|
| |
| |
(5) References in this paragraph to a financial asset include any | |
financial risk in relation to a loan, or potential loan, that is capable | |
of giving rise to fees or other receipts and for which the holding of | |
capital is required (or would be required if the transaction were | |
between parties at arm’s length). | 5 |
Borrowing by non-resident banks: permanent establishment acting as agent or | |
intermediary | |
10 (1) This paragraph applies where a permanent establishment— | |
(a) borrows funds for the purposes of another part of the non- | |
resident company, and | 10 |
(b) in relation to that borrowing acts only as an agent or | |
intermediary. | |
(2) In such a case, in accordance with the separate enterprise | |
principle— | |
(a) the profits attributable to the permanent establishment, | 15 |
and | |
(b) the capital attributable to the permanent establishment | |
under section 11AA(3), | |
shall be that appropriate in the case of an agent acting at arm’s | |
length, taking into account the risks and costs borne by the | 20 |
establishment.”. | |
Schedule 26 | |
Section 151 | |
Non-resident companies: transactions through broker, investment | |
manager or Lloyd’s agent | |
Introduction | 25 |
1 (1) This Schedule makes provision about transactions carried out on behalf of a | |
company that is not resident in the United Kingdom (a “non-resident | |
company”), in the course of that company’s trade, by a person in the United | |
Kingdom acting as— | |
(a) a broker (paragraph 2), | 30 |
(b) an investment manager (paragraphs 3 to 5), or | |
(c) a members’ or managing agent at Lloyd’s (paragraph 6). | |
(2) The provisions of this Schedule supplement— | |
(a) section 147(3) (meaning of “permanent establishment”: not to | |
include independent agent), and | 35 |
(b) section 150(2)(c) (limit on income tax chargeable on non-resident | |
company: income arising from transactions carried out through | |
independent agent). | |
Brokers | |
2 (1) In relation to a transaction carried out on behalf of a non-resident company, | 40 |
a broker is regarded as an agent of independent status acting in the ordinary | |
course of his business if, and only if, the following conditions are met. | |
| |
| |
|
| |
| |
(2) The conditions are— | |
(a) that at the time of the transaction he is carrying on the business of a | |
broker; | |
(b) that the transaction is carried out by him in the ordinary course of | |
that business; | 5 |
(c) that the remuneration he receives in respect of the transaction for the | |
provision of the services of a broker to the non-resident company is | |
not less than is customary for that class of business; and | |
(d) that he does not fall to be treated as a permanent establishment of the | |
non-resident company in relation to any other transaction carried | 10 |
out in the same accounting period. | |
Investment managers | |
3 (1) In relation to an investment transaction carried out on behalf of a non- | |
resident company by a person providing investment management services | |
(an “investment manager”), the investment manager is regarded as an agent | 15 |
of independent status acting in the ordinary course of his business if, and | |
only if, the following conditions are met. | |
(2) The conditions are— | |
(a) that at the time of the transaction he is carrying on a business of | |
providing investment management services; | 20 |
(b) that the transaction is carried out in the ordinary course of that | |
business; | |
(c) that he acts on behalf of the non-resident company in relation to the | |
transaction in an independent capacity; | |
(d) that the requirements of the 20% rule are met (see paragraph 4); | 25 |
(e) that the remuneration he receives in respect of the transaction for the | |
provision to the non-resident company of investment management | |
services is not less than is customary for that class of business; and | |
(f) that he does not fall to be treated as a permanent establishment of the | |
company in relation to any other transaction carried out in the same | 30 |
accounting period. | |
(3) In sub-paragraph (1) “investment transaction” means— | |
(a) transactions in shares, stock, futures contracts, options contracts or | |
securities of any description not mentioned in this paragraph, but | |
excluding futures contracts or options contracts relating to land, | 35 |
(b) transactions consisting in the buying or selling of any foreign | |
currency or in the placing of money at interest, and | |
(c) such other transactions as the Treasury may by regulations designate | |
for the purposes of this Schedule. | |
Regulations for the purposes of paragraph (c) shall be made by statutory | 40 |
instrument which shall be subject to annulment in pursuance of a resolution | |
of the House of Commons. | |
(4) For the purposes of sub-paragraph (3) a contract is not prevented from being | |
a futures contract or an options contract by the fact that any party is or may | |
be entitled to receive or liable to make, or entitled to receive and liable to | 45 |
make, only a payment of a sum (as opposed to a transfer of assets other than | |
money) in full settlement of all obligations. | |
| |
| |
|
| |
| |
Investment managers: the 20% rule | |
4 (1) The requirements of the 20% rule are— | |
(a) that in relation to a qualifying period (see sub-paragraph (2)) it has | |
been or is the intention of the investment manager and the persons | |
connected with him that the company’s relevant excluded income | 5 |
(see sub-paragraph (3)) should, as to at least 80%, consist of amounts | |
to which neither he nor any such person has a beneficial entitlement | |
(see sub-paragraph (4)), and | |
(b) to the extent that there is a failure to fulfil that intention, that | |
failure— | 10 |
(i) is attributable (directly or indirectly) to matters outside the | |
control of the investment manager and persons connected | |
with him, and | |
(ii) does not result from a failure by him or any of those persons | |
to take such steps as may be reasonable for mitigating the | 15 |
effect of those matters in relation to the fulfilment of that | |
intention. | |
(2) A “qualifying period” means— | |
(a) the accounting period in which the transaction in question is carried | |
out, or | 20 |
(b) a period of not more than five years comprising two or more | |
complete accounting periods including that one. | |
(3) The “relevant excluded income” of a non-resident company for a qualifying | |
period is the aggregate of such of the chargeable profits of the company for | |
the accounting periods comprised in the qualifying period as derive from | 25 |
transactions carried out by the investment manager on the company’s behalf | |
in relation to which the manager does not (apart from the requirements of | |
the 20% rule) fall to be treated as a permanent establishment of the company. | |
(4) A person has a “beneficial entitlement” to relevant excluded income if he has | |
or may acquire a beneficial entitlement by virtue of— | 30 |
(a) an interest of his (whether or not an interest giving a right to an | |
immediate payment of a share in the profits or gains) in property in | |
which the whole or any part of that income is represented, or | |
(b) an interest of his in or other rights in relation to the non-resident | |
company, | 35 |
that is or would be attributable to that income. | |
(5) In the case