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Paragraph 10 of Schedule 24 |
| | 21. In paragraph 10 of Schedule 24 to the Taxes Act 1988 (capital allowances) in sub-paragraph (1) (which, subject to paragraphs 11 and 12, provides an assumption where capital expenditure is incurred in an accounting period falling before the first accounting period in respect of which a direction is given or which is an ADP exempt period)-
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(a) for "Subject to paragraphs 11 and 12 below," there shall be substituted "Subject to paragraph 12 below,"; and |
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(b) in paragraph (a), for "a direction is given under section 747(1)" there shall be substituted "an apportionment under section 747(3) falls to be made". |
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Paragraph 11 of Schedule 24 |
| | 22. Paragraph 11 of Schedule 24 to the Taxes Act 1988 (power of Board by notice to declare that a specified accounting period is to be treated as the first direction period where it appears that no direction was given as respects that period as a result of capital allowances being claimed) shall cease to have effect.
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Paragraph 11A of Schedule 24 |
| | 23. In paragraph 11A of Schedule 24 to the Taxes Act 1988 (capital allowances) sub-paragraphs (3) and (6) (which relate to the application of paragraph 11(1)(c)) shall cease to have effect.
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Transfer pricing |
| | 24. After paragraph 19 of Schedule 24 to the Taxes Act 1988 there shall be inserted-
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"Transfer pricing |
| | 20. - (1) Sub-paragraph (2) of paragraph 5 of Schedule 28AA (no potential UK tax advantage where both parties are within charge to income or corporation tax etc) shall be assumed not to apply in any case where, apart from that sub-paragraph (and on the assumption in paragraph 1(1) above),-
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(a) paragraph 6 of that Schedule would apply; and |
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(b) the company would be the disadvantaged person for the purposes of that paragraph. |
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(2) Schedule 28AA (transfer pricing etc: provision not at arm's length) shall be assumed not to apply in any case where, apart from this sub-paragraph,-
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(a) the actual provision would (on the assumption in paragraph 1(1) above) confer a potential advantage in relation to United Kingdom taxation on the company; |
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(b) the other affected person would be a company resident outside the United Kingdom; and |
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(c) each accounting period of that company which falls wholly or partly within the accounting period in question is one as regards which- |
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(i) an apportionment under section 747(3) falls to be made; or
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(ii) no such apportionment falls to be made by virtue of the period being an ADP exempt period.
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(3) In any case where-
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(a) by virtue of sub-paragraph (2) above, Schedule 28AA is assumed not to apply, and |
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(b) the actual provision mentioned in paragraph (a) of that sub-paragraph involves (on the assumption in paragraph 1(1) above) any such interest or other distribution out of assets as would constitute a distribution for the purposes of the Corporation Tax Acts by virtue of paragraph (da) of section 209(2), |
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that interest or distribution out of assets shall be assumed not to constitute such a distribution by virtue of that paragraph."
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Schedule 25 |
| | 25. For the heading to Schedule 25 to the Taxes Act 1988 (cases excluded from direction-making powers) there shall be substituted-
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"CASES WHERE SECTION 747(3) DOES NOT APPLY". |
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Paragraph 1 of Schedule 25 |
| | 26. In paragraph 1 of Schedule 25 to the Taxes Act 1988 (which provides that Part I of the Schedule has effect for the purposes of section 748(1)(a)) there shall be added at the end "and the other provisions of Chapter IV of Part XVII which refer to a company pursuing an acceptable distribution policy".
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Paragraph 2A of Schedule 25 |
| | 27. - (1) Paragraph 2A of Schedule 25 to the Taxes Act 1988 (acceptable distribution policy: modifications of paragraph 2) shall be amended as follows.
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(2) In sub-paragraph (2) (dividend paid for earlier accounting period which is not an excluded period to be treated as falling within paragraph 2(1)(a)) in paragraph (a) and paragraph (b)-
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(a) for "which immediately precedes" there shall be substituted "immediately preceding"; and |
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(b) for "is not an excluded period" there shall be substituted "which is not an excluded dividend". |
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(3) In sub-paragraph (4) (position where no direction could be given under section 747(1) in respect of earlier accounting period because foreign company pursued acceptable distribution policy) for "no direction could be given in respect of the earlier period under section 747(1)" there shall be substituted "no apportionment under section 747(3) fell to be made in respect of the earlier period".
