Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 30 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
388

(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

Finance Bill
Schedule 30 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
389

6     (1)
After Chapter 3A insert—
“Chapter 3B
Repayments and return payments
464C
Treatment of certain repayments and return payments
(1)
Where—
5
(a)
within any period of 30 days—
(i)
the qualifying amount of repayments made to a close
company in respect of one or more chargeable
payments made by the company to a person totals
£5,000 or more, and
10
(ii)
the available amount of the relevant chargeable
payments made by the company to the person or an
associate of the person totals £5,000 or more, and
(b)
the relevant chargeable payments are made in an accounting
period subsequent to that in which the chargeable payments
15
mentioned in paragraph (a)(i) were made,

the qualifying amount of the repayments, so far as not exceeding the
available amount of the relevant chargeable payments, is to be
treated for the purposes of this Chapter as a repayment of the
relevant chargeable payments.
20
(2)
A chargeable payment is a relevant chargeable payment for the
purposes of subsection (1) if (or to the extent that) it is not repaid
within the period of 30 days mentioned in that subsection.
(3)
Where—
(a)
immediately before a repayment is made in respect of one or
25
more chargeable payments made by a close company to a
person, the total amount owed to the company by the person
in respect of chargeable payments is £15,000 or more,
(b)
at the time the repayment is made, arrangements had been
made for one or more chargeable payments to be made to
30
replace some or all of the amount repaid, and
(c)
the available amount of the chargeable payments made by
the company to the person or an associate of the person
under the arrangements totals £5,000 or more,

the qualifying amount of the repayment, so far as not exceeding the
35
available amount of the chargeable payments mentioned in
paragraph (c), is to be treated for the purposes of this Chapter as a
repayment of those chargeable payments.
(4)
An amount contained in a chargeable payment is an available
amount—
40
(a)
for the purposes of subsection (1), to the extent that no
repayment has been treated as made in respect of it by the
previous operation of that subsection, and
(b)
for the purposes of subsection (3), to the extent that no
repayment has been treated as made in respect of it—
45
(i)
by the operation of subsection (1), or
(ii)
by the previous operation of subsection (3).

Finance Bill
Schedule 30 — Close companies
Part 2 — Other amendments
390

(5)
An amount contained in a repayment is a qualifying amount to the
extent that it has not been treated by the previous operation of this
section as a repayment of a chargeable payment.
(6)
This section does not apply in relation to a repayment which gives
rise to a charge to income tax on the participator or associate by
5
reference to whom the loan, advance or benefit was a chargeable
payment.
(7)
The Treasury may by order vary a sum specified in subsection (1) or
(3).
(8)
An order under subsection (7) may contain incidental, supplemental,
10
consequential and transitional provision and savings.
464D
Section 464C: supplementary
(1)
All such assessments and adjustments of assessments are to be made
as are necessary to give effect to section 464C(1) and (3).
(2)
If a person who has made a tax return becomes aware that, after
15
making it, anything in it has become incorrect because of the
operation of section 464C(1) or (3), the person must give notice to an
officer of Revenue and Customs specifying how the return needs to
be amended.
(3)
The notice must be given within 3 months beginning with the day on
20
which the person became aware that anything in the return had
become incorrect because of the operation of section 464C(1) or (3).
(4)
In section 464C, “chargeable payment” means—
(a)
a loan or advance made by a close company which gives rise
to a charge to tax under section 455, or
25
(b)
the conferral of a benefit on an individual in circumstances
which give rise to a charge to tax under section 464A.
(5)
In a case within subsection (4)(b)—
(a)
the conferral of the benefit is to be treated for the purposes of
section 464C as a loan made by the close company to the
30
individual to the value of the benefit conferred, and
(b)
any payment in respect of which (apart from section 464C)
relief is due to the close company under section 464B is to be
treated for the purposes of section 464C as a repayment of the
loan.”
35
      (2)
The amendment made by this paragraph has effect in relation to repayments
and return payments made on or after 20 March 2013.
7
In section 465 (power to obtain information), after “Chapter 3” (in both
places) insert “or 3A”.
Part 2
40
Other amendments
Taxes Management Act 1970
8
TMA 1970 is amended as follows.

