Acquisition by company of its own shares
Venture capital trusts
1 In Schedule 15B to the Taxes Act 1988 (venture capital trusts: relief from
income tax), in paragraph 1 (entitlement to claim relief on investment), after
sub-paragraph (9) insert—
“(10) An individual is not eligible for relief under this Part of this
Schedule by reference to any shares which are treated as issued to
him by virtue of section 192(8) of the Finance Act 2003 (tax
treatment of disposal by company of its own shares).
(11) Where a company which is a venture capital trust issues to any
individual eligible shares to which sub-paragraph (10) above
applies, it must—
(a) at the time of the issue of those shares, give that individual
a notice stating that he is not eligible for relief under this
Part of this Schedule by reference to those shares, and
(b) no later than three months after the issue of those shares,
give a copy of that notice to an officer of the Board.”.
Stamp duty and stamp duty reserve tax
2 In section 66 of the Finance Act 1986 (c. 41) (stamp duty: company’s
purchase of own shares)—
(a) in subsection (2)—
(i) for “The return which relates to the shares” substitute “Any
return which relates to any of the shares”,
(ii) after “169” insert “(1) or (1B)”, and
(iii) after “transferring the shares” insert “to which it relates”,
(b) after that subsection insert—
“(2A) Any return which relates to the cancellation of any of the
shares purchased and is delivered to the registrar of
companies under section 169A of the Companies Act 1985
shall be chargeable under this subsection with stamp duty of
(c) in subsection (3), after “169” insert “(1) or (1B)”.
3 In section 90 of that Act (exemptions from stamp duty reserve tax), after
subsection (7) insert—
“(7A) Section 87 above does not apply as regards an agreement to transfer
any shares in a company which are held by the company (whether in
accordance with section 162A of the Companies Act 1985 (treasury
shares) or otherwise).”.
4 (1) Section 92 of that Act (stamp duty reserve tax: repayment or cancellation of
tax) is amended as follows.
(2) After subsection (1B) insert—
“(1C) If, as regards an agreement to transfer shares in a company to that
company (“the own-shares agreement”)—
(a) tax is charged under section 87 above, and
(b) it is proved to the Board’s satisfaction that at a time in the
period of six years beginning on the relevant day (as defined
in section 87(3)) the conditions mentioned in subsection (1D)
have been fulfilled in respect of those shares,
subsections (2) to (4A) apply.
(1D) The conditions referred to in subsection (1C) are—
(a) that, in relation to the transfer made in pursuance of the own-
shares agreement, a return has been made in respect of each
of those shares in accordance with section 169(1) or (1B) of the
Companies Act 1985 (c. 6) (disclosure by company of
purchase of own shares), and
(b) that any such return has been duly stamped in accordance
with section 66.”.
(3) In subsection (2), after “subsection (1)” insert “or, as the case may be, (1C)”.
5 In Schedule 13 to the Finance Act 1999 (c. 16) (stamp duty: instruments
chargeable and rates of duty), in Part 1 (conveyance or transfer on sale), in
paragraph 1 (stamp duty charge), after sub-paragraph (2) insert—
“(3) Sub-paragraph (1) is subject to sub-paragraphs (4) to (6).
(4) Where a company acquires any shares in itself by virtue of section
162 of the Companies Act 1985 (power of company to purchase
own shares) or otherwise, sub-paragraph (1) does not apply to any
instrument by which the shares are transferred to the company.
(5) Where a company holds any shares in itself by virtue of section
162A of that Act (treasury shares) or otherwise, any instrument to
which sub-paragraph (6) applies is to be treated for the purposes
of this Schedule as a conveyance otherwise than on sale, and
paragraph 16 applies accordingly.
(6) This sub-paragraph applies to any instrument for the sale or
transfer of any of the shares by the company, other than an
instrument which, in the absence of sub-paragraph (5), would be
an instrument in relation to which—
(a) section 67(2) of the Finance Act 1986 (transfer to person
whose business is issuing depositary receipts etc), or
(b) section 70(2) of that Act (transfer to person who provides
clearance services etc),
Companies in administration
Accounting period for company in administration
1 (1) Section 12 of the Taxes Act 1988 (corporation tax: basis of, and periods for,
assessment) is amended as follows.
(2) In subsection (3), after paragraph (d) insert—
“(da) the company ceasing to be in administration;”.
(3) After subsection (5A) insert—
“(5B) For the purposes of subsection (3)(da) a company ceases to be in
administration when it ceases to be in administration under
Schedule B1 to the Insolvency Act 1986 or any corresponding event
occurs otherwise than under that Act.”.
(4) In subsection (7) (accounting periods where company is wound up), after
the words “subject to” insert “subsection (7ZA) below and”.