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(4) In sub-paragraph (8), before paragraph (a) (definition of "excluded period") there shall be inserted-
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"(aa) a dividend is an excluded dividend if it is paid, in whole or in part, out of the total profits from which (in accordance with section 747(6)(a)) the chargeable profits for an excluded period are derived,". |
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(5) In sub-paragraph (8)(a) (which defines an excluded period as one for which a direction is given under section 747(1)) for "a direction is given under section 747(1)" there shall be substituted "an apportionment under section 747(3) falls to be made".
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Paragraph 3 of Schedule 25 |
| | 28. In paragraph 3(4A) of Schedule 25 to the Taxes Act 1988 (meaning of "net chargeable profits") in paragraph (b), for "a direction were given under section 747(1)" there shall be substituted "an apportionment under section 747(3) fell to be made".
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Paragraph 5 of Schedule 25 |
| | 29. In paragraph 5(2)(a) of Schedule 25 to the Taxes Act 1988, for "749(3)" there shall be substituted "749(5)".
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Paragraph 6 of Schedule 25 |
| | 30. - (1) Paragraph 6 of Schedule 25 to the Taxes Act 1988 (exemption for controlled foreign companies engaged in exempt activities) shall be amended as follows.
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(2) In sub-paragraph (1)(c) (which provides that for a company to be engaged in exempt activities, any of sub-paragraphs (2) to (4) must apply) for "(4)" there shall be substituted "(4A)".
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(3) In sub-paragraph (2)(b) (which in certain cases requires less than 50 per cent. of gross trading receipts to be derived from connected or associated persons or persons who have an interest in the company at any time during the accounting period) for "an interest in the company at any time during" there shall be substituted "a 25 per cent. assessable interest in the company in the case of".
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(4) In sub-paragraph (3) (local holding companies) in paragraph (b) (controlled companies which are not themselves holding companies but which are otherwise engaged in exempt activities)-
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(a) after "holding companies" there shall be inserted "or superior holding companies"; and |
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(b) after "exempt activities" there shall be inserted "or are, in terms of sub-paragraph (5A) below, exempt trading companies". |
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(5) In sub-paragraph (4) (holding companies other than local holding companies) in paragraph (b) (controlled companies which are not holding companies but which are otherwise engaged in exempt activities)-
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(a) after "holding companies (whether local or not)" there shall be inserted "or superior holding companies"; and |
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(b) after "exempt activities" there shall be inserted "or are, in terms of sub-paragraph (5A) below, exempt trading companies". |
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(6) After sub-paragraph (4) there shall be inserted-
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"(4A) This sub-paragraph applies to a company which is a superior holding company if at least 90 per cent. of its gross income during the accounting period in question-
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(a) represents qualifying exempt activity income of its subsidiaries; and |
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(b) is derived directly from companies which it controls and which fall within sub-paragraph (4B) below. |
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(4B) For the purposes of paragraph (b) of sub-paragraph (4A) above, a company falls within this sub-paragraph if-
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(a) throughout the accounting period mentioned in that sub-paragraph, it is not itself a superior holding company but otherwise is, in terms of this Schedule, engaged in exempt activities or is, in terms of sub-paragraph (5A) below, an exempt trading company; or |
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(b) it is itself a superior holding company throughout that period and at least 90 per cent of its gross income during that period- |
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(i) represents qualifying exempt activity income of its subsidiaries, and
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(ii) is derived directly from companies which it controls and which themselves fall within this paragraph or paragraph (a) above."
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(7) After sub-paragraph (4B) there shall be inserted-
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"(4C) For the purposes of sub-paragraph (2)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company's chargeable profits for the accounting period would be apportioned to that person."
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(8) In sub-paragraph (5) (extended meaning of references in sub-paragraph (3) or (4) to companies which a holding company controls)-
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(a) for "sub-paragraph (3) or (4)" there shall be substituted "sub-paragraphs (3) to (4B)"; and |
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(b) after "holding company", in each place where it occurs, there shall be inserted "or superior holding company". |
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(9) After sub-paragraph (5) there shall be inserted-
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"(5A) For the purposes of sub-paragraphs (3) to (4B) above, a company is an exempt trading company throughout any period if-
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(a) it is a trading company throughout each of its accounting periods which falls wholly or partly within that period; and |
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(b) each of those accounting periods is one as regards which- |
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(i) the condition in section 747(1)(c) is not satisfied; or
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(ii) the conditions in section 748(1)(e) are satisfied; or
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(iii) the conditions in section 748(3)(a) and (b) are satisfied."
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