Amendments proposed to the Finance Bill - continued House of Commons

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Mr Richard Ottaway [R]
Mr David Heathcoat-Amory [R]
Mr Howard Flight [R]

293

Schedule     22,     page     437,     leave out lines 18 to 25 and insert—

.'.

'number of years
percentage reduction
1
20%
2
40%
3
60%
4
80%
5 or more
100%

   

Mr Richard Ottaway [R]
Mr David Heathcoat-Amory [R]
Mr Howard Flight [R]

294

Schedule     22,     page     439,     line     34,     at end insert—

    'The regulations shall make provision for the writing down to be done on a basis to be specified by the tonnage tax company, provided that the company can demonstrate that the basis is just and reasonable.'.

   

Mr Andrew Smith

319

Schedule     22,     page     440,     line     33,     leave out 'paragraph 90' and insert 'paragraphs 90 and 90A'.

   

Mr Andrew Smith

320

Schedule     22,     page     441,     line     4,     leave out sub-paragraphs (3) and (4).

   

Mr Andrew Smith

321

Schedule     22,     page     441,     line     20,     at end insert—

'Defeased leasing: excepted forms of security

    90A.—(1) Pararaph 90 (defeased leasing) is subject to the following exceptions.

    (2) It does not apply to the provision of security of any of the following kinds by the lessee, or a person connected with the lessee—

      (a) a mortgage of the ship;

      (b) security attaching—

          (i) to the ship's earnings, or

          (ii) to the proceeds of insurance policies on the ship;

      (c) security over rental rebates arising from the arm's length sale of the ship;

      (d) any other form of security relating to assets, sums or rights arising directly from the ordinary operation of the ship or from arm's length transactions involving the ship.

    In this sub-paragraph "the ship" means the ship that is the subject of the lease.

    (3) It does not apply to the provision of security by the lessee, or a person connected with the lessee, if the following conditions are met—

      (a) no deposit of money or other property by way of security is obtained by the lessor or any third party;

      (b) any payments under the security are limited to the amount of any rental payments under the lease in respect of which the lessee is in default.

    (4) It does not apply to the provision of security by a third party where no security other than security of a kind mentioned in sub-paragraph (2)(a) to (d) is held by the third party or any person connected with the third party.

    (5) It does not apply to the provision of security by a third party if the following conditions are met—

      (a) no deposit of money or other property by way of security is obtained by the lessor or any third party;

      (b) the security does not involve the assumption of any obligations of the lessee under the lease in return for a payment made (directly or indirectly) by the lessee or a person connected with him;

      (c) the security does not give rise to any payments to the lessor unless the lessee defaults on the rental payments under the lease; and

      (d) any payments under the security are limited to the amount of the rental payments in default.

    (6) For the purposes of this paragraph the lessor and any persons connected with him shall be treated as the same person.

    (7) In this paragraph—

      "connected person" has the meaning given by section 839 of the Taxes Act 1988; and

      "third party" means a person not connected with either the lessor or the lessee.'.

   

Mr Andrew Smith

322

Schedule     22,     page     441,     leave out lines 38 to 45 and insert—

    'After the time of that transaction the ship is used for the purposes of a tonnage tax trade carried on—

      (a) by the original company, or

      (b) by another tonnage tax company that is a member of the same group,

    without having been used since that time for the purposes of any other trade (except that of leasing).

    (3) This paragraph does not apply if the ship is newly-constructed and the transaction mentioned in Step Two in sub-paragraph (2) is effected not more than four months after the first occasion on which the ship is brought into use by any person for any purpose.

    (4) A person is regarded for the purposes of this paragraph as owning a ship if it is treated as belonging to him for the purposes of Part II of the Capital Allowances Act 1990.'.

   

Mr Andrew Smith

323

Schedule     22,     page     443,     line     19,     leave out 'applied' and insert 'applies'.

   

Mr Andrew Smith

324

Schedule     22,     page     443,     line     30,     leave out paragraphs 97 and 98 and insert—

'Quantitative restrictions: change of circumstances bringing case within restrictions

    97.—(1) The provisions of this paragraph apply where—

      (a) the lessor under a finance lease has been entitled to capital allowances in circumstances in which paragraph 93 (quantitative restrictions on allowances) did not apply, and

      (b) a change of circumstances brings the case within paragraph 89(1) so that the restrictions in paragraph 93 do apply.