(5) After subsection (7) insert—
“(7ZA) Notwithstanding anything in subsections (1) to (6) above, where a
company enters administration—
(a) an accounting period of the company shall end immediately
before the day the company enters administration, and
(b) if immediately before the company enters administration it is
in the course of being wound up, subsection (7) ceases to
apply at the end of that accounting period.
For this purpose a company enters administration when it enters
administration under Schedule B1 to the Insolvency Act 1986 or is
subject to any corresponding procedure otherwise than under that
(6) In subsection (7A) for “subsections (1) to (7)” substitute “subsections (1) to
Responsibility of officers of company in administration
2 (1) Section 108 of the Taxes Management Act 1970 (c. 9) (responsibility of
company officers) is amended as follows.
(2) In subsection (3)(a)—
(a) after first “liquidator” insert “or administrator”, and
(b) after second “liquidator” insert “or, as the case may be,
(3) After subsection (3) insert—
“(4) For the purposes of subsection (3)(a), where two or more persons are
appointed to act jointly or concurrently as the administrator of a
company, the proper officer is—
(a) such one of them as is specified in a notice given to the Board
by those persons for the purposes of this section, or
(b) where the Board is not so notified, such one or more of those
persons as the Board may designate as the proper officer for
Tax on companies in administration
3 After section 342 of the Taxes Act 1988 (tax on company in liquidation)
“342A Tax on companies in administration
(1) In this section—
(a) references to the relevant event, in relation to a company in
administration, are references—
(i) to the administrator sending a notice in respect of the
company under paragraph 84(1) of Schedule B1 to the
Insolvency Act 1986 (company moving from
administration to dissolution), or
(ii) in the case of a company which enters administration
otherwise than under that Act, to the doing of any
other act for a like purpose, and
(b) references to a company’s final year are references to the
financial year in which the relevant event occurs, and
references to the company’s penultimate year are references
to the last financial year preceding its final year.
(2) Subject to subsections (3) and (4)—
(a) corporation tax shall be charged on the profits of the
company arising in the administration in its final year at the
rate of corporation tax fixed or proposed for the penultimate
(b) where the corporation tax charged on the company’s income
included in those profits falls to be calculated or reduced in
accordance with section 13, it shall be so calculated or
reduced in accordance with such rate or fraction fixed or
proposed for the penultimate year as is applicable under that
(3) If, before the relevant event, any of the rates or fractions mentioned
in subsection (2) has been fixed or proposed for the final year, that
subsection shall have effect in relation to that rate or fraction as if for
the references to the penultimate year there were substituted
references to the final year.
(4) If, in the case of the company’s final accounting period, the income
(if any) which consists of interest received or receivable by the
company under section 826 does not exceed £2,000, that income shall
not be subject to corporation tax.
(5) In subsection (4) “the company’s final accounting period” means the
last accounting period of the company before the relevant event.
(6) An assessment on the company’s profits for an accounting period in
which the company is in administration shall not be invalid because
made before the end of the accounting period.
(7) In making an assessment after the company enters administration
and before the date of the relevant event, the administrator may act
on an assumption as to when that date will fall so far as it governs
(8) The assumption of the wrong date shall not alter the company’s final
and penultimate year and, if the right date is later—
(a) an accounting period shall end on the date assumed and a
new accounting period shall begin, and
(b) thereafter, section 12(3) shall apply as if the company had
entered administration at the beginning of that new
(9) Subsections (7) and (9) of section 342 apply in relation to this section
as they apply in relation to that section, except that in subsection (7)
of that section the reference to the completion of the winding up is to
be read as a reference to the relevant event.
(10) Where the company entered administration before its final year,
paragraphs (a) and (b) of subsection (2) (but not subsection (3)) apply
in relation to the company’s profits arising at any time in its
Debit for bad debt where parties connected and creditor insolvent
4 (1) Paragraph 6A of Schedule 9 to the Finance Act 1996 (c. 8) (bad debt etc:
parties having connection and creditor in insolvent liquidation etc) is
amended as follows.
(2) In sub-paragraph (1)—
(a) in paragraph (a), for “has gone into” substitute “is in”,
(b) for paragraph (b) substitute—
“(b) that company is in insolvent administration;”, and
(c) in paragraph (d), for “an event has occurred, or circumstances exist,”
substitute “circumstances exist”.
(3) In sub-paragraph (2)—
(a) in paragraph (a) for “after the commencement” substitute “in the
(b) in paragraph (b) for “when the administration order is in force”
substitute “in the course of the administration”.
