Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
615

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)—
15
(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).
20
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
35
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,
45

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
616

(b)
the company agrees to pay interest on the tax in
accordance with paragraph 9(3), and
(c)
the plan meets the requirements set out in paragraphs 10
to 12 as to the matters that must be specified in it.
      (2)
The exit charge payment plan may, in the circumstances
5
mentioned in sub-paragraph (3), contain appropriate provision
regarding security for Her Majesty’s Revenue and Customs in
respect of the deferred payment of the tax.
      (3)
Those circumstances are where an officer of Her Majesty’s
Revenue and Customs considers that agreeing to accept payment
10
of qualifying corporation tax in accordance with the plan would
present a serious risk as to collection of the tax in the absence of
provision regarding security in respect of that tax.
      (4)
An exit charge payment plan is void if any information furnished
by the company in connection with the plan does not fully and
15
accurately disclose all facts and considerations material to the
decision of the officer of Revenue and Customs to accept payment
of qualifying corporation tax in accordance with the plan.
Effect of exit charge payment plan
9     (1)
This paragraph applies where an exit charge payment plan is
20
entered into by a company in respect of qualifying corporation tax
in accordance with this Schedule.
      (2)
As regards when the tax is payable—
(a)
the plan does not prevent the tax becoming due and
payable under section 59D or 59E, but
25
(b)
the Commissioners for Her Majesty’s Revenue and
Customs—
(i)
may not seek payment of the tax otherwise than in
accordance with the plan;
(ii)
may make repayments in respect of any amount of
30
the tax paid, or any amount paid on account of the
tax, before the plan is entered into.
      (3)
As regards interest—
(a)
the tax carries interest in accordance with Part 9 as if the
plan had not been entered into, and
35
(b)
each time a payment is made under the plan, it is to be paid
together with any interest payable on it.
      (4)
As regards penalties, the company will be liable to penalties for
late payment of the tax only if it fails to make payments in
accordance with the plan (see item 6ZA of the Table at the end of
40
paragraph 1 of Schedule 56 to the Finance Act 2009).
      (5)
Qualifying corporation tax payable in accordance with an exit
charge payment plan which is for the time being unpaid may be
paid at any time before it becomes payable under the plan together
with interest payable on it to the date of payment.
45

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
617

Content of exit charge payment plan
10    (1)
An exit charge payment plan entered into by a Part 1 company
must specify—
(a)
the date on which the company ceased to be resident in the
United Kingdom, and
5
(b)
the EEA state in which the company has become resident.
      (2)
An exit charge payment plan entered into by a Part 2 company
must specify—
(a)
the EEA state in which the company is resident, and
(b)
if the company has ceased to carry on a trade in the United
10
Kingdom through a permanent establishment there, the
date on which it ceased to do so.
      (3)
In either case an exit charge payment plan entered into by a
company must also specify—
(a)
the amount of qualifying corporation tax which, in the
15
company’s opinion, is payable by it in respect of the
migration accounting period,
(b)
the amount of that qualifying corporation tax which the
company wishes to defer paying under the exit charge
payment plan (“ECPP tax”), and
20
(c)
whether the ECPP tax is to be paid in accordance with—
(i)
the standard instalment method (see paragraph
13),
(ii)
the realisation method (see paragraphs 14 to 17), or
(iii)
a combination of the two methods.
25
      (4)
If the ECPP tax is to be paid in accordance with a combination of
the two methods, the exit charge payment plan must also
specify—
(a)
in the case of each of the company’s exit charge assets or
liabilities (see paragraphs 3(2) or 6(2), as the case may be),
30
the method in accordance with which the amount of ECPP
tax attributable to the asset or liability (see sub-paragraph
(6)) is to be paid, and
(b)
the amount of the ECPP tax specified under sub-paragraph
(3)(b) that is to be paid in accordance with each method.
35
      (5)
But an exit charge payment plan may specify that any ECPP tax is
to be paid in accordance with the standard instalment method
only if—
(a)
in the case of a plan entered into by a Part 1 company, the
company’s ceasing to be resident in the United Kingdom is
40
not part of arrangements the main purpose of which, or
one of the main purposes of which, is to defer the payment
of any qualifying corporation tax payable by it;
(b)
in the case of a plan entered into by a Part 2 company, none
of the PE qualifying events occurring during the migration
45
accounting period, or bringing that period to an end, is
part of arrangements the main purpose of which, or one of
the main purposes of which, is to defer the payment of any
qualifying corporation tax payable by it.