Finance Bill
Schedule 30 — Close companies
Part 2 — Other amendments
391

9
In section 59E(11)(a) (provision as to when tax is due and payable)—
(a)
after “455” insert “or 464A”, and
(b)
after “loan” insert “or benefit”.
10
In section 59F(6)(a) (arrangements for paying tax on behalf of group
members)—
5
(a)
after “455” insert “or 464A”, and
(b)
after “loan” insert “or benefit”.
11    (1)
Section 109 (corporation tax on close company in connection with loans to
participators etc) is amended as follows.
      (2)
In subsection (1)—
10
(a)
after “459” insert “and 464A and 464B”, and
(b)
for “by close companies” insert “or benefits”.
      (3)
For subsection (3) substitute—
“(3)
For the purposes of section 87A of this Act as applied by subsection
(1) above—
15
(a)
the date when tax under section 455 of CTA 2010 became due
and payable is that determined in accordance with
subsection (3) of that section, and
(b)
the date when tax under section 464A of CTA 2010 became
due and payable is that determined in accordance with
20
subsection (4) of that section.”
      (4)
After subsection (3A) insert—
“(3B)
If there is a payment which for the purposes of section 464B of CTA
2010 is a return payment in respect of a benefit conferred, interest
under section 87A of this Act on so much of the tax under section
25
464A of CTA 2010 as is referable to the return payment is not payable
in respect of any period after the date on which the return payment
was made.”
      (5)
In subsection (4), after “458” insert “or 464B”.
      (6)
In subsection (5), after “459” insert “or 464A and 464B”.
30
      (7)
In the heading, after “loans” insert “or benefits”.
12
The amendments made by paragraphs 9 to 11 are treated as having come
into force on 20 March 2013.
Finance Act 1998
13    (1)
Schedule 18 to FA 1998 (company tax returns, assessments and related
35
matters) is amended as follows.
      (2)
In paragraph 1 (meaning of “tax”), after the entry relating to section 455 of
CTA 2010 insert—
“section 464A of that Act (tax on other benefit conferred on
participator),”.
40
      (3)
In paragraph 8(1) (calculation of tax payable), in paragraph 1 of the third
step—
(a)
after “455” insert “or 464A”, and

Finance Bill
Schedule 31 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
392

(b)
for “or advance made by close company” substitute “, advance or
benefit”.
      (4)
In paragraph 18 (failure to deliver return: tax-related penalty), for sub-
paragraph (4) substitute—
    “(4)
In determining that amount no account is to be taken of—
5
(a)
any relief under section 458 of the Corporation Tax Act
2010 (relief in respect of repayment, etc of loan) which is
deferred under subsection (5) of that section, or
(b)
any relief under section 464B of that Act (relief in respect of
return payment) which is deferred under subsection (5) of
10
that section.”
      (5)
The amendments made by this paragraph are treated as having come into
force on 20 March 2013.
Income Tax (Trading and Other Income) Act 2005
14    (1)
In section 417 of ITTOIA 2005 (person liable for charge on release of loan or
15
advance), for subsection (1) substitute—
“(1)
The person liable for any tax charged under this Chapter is—
(a)
in the case of a loan or advance made to a partnership, any
partner who is an individual, and
(b)
in any other case, the person to whom the loan or advance
20
was made.
(1A)
If more than one person is liable in a case within subsection (1)(a), the
liability is to be apportioned between them in a just and reasonable
manner.”
      (2)
The amendment made by this paragraph has effect in relation to loans or
25
advances made on or after 20 March 2013.
Schedule 31
Section 89

Miscellaneous amendments relating to decommissioning
Part 1
Abandonment guarantees and abandonment expenditure
30
Expenditure on abandonment guarantees
1     (1)
In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is
amended as follows.
      (2)
In section 225N (expenditure on and under abandonment guarantees)—
(a)
after subsection (1) insert—
35
“(1A)
Subsection (2) also applies if expenditure incurred by a
participator in an oil field would be so allowable as a result of
section 3(1)(hh) of that Act but for the fact that the oil field is