(4) For sub-paragraph (3) substitute—
“(3) For the purposes of this paragraph a company is in insolvent
liquidation during the period which—
(a) begins when it goes into liquidation, as defined in section
247(2) of the Insolvency Act 1986 or Article 6(2) of the
Insolvency (Northern Ireland) Order 1989, at a time when
its assets are insufficient for the payment of its debts and
other liabilities and the expenses of the winding up, and
(b) ends when the winding up is completed or otherwise
brought to an end (whether under paragraph 37 or 38 of
Schedule B1 to the Insolvency Act 1986 or otherwise).
(4) For the purposes of this paragraph a company in administration is
in insolvent administration if—
(a) in the case of an administration under Schedule B1 to the
Insolvency Act 1986, it entered administration at a time
when its assets were insufficient for the payment of its
debts and other liabilities and the expenses of the
(b) in a case where an administration order has effect under
Part 3 of the Insolvency (Northern Ireland) Order 1989, the
order was made at such a time.”.
5 (1) Subject to sub-paragraph (2), this Schedule has effect in relation to
companies which enter administration (whether under the Insolvency Act
1986 (c. 45) or otherwise) on or after the commencement of section 248 of the
Enterprise Act 2002 (c. 40) (which substitutes Part 2 of the Insolvency Act
(2) Paragraph 4 has effect in relation to companies which—
(a) are in insolvent liquidation or insolvent administration immediately
before 9th April 2003, or
(b) go into insolvent liquidation or insolvent administration on or after
For this purpose “insolvent liquidation” and “insolvent administration” are
to be construed in accordance with paragraph 6A of Schedule 9 to the
Finance Act 1996 (c. 8) (as amended by paragraph 4 above).
Controlled foreign companies: exempt activities
1 Part 2 of Schedule 25 to the Taxes Act 1988 (controlled foreign companies:
exempt activities) is amended as follows.
Companies engaged in wholesale, distributive, financial or service business
2 (1) Paragraph 6 (meaning of “engaged in exempt activities”) is amended as
(2) In sub-paragraph (1)(c) (requirement that any of sub-paragraphs (2) to (4A)
applies to the company) for “(2) to (4A)” substitute “(2), (3), (4) or (4A)”.
(3) In sub-paragraph (2A) (persons from whom less than 50% of the gross
trading receipts of a wholesale etc business of the controlled foreign
company must be derived) omit the word “and” immediately preceding
paragraph (c) and at the end of that paragraph add— “;
(d) persons not falling within paragraphs (a) to (c) above which
are companies resident in the United Kingdom;
(e) persons not falling within paragraphs (a) to (c) above which
are companies not resident in the United Kingdom which
carry on business through a branch or agency in the United
(f) persons not falling within paragraphs (a) to (c) above who are
individuals habitually resident in the United Kingdom;
but where the company is a controlled foreign company falling
within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be
(4) After sub-paragraph (2A) insert—
“(2B) A controlled foreign company falls within this sub-paragraph if
(a) its main business is the effecting or carrying out of
contracts of long-term insurance, other than protection
(b) it is a member of an insurance group and its main business
is insuring or reinsuring large risks.
Paragraph 11A below has effect for the interpretation of this sub-
(2C) For the purposes of sub-paragraph (2)(b) above, a company’s
gross trading receipts from a business shall be regarded as directly
or indirectly derived from a person falling within sub-paragraph
(2A)(e) above only to the extent that they are derived directly or
indirectly from contracts or other arrangements relating to that
person’s branch or agency in the United Kingdom.”.
(5) In sub-paragraph (4C) (which defines for the purposes of sub-paragraph
(2)(b) a “25 per cent assessable interest”, an expression not used in sub-
paragraph (2)(b) but used in sub-paragraph (2A)(b)) for “(2)(b)” substitute
Companies engaged in business of banking etc
3 (1) Paragraph 11 (provisions relating to wholesale, distributive, financial or
service business) is amended as follows.
(2) In sub-paragraph (3) (controlled foreign company engaged in business of
banking etc) for paragraph (a) (interest from UK company not to be regarded
as receipt derived from connected or associated persons) substitute—
“(a) no payment of interest received from a company resident in
the United Kingdom which is connected or associated with
the controlled foreign company shall be regarded for the
purposes of paragraph 6(2)(b) above as a receipt derived
directly or indirectly from a person falling within paragraph
6(2A) above, but”.
(3) At the end of paragraph (b) of that sub-paragraph (the capitalisation test)
add “, and
(c) it shall also be conclusively presumed that the condition in
paragraph 6(2)(b) is not fulfilled if 10% or more of the
company’s gross trading receipts from all businesses carried
on by it in the accounting period in question, taken together,
are receipts other than interest and are directly or indirectly
derived from persons—
(i) which are companies resident in the United
(ii) which are companies not resident in the United
Kingdom but which carry on business through a
branch or agency in the United Kingdom, or
(iii) who are individuals habitually resident in the United
but for this purpose a company’s gross trading receipts shall
be regarded as directly or indirectly derived from a person