
preceding periods of 12 months throughout which the
5company had that beneficial ownership.
(5)
The reference in this section to the commercial letting of furnished
holiday accommodation is to be read in accordance with Chapter 6
of Part 4 of CTA 2009, but as if—
(a) sections 266, 268 and 268A were omitted, and
(b)
10the reference to an accounting period in section 267(1) were
to a relevant period.
(6)
A gain accruing on the disposal of an asset is “connected to other
economically significant foreign activities” if—
(a)
the asset is used only for the purposes of activities carried on
15by the company wholly or mainly outside the United
Kingdom,
(b)
the activities consist of the provision of goods or services on
a commercial basis, and
(c)
the activities also satisfy the staff, premises and economic
20value test.
(7)
Activities satisfy the staff, premises and economic value test if they
involve—
(a)
the use of employees, agents or contractors of the company in
numbers, and with competence and authority,
25commensurate with the size and nature of the activities,
(b)
the use of premises and equipment commensurate with the
size and nature of the activities, and
(c)
the addition of economic value by the company to the
persons to whom the goods or services are provided
30commensurate with the size and nature of the activities.
(8) This section applies for the purposes of section 3(1)(b) and (c).
3B Participators and their interests
(1) “Participator” has the meaning given by section 454 of CTA 2010.
(2)
Any reference to a person’s interest as a participator in a company is
35to the interest in it represented by all the factors by reference to
which the person is a participator.
(3)
Any reference to the extent of a person’s interest as a participator in
a company is to such proportion of the interests as participators of all
of the company’s participators as, on a just and reasonable basis, is
40represented by that interest.
(4) If—
(a)
the interest of a person in a company is wholly or partly
represented by an interest under a settlement (“the beneficial
interest”), and
(b)
45the beneficial interest is the factor (or one of them) by
reference to which the person would, apart from this
subsection, have an interest as a participator in the company,
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that interest as a participator is, so far as represented by the beneficial
interest, to be treated instead as the interest of the trustees of the
settlement.
(5) If—
(a)
5exempt assets of a pension scheme are taken into account in
ascertaining a person’s interest as a participator in a
company, and
(b)
if those assets were ignored, an amount in respect of a gain
accruing to the company would not be apportioned to the
10person as a result of section 3,
no amount in the respect of the gain is to be apportioned to the
person as a result of that section.
(6) For this purpose—
(a)
“assets of a pension scheme” means assets held for the
15purposes of a fund or scheme to which section 271(1)(c) or
(1A) applies, and
(b)
those assets are “exempt” if, at the time when the gain
accrues, a disposal of those assets would be exempt from tax
as a result of either of those provisions.
(7) 20This section applies for the purposes of section 3.
Prevention of multiple charges
3C Prevention of double UK taxation
(1) If—
(a)
an amount of tax is paid by a person as a result of section 3 in
25respect of a gain, and
(b)
there is a distribution of an amount in respect of the gain
before the end of the relevant period,
the amount of tax is applied so as to reduce or extinguish any liability
of the person to tax in respect of the distribution.
(2) 30For the purposes of subsection (1)—
(a)
the distribution is one made by way of dividend or
distribution of capital or on the dissolution of the company,
(b)
the tax in respect of the distribution is income tax,
corporation tax or capital gains tax, and
(c)
35in determining the liability to tax of any individual in respect
of any distribution for a tax year it is to be assumed that the
distribution is the highest part of the individual’s income for
the year.
(3)
For the purposes of subsection (1) “the relevant period” means the
40period of 3 years from the end of whichever of the following periods
is earlier—
(a)
the period of account of the company in which the gain
accrued, and
(b)
the period of 12 months beginning with the date on which the
45gain accrued.
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(4)
The amount of tax paid by a person as a result of section 3 is
allowable as a deduction in calculating a chargeable gain accruing on
the disposal by the person of any asset representing the person’s
interest as a participator in the company.
(5) 5An amount of tax—
(a)
is not to be used more than once under this section (whether
to reduce or extinguish a liability or as a deduction or a
combination of those things), and
(b) is not to be applied if it is reimbursed by the company.
10Non-UK domiciled individuals and temporary non-residents
3D Non-UK domiciled individuals
(1)
This section applies if, as a result of section 3, an amount in respect
of a gain accruing to a company in a tax year is apportioned to an
individual who is not domiciled in the United Kingdom in that year.
(2)
15The apportioned amount is regarded for the purposes of paragraph
1 of Schedule 1 as accruing on a disposal of a foreign asset if the asset
disposed of by the company is a foreign asset (but not otherwise).
(3)
For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance
basis)—
(a)
20treat any consideration obtained by the company on the
disposal of the asset as deriving from the apportioned
amount, and
(b)
if that consideration is less than the market value of the asset,
treat the asset as deriving from the apportioned amount.