Finance Bill
Schedule 31 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
393

a non-taxable oil field within the meaning of Part 3 of FA 1993
(see section 185 of that Act).”;
(b)
in subsection (2), for “that expenditure is so allowable” substitute
“the expenditure mentioned in subsection (1) or (1A) is or would be
so allowable”.
5
      (3)
In section 225R (introduction to sections 225S and 225T)—
(a)
in paragraph (a) of subsection (1), omit the words from “, or would
apply” to “made”;
(b)
in paragraph (b) of that subsection, after “Schedule” insert “, or
would fall to be so attributed if a claim under paragraph 2A(2) of that
10
Schedule were made”;
(c)
after subsection (1) insert—
“(1A)
The condition in subsection (1)(b) is to be treated as met for
the purposes of this section if it would be met but for the fact
that the contributing participator is (or was) a participator in
15
an oil field that is a non-taxable oil field within the meaning
of Part 3 of FA 1993 (see section 185 of that Act).”;
(d)
in subsection (2), before “attributed” insert “or would be”.
2     (1)
In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is
amended as follows.
20
      (2)
In section 292 (expenditure on and under abandonment guarantees)—
(a)
after subsection (1) insert—
“(1A)
Subsection (2) also applies if expenditure incurred by a
participator in an oil field would be so allowable as a result of
section 3(1)(hh) of that Act but for the fact that the oil field is
25
a non-taxable oil field within the meaning of Part 3 of FA 1993
(see section 185 of that Act).”;
(b)
in subsection (2), for “that expenditure is so allowable” substitute
“the expenditure mentioned in subsection (1) or (1A) is or would be
so allowable”.
30
      (3)
In section 296 (introduction to sections 297 and 298)—
(a)
in paragraph (a) of subsection (1), omit the words from “, or would
apply” to “made”;
(b)
in paragraph (b) of that subsection, after “Schedule” insert “, or
would fall to be so attributed if a claim under paragraph 2A(2) of that
35
Schedule were made”;
(c)
after subsection (1) insert—
“(1A)
The condition in subsection (1)(b) is to be treated as met for
the purposes of this section if it would be met but for the fact
that the contributing participator is (or was) a participator in
40
an oil field that is a non-taxable oil field within the meaning
of Part 3 of FA 1993 (see section 185 of that Act).”;
(d)
in subsection (2), before “attributed” insert “or would be”.
Expenditure under abandonment guarantees
3
In Schedule 3 to OTA 1975 (petroleum revenue tax: miscellaneous
45
provisions), in paragraph 8 (certain subsidised expenditure to be

Finance Bill
Schedule 31 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
394

disregarded), after sub-paragraph (1) insert—
   “(1A)
But sub-paragraph (1) above does not apply to any expenditure
for which the relevant participator is liable that has been or is to be
met directly or indirectly out of a payment made by the guarantor
under an abandonment guarantee.
5
     (1B)
In sub-paragraph (1A) above—
“abandonment guarantee” has the same meaning as it has for
the purposes of section 3 of this Act (see section 104 of the
Finance Act 1991), and
“the guarantor” and “the relevant participator” have the
10
same meaning as in section 104 of that Act.”
4
In Schedule 5 to OTA 1975 (allowance of expenditure), in paragraph 2C(2),
in the definition of “sum in default”, for the words from “less the aggregate
of” to the end substitute “less so much of that payment as has been made by
the defaulter”.
15
5     (1)
Part 3 of FA 1991 (oil taxation) is amended as follows.
      (2)
Omit section 105 (restriction of expenditure relief by reference to payments
under abandonment guarantees).
      (3)
Omit section 106 (relief for reimbursement expenditure under abandonment
guarantees).
20
6     (1)
In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is
amended as follows.
      (2)
In section 225N (expenditure on and under abandonment guarantees), omit
subsections (3) and (4).
      (3)
Omit section 225O (relief for reimbursement expenditure under
25
abandonment guarantees).
7     (1)
In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is
amended as follows.
      (2)
In section 292 (expenditure on and under abandonment guarantees), omit
subsections (3) and (4).
30
      (3)
Omit section 293 (relief for reimbursement expenditure under abandonment
guarantees).
Reimbursement by defaulter in respect of abandonment expenditure
8
In Part 3 of FA 1991, omit section 108 (reimbursement by defaulter in respect
of certain abandonment expenditure).
35
9
In Part 2 of ITTOIA 2005, omit section 225T (reimbursement by defaulter in
respect of certain abandonment expenditure).
10
In Part 8 of CTA 2010, omit section 298 (reimbursement by defaulter in
respect of certain abandonment expenditure).
Consequential amendments
40
11    (1)
Section 104 of FA 1991 is amended as follows.