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| De-grouping charge: transitional relief. |
77. Schedule 29 to the Finance Act 2000 (chargeable gains: non-resident companies and groups etc) shall be deemed to have been enacted with the following paragraph added at the end of Part III (transitional provisions) after paragraph 46-
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"De-grouping charge: deferral until company leaves new group |
| | 47. - (1) This paragraph has effect for the purposes of section 179 of the Taxation of Chargeable Gains Act 1992 as that section has effect in relation to assets acquired before 1st April 2000 ("old section 179").
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(2) Where-
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(a) a company would (apart from this paragraph) fall to be regarded for the purposes of old section 179 as ceasing to be a member of an old group at any time, but |
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(b) immediately before that time, it is also a member of a new group for the purposes of new section 179, |
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the company shall not be regarded for the purposes of old section 179 as ceasing to be a member of the old group unless or until it also ceases to be a member of the new group for the purposes of new section 179.
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(3) Sub-paragraph (2) above does not prevent the company from being or becoming a member of another old group at any time.
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(4) Where a company ceases to be a member of a new group on any occasion, it shall not by virtue of sub-paragraph (2) above be treated for the purposes of old section 179 as if it had on that occasion ceased to be a member of the same old group more than once.
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(5) For the purposes of this paragraph-
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(a) references to a company being a member of an old group are references to its being, for the purposes of old section 179, a member of a group of companies within the meaning given by old section 170; |
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(b) references to a company being a member of a new group are references to its being, for the purposes of new section 179, a member of a group of companies within the meaning given by new section 170; and |
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(c) references to a company ceasing to be a member of an old group or a new group shall be construed in accordance with paragraph (a) or (b) above, as the case may be. |
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(6) Where, for the purposes of sub-paragraph (2)(b) above, a company is not a member of a new group by reason only that-
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(a) the principal company of the old group is not the principal company of the new group, and |
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(b) the company in question is not an effective 51 per cent subsidiary of the principal company of the new group, |
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subsection (3)(b) of new section 170 shall not apply in relation to the company for the purposes of this paragraph for so long as it remains an effective 51 per cent subsidiary of the company which was the principal company of the old group.
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(7) In this paragraph-
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(a) "new section 179" means section 179 of the Taxation of Chargeable Gains Act 1992 as it has effect in relation to assets acquired on or after 1st April 2000; |
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(b) "new section 170" means section 170 of that Act, as amended by the main amendments; |
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(c) "old section 170" means section 170 of the Taxation of Chargeable Gains Act 1992, as it stands before the main amendments. |
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(8) Expressions used in this paragraph and in section 170 of the Taxation of Chargeable Gains Act 1992 shall be construed in accordance with that section.".
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| Attribution of gains of non-resident companies. |
78. - (1) Section 13 of the Taxation of Chargeable Gains Act 1992 (attribution of gains to members of non-resident companies) is amended as follows.
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(2) In subsection (4) (no attribution if amount does not exceed one twentieth of gain) for "one twentieth" substitute "one tenth".
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(3) In subsection (5) (gains to which the section does not apply) for paragraph (b) substitute-
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"(b) a chargeable gain accruing on the disposal of an asset used, and used only- |
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(i) for the purposes of a trade carried on by the company wholly outside the United Kingdom, or
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(ii) for the purposes of the part carried on outside the United Kingdom of a trade carried on by the company partly within and partly outside the United Kingdom,".
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(4) For subsection (5A) (credit for tax on attributed gain in relation to later distribution) substitute-
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"(5A) Where-
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(a) an amount of tax is paid by a person in pursuance of subsection (2) above, and |
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(b) an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) before the end of the period specified in subsection (5B) below, |
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the amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax, capital gains tax or corporation tax in respect of the distribution.
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(5B) The period referred to in subsection (5A)(b) above is the period of three years from-
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(a) the end of the period of account of the company in which the chargeable gain accrued, or |
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(b) the end of the period of twelve months beginning with the date on which the chargeable gain accrued, |
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whichever is earlier.
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In paragraph (a) above a "period of account" means a period for which the company makes up its accounts.".
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(5) After subsection (10A) insert-
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"(10B) A chargeable gain that would be treated as accruing to a person under subsection (2) above shall not be so treated if-
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(a) it would be so treated only if assets that are assets of a pension scheme were taken into account in ascertaining that person's interest as a participator in the company, and |
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(b) at the time the gain accrues a gain arising on a disposal of those assets would be exempt from tax by virtue of section 271(1)(b), (c), (d), (g) or (h) or (2). |
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In paragraph (a) above "assets of a pension scheme" means assets held for the purposes of a fund or scheme to which any of the provisions mentioned in paragraph (b) above applies.".