(4)
25The apportioned amount may not be reduced or extinguished by a
loss under section 3 if—
(a)
the apportioned amount is regarded for the purposes of
paragraph 1 of Schedule 1 as accruing on a disposal of a
foreign asset,
(b)
30the remittance basis applies to the individual for the tax year
in question, and
(c)
any of the apportioned amount is remitted to the United
Kingdom in a subsequent tax year.
(5)
Paragraph 5 of Schedule 1 applies for the purposes of this section as
35it applies for the purposes of that Schedule.
3E Temporary non-residents
(1) This section applies if—
(a) an individual is temporarily non-resident, and
(b)
a gain or loss accrues to a company in a tax year falling
40wholly or partly in the temporary period of non-residence.
(2)
So much of the gain as would, as a result of section 3, have been
treated as accruing to the individual in the tax year if the residence
assumption were made is to be treated as accruing to the individual
in the period of return.
(3) 45But if—
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(a)
the remittance basis applies to the individual for the tax year
that comprises or includes the period of return, and
(b)
any part of the gain has not been remitted to the United
Kingdom before the period of the return,
5subsection (2) has effect subject to the further application of Schedule
1 (as read with section 3D) in relation to that part of the gain.
(4)
Paragraph 5 of Schedule 1 applies for the purposes of subsection (3)
as it applies for the purposes of that Schedule.
(5)
So much of the loss accruing in the tax year as would, in accordance
10with section 3(9), have reduced or extinguished a gain treated as
accruing to the individual in that year as a result of section 3 if the
residence assumption were made is to be treated as accruing to the
individual in the period of return.
(6) For the purposes of this section the “residence assumption” is—
(a)
15that the individual was resident in the United Kingdom for
the tax year in which the gain or loss accrued to the company,
and
(b)
that the tax year was not a split year as respects the
individual.
(7)
20Nothing in any double taxation arrangements prevents a charge to
capital gains tax arising as a result of this section.
(8)
For the purposes of this section each of the following expressions has
the meaning given by Part 4 of Schedule 45 to the Finance Act 2013
(statutory residence test: anti-avoidance)—
-
25“the period of return”
-
“temporarily non-resident”
-
“the temporary period of non-residence”.
Application to groups
3F Non-resident groups of companies
(1)
30This section applies, for the purposes of section 3, certain provisions
of this Act (modified as mentioned below) in relation to non-resident
companies which are members of a non-resident group of
companies.
(2) The applied provisions are—
(a) 35section 41(8),
(b) section 171 but as if subsections (1)(b) and (1A) were omitted,
(c)
section 173 but as if “to which this section applies” in
subsections (1)(a) and (2)(a) were omitted, as if “such” in
subsections (1)(c) and (2)(c) were omitted and as if subsection
40(3) were omitted,
(d)
section 174(4) but as if “at a time when both were members of
the group” were substituted for “in a transfer to which
section 171(1) applied”,
(e)
section 175(1) but as if “to which this section applies” were
45omitted, and
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(f)
section 179 but as if subsections (1)(b) and (1A) were omitted,
as if for any reference to a group of companies there were
substituted a reference to a non-resident group of companies
and as if for any reference to a company there were
5substituted a reference to a non-resident company.
(3) In this section—
-
“non-resident company” means a company which is not
resident in the United Kingdom, -
“non-resident group of companies”—
(a)10in the case of a group none of whose members are
resident in the United Kingdom, means that group,
and(b)in the case of a group some of whose members are not
resident in the United Kingdom, means the members
15which are not resident in the United Kingdom, and -
“group” is to be read in accordance with section 170.
Supplementary
3G Supplementary provisions
(1) If tax payable by a person (“P”) as a result of section 3 is paid by—
(a) 20the company (“C”) to which the gain accrues, or
(b)
a company by reference to which P is regarded as an indirect
participator in C,
the amount paid is not a payment to P for tax purposes.
(2)
The reference here to tax purposes is to the purposes of income tax,
25capital gains tax or corporation tax.
(3)
For the purposes of section 3 the amount of a gain or loss accruing to
a company is calculated as if the company were a company resident
in the United Kingdom chargeable to corporation tax on the gain.”
3 Omit sections 16ZB to 16ZD (losses of non-UK domiciled individuals).
4 30After section 36 insert—
““Re-basing for non-residents for UK land etc held on 5 April 2019
36A Re-basing in relation to direct or indirect disposals of UK land
Schedule 4AA makes provision for the re-basing of assets where—
(a) the assets are held on 5 April 2019,
(b) 35there is a disposal after that date, and
(c)
the disposal is a direct or indirect disposal of UK land (within
the meaning of that Schedule).”
5
Omit Chapter 5 of Part 2 (computation of gains and losses: relevant high
value disposals).
6
40Omit Chapter 6 of Part 2 (computation of gains and losses: non-resident CGT
disposals).