    (2) In this paragraph—

      "the relevant period" means the period beginning—

          (a) with the beginning of the accounting period of the lessor in which there occurs the change of circumstances in relation to which this paragraph applies, or

          (b) if since the beginning of that period there has been a change of circumstances in relation to which paragraph 98 applied (change taking case out of restrictions), with the time of that change (or if there has been more than one such change, the last of them),

      and ending with the time of the change of circumstances in relation to which this paragraph applies; and

      "the lessor's normal pool" means the lessor's pool that contains the qualifying expenditure relating to the ship at the beginning of the relevant period.

    (3) At the beginning of the relevant period an amount ("amount A") equal to—

      (a) the tax written down value of the ship as at that time, or

      (b) if less, the amount of unrelieved qualifying expenditure in the lessor's normal pool at that time,

    shall be brought into account as a disposal value in the lessor's normal pool.

    (4) At the same time an amount of qualifying expenditure equal to amount A shall be taken to a separate single-asset pool ("the temporary pool").

    (5) Any qualifying expenditure or other items relating to the ship that would otherwise have been brought into account in the lessor's normal pool in the relevant period shall instead be brought into account in the temporary pool.

    (6) At the end of the relevant period, the temporary pool shall be closed as if the ship had been disposed of by the lessor for an amount equal to its tax written down value at that time ("amount B"), and any resulting balancing allowance or balancing charge shall be given effect.

    (7) The lessor shall be treated as if he had incurred qualifying expenditure equal to amount B on the provision of the ship for the purposes of the lessee's tonnage tax trade immediately after the end of the relevant period.

    (8) There shall be allocated to the lessor's 25% and 10% pools the same proportions of amount B as the proportions of the actual cost of providing the ship that would have been so allocated if the case had been within paragraph 89(1) at all material times.

Quantitative restrictions: change of circumstances taking case out of restrictions

    98.—(1) The provisions of this paragraph apply where—

      (a) the lessor under a finance lease has been entitled to capital allowances in circumstances in which paragraph 93 (quantitative restrictions on allowances) applied, and

      (b) a change of circumstances takes the case out of paragraph 89(1) so that the restrictions in paragraph 93 no longer apply.

    (2) When the change of circumstances occurs a disposal value shall be brought into account by the lessor equal to the tax written down value of the ship as at that time.

    The provisions of paragraph 96 (treatment of disposal proceeds) apply as regards the allocation of that amount to the lessor's 25% and 10% pools.

    (3) The lessor shall be treated as if he had incurred qualifying expenditure on the provision of the ship for the purposes of the lessee's non-tonnage tax trade immediately after the change of circumstances occurs.

    (4) The amount of that expenditure shall be taken to be the whole of the expenditure on the ship that would have qualified for capital allowances if paragraph 93 had never applied, written down at 25% per annum on the reducing balance for the period beginning with the time when it was actually incurred and ending when the change of circumstances occurs.

Determination of tax written down value, etc.

    98A.—(1) This paragraph supplements paragraphs 97 and 98.

    (2) The "tax written down value" of the ship at any time means what would be the amount of unrelieved qualifying expenditure at that time determined on the following assumptions—

      (a) that the qualifying expenditure relating to the ship had been held in a single asset pool, and

      (b) that there had been made to the lessor—

          (i) the first-year allowance (if any) that was actually made to him,

          (ii) any first-year allowance falling to be made to him that was postponed under section 30(1)(a) or (c) of the Capital Allowances Act 1990, and

          (iii) the maximum amount of any writing-down allowances that, on the preceding assumptions, could have been made.

    (3) The references in paragraph 97(3)(b) and sub-paragraph (2) above to the amount of "unrelieved qualifying expenditure" are to the balance that would otherwise have been carried forward under Part II of the Capital Allowances Act 1990.

    (4) For the purpose of determining that amount at a time other than the beginning or end of an accounting period of the lessor, it shall be assumed that an accounting period of the lessor began or ended at that time.'.

 
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