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
618

      (6)
The amount of ECPP tax attributable to each exit charge asset or
liability is—
where—

“A” is the income, profits or gains arising in respect of
the asset or liability in the migration accounting
5
period by virtue of the relevant exit charge provision
only,

“B” is the total income, profits or gains arising in
respect of all the exit charge assets and liabilities in
the migration accounting period by virtue of the exit
10
charge provisions only, and

“T” is the ECPP tax.
Content: realisation method
11    (1)
This paragraph applies if, under an exit charge payment plan, the
amount of ECPP tax attributable to any exit charge asset or
15
liability is to be paid in accordance with the realisation method.
      (2)
The plan must specify—
(a)
each such asset or liability (so far as not already specified
under paragraph 10(4)(a)), and
(b)
the amount of ECPP tax attributable to the asset or liability,
20
calculated in accordance with paragraph 10(6).
      (3)
The plan must also include requirements as to the ongoing
provision of information by the company to Her Majesty’s
Revenue and Customs in relation to the asset or liability.
Content: additional information relating to assets and liabilities
25
12    (1)
This paragraph applies if, under an exit charge payment plan, the
amount of ECPP tax attributable to an exit charge asset or liability
is to be paid in accordance with the realisation method.
      (2)
The plan must specify any additional information required by this
paragraph in relation to the asset or liability.
30
      (3)
Sub-paragraph (4) applies in the case of a financial exit charge
asset or liability if, immediately after the migration accounting
period, the remaining term of the loan relationship or derivative
contract in question is less than 10 years.
      (4)
The plan must specify, in relation to the asset or liability, how
35
many years of the term of the loan relationship or derivative
contract remain (rounded up to the nearest whole year).
      (5)
Sub-paragraph (6) applies in the case of an intangible exit charge
asset if, immediately after the migration accounting period, the
remaining useful life of the asset for accountancy purposes is less
40
than 10 years.

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
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      (6)
The plan must specify, in relation to the asset, how many years of
the useful life of the asset remain (rounded up to the nearest whole
year).
The standard instalment method
13    (1)
This paragraph applies if, under an exit charge payment plan,
5
some or all of the ECPP tax is to be paid in accordance with the
standard instalment method.
      (2)
The amount of the ECPP tax that is to be paid in accordance with
the standard instalment method is payable in 6 instalments of
equal amounts as follows—
10
(a)
the first instalment is due on the first day after the period
of 9 months beginning immediately after the migration
accounting period, and
(b)
the other 5 instalments are due one on each of the first 5
anniversaries of that day.
15
      (3)
But if a relevant event occurs, the outstanding balance of the ECPP
tax that is payable in accordance with the standard instalment
method is payable on the date on which the next instalment of that
tax would otherwise have been due under the plan.
      (4)
A “relevant event” means—
20
(a)
the company becoming insolvent or entering into
administration,
(b)
the appointment of a liquidator,
(c)
any event under the law of an EEA state outside the United
Kingdom corresponding to an event specified in
25
paragraph (a) or (b), or
(d)
the company ceasing to be resident in an EEA state and, on
so ceasing, not becoming resident in any other EEA state.
The realisation method: TCGA or trading stock exit charge assets
14    (1)
This paragraph applies if—
30
(a)
under an exit charge payment plan, the amount of ECPP
tax attributable to an exit charge asset is to be paid in
accordance with the realisation method, and
(b)
the asset is a TCGA or trading stock exit charge asset (see
paragraph 3(2)(a) or 6(2)(a), as the case may be).
35
      (2)
The amount of ECPP tax attributable to the asset under paragraph
10(6) is payable in relation to whichever is the first to occur of the
following events—
(a)
the disposal of that asset at any time after—
(i)
the company ceases to be resident in the United
40
Kingdom (in the case of a Part 1 company), or
(ii)
the occurrence of the PE qualifying event in respect
of the asset (in the case of a Part 2 company),
(b)
the tenth anniversary of the end of the migration
accounting period, or
45
(c)
a relevant event (as defined in paragraph 13(4)).