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(6) This section applies to chargeable gains accruing as mentioned in section 13(1) of the Taxation of Chargeable Gains Act 1992 on or after 7th March 2001.
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International matters |
| Double taxation relief. |
79. Schedule 26 to this Act (double taxation relief) has effect.
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| Controlled foreign companies: acceptable distribution policy. |
80. - (1) Part I of Schedule 25 to the Taxes Act 1988 (acceptable distribution policy) is amended as follows.
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(2) In paragraph 2 (meaning of acceptable distribution policy) at the end of sub-paragraph (1A) (requirement that payment of dividend is taken into account in computing corporation tax) add"and-
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(a) it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or |
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(b) if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme; |
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and paragraph 2B below has effect for the purposes of paragraph (b) above.".
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(3) After paragraph 2A insert-
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| "2B. - (1) This paragraph has effect for the purposes of paragraph 2(1A)(b) above.
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(2) No payment of dividend by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period.
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(3) "UK tax avoidance scheme" means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax.
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(4) A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company-
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(a) would have been liable for any such tax or for a greater amount of any such tax; or |
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(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax. |
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(5) In this paragraph-
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"arrangement" means an arrangement of any kind, whether in writing or not; |
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"United Kingdom tax" means corporation tax or any tax chargeable as if it were corporation tax.". |
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(4) In paragraph 4 (controlled foreign company dividends passing up a chain of related companies) at the end of sub-paragraph (1) (which provides for a payment made by a controlled foreign company to be regarded as made to a United Kingdom resident) add "and shall be taken to satisfy the conditions in paragraph 2(1A) above".
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(5) At the end of sub-paragraph (1A) of that paragraph (requirement that the subsequent dividend is taken into account in computing corporation tax) add "and-
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(a) it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or |
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(b) if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme; |
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and paragraph 4A below has effect for the purposes of paragraph (b) above.".
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(6) In sub-paragraph (2) of that paragraph (interpretation) after "one company is related to another if" insert "neither is resident in the United Kingdom and".
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(7) After paragraph 4 insert-
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| "4A. - (1) This paragraph has effect for the purposes of paragraph 4(1A)(b) above.
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(2) No payment to a company resident in the United Kingdom which represents the whole or part of a dividend paid by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that-
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(a) there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period, and |
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(b) so much of the dividend as is represented by that payment will (if paragraph 4(1) above has effect) fall to be brought into account in determining whether the controlled foreign company has done so. |
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(3) "UK tax avoidance scheme" means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax.
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(4) A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company-
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(a) would have been liable for any such tax or for a greater amount of any such tax; or |
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(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax. |
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(5) In this paragraph-
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"arrangement" means an arrangement of any kind, whether in writing or not; |
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"United Kingdom tax" means corporation tax or any tax chargeable as if it were corporation tax.". |
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(8) This section applies to dividends paid on or after 7th March 2001 by a controlled foreign company for any accounting period of that controlled foreign company which ends on or after that date.
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(9) In this section "accounting period" and "controlled foreign company" have the same meaning as they have in Chapter IV of Part XVII of the Taxes Act 1988.
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Miscellaneous |
| Life policies, life annuity contracts and capital redemption policies. |
81. - (1) Schedule 27 to this Act (which makes amendments relating to Chapter II of Part XIII of the Taxes Act 1988) has effect.
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(2) The amendments made by Part I of that Schedule (which relate to the assignment or surrender of part of, or a share in, the rights conferred by a policy or contract) have effect, in the case of any policy or contract, in relation to any year (within the meaning given by section 546(4) of the Taxes Act 1988) beginning on or after 6th April 2001.
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(3) The amendments made by Part II of that Schedule (which relate to the provision by insurers etc of information relating to chargeable events happening in connection with a policy or contract) have effect in relation to chargeable events happening on or after 6th April 2002.
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| Exclusion of deductions for deemed manufactured payments. |
82. - (1) Section 736B of the Taxes Act 1988 (deemed manufactured payments in case of stock lending arrangements) is amended as follows.
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(2) In subsection (2) (application of provisions to deemed manufactured payments) after "shall apply" insert ", subject to subsection (2A) below,".
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(3) After that subsection insert-
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"(2A) The borrower is not entitled, by virtue of anything in Schedule 23A or any provision of regulations under that Schedule, or otherwise-
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(a) to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or |
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(b) to any deduction against total income or, as the case may be, total profits, |
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in respect of any such deemed requirement or payment as is provided for by subsection (2) above.
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Where the borrower is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.".
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(4) This section applies to payments treated under section 736B as made on or after 3rd October 2000.
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