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
620

      (3)
The date on which the amount is payable is—
(a)
in a case falling within sub-paragraph (2)(a) or (b), the date
of the event referred to, and
(b)
in a case falling within sub-paragraph (2)(c), the relevant
date or, if that date has already passed, the next
5
anniversary of that date.
      (4)
In sub-paragraph (3)(b), “relevant date” means the first day after
the period of 9 months beginning immediately after the migration
accounting period.
      (5)
Section 21(2) of the 1992 Act (part disposals of assets) applies for
10
the purposes of sub-paragraph (2)(a) as it applies for the purposes
of that Act.
      (6)
Where part of an asset is disposed of at any time after the event
mentioned in sub-paragraph (2)(a), the amount of ECPP tax
attributable to the asset under paragraph 10(6) is to be
15
apportioned on a just and reasonable basis for the purpose of
applying this paragraph to the part of the asset disposed of and the
part which remains undisposed of.
The realisation method: other exit charge assets and liabilities
15    (1)
This paragraph applies if—
20
(a)
under an exit charge payment plan, the ECPP tax
attributable to an exit charge asset or liability is to be paid
in accordance with the realisation method, and
(b)
the asset or liability is—
(i)
a financial exit charge asset or liability, or
25
(ii)
an intangible exit charge asset,

(see paragraph 3(2)(b) and (c) or 6(2)(b) and (c), as the case
may be).
      (2)
The amount of ECPP tax attributable to any such asset or liability
under paragraph 10(6) is payable in a number of annual
30
instalments of equal amounts.
      (3)
The number of annual instalments is—
(a)
in a case where a number of years is specified in the plan
in relation to the asset or liability by virtue of paragraph
12(4) or (6), that number, and
35
(b)
otherwise, 10.
      (4)
The instalments are due as follows—
(a)
the first instalment is due on the first day after the period
of 9 months beginning immediately after the migration
accounting period, and
40
(b)
the other instalments are due one on each of the
subsequent anniversaries of that day (until they are all
paid).
      (5)
But see paragraphs 16 and 17 for circumstances in which all or part
of the outstanding balance of the amount of ECPP tax attributable
45
to the asset or liability under paragraph 10(6) (“the outstanding
balance in respect of the asset or liability”) becomes payable.

Finance Bill
Schedule 49 — Corporation tax: deferral of payment of exit charge
621

Outstanding balance becoming payable in full
16    (1)
This paragraph applies where the amount of ECPP tax attributable
to an asset or liability under paragraph 10(6) is payable in
instalments in accordance with paragraph 15.
      (2)
All of the outstanding balance in respect of the asset or liability (as
5
defined in paragraph 15(5)) is payable in accordance with sub-
paragraph (3) if—
(a)
a trigger event occurs in relation to the asset or liability (see
sub-paragraph (4)), or
(b)
a relevant event occurs (as defined in paragraph 13(4)),
10

before the last instalment is payable in accordance with paragraph
15.
      (3)
The outstanding balance is payable—
(a)
in a case falling within sub-paragraph (2)(a), on the date of
the trigger event, and
15
(b)
in a case falling within sub-paragraph (2)(b), on the date on
which the next instalment would otherwise have been due
under the plan.
      (4)
For the purposes of this paragraph, a trigger event occurs in
relation to an asset or liability if—
20
(a)
in the case of a financial exit charge asset or liability, the
company ceases to be party to the loan relationship or
derivative contract in question, or
(b)
in the case of an intangible fixed asset, the asset is disposed
of.
25
Outstanding balance becoming payable in part
17    (1)
This paragraph applies where—
(a)
the amount of ECPP tax attributable to an asset or liability
under paragraph 10(6) is payable in instalments in
accordance with paragraph 15, and
30
(b)
a partial trigger event occurs in relation to the asset or
liability (see sub-paragraph (4)) before the last instalment
is payable.
      (2)
On the occurrence of that event, part of the outstanding balance in
respect of the asset or liability (as defined in paragraph 15(5)) is
35
payable.
      (3)
The part payable under sub-paragraph (2) is so much of the
outstanding balance in respect of the asset or liability as is
attributable to the transaction mentioned in sub-paragraph (4)(a)
or (b).
40
      (4)
For the purposes of sub-paragraph (2), a partial trigger event
occurs in relation to an asset or liability if—
(a)
in the case of a financial exit charge asset or liability—
(i)
there is a disposal of rights or liabilities under the
loan relationship or derivative contract in question
45
which amounts to a related transaction (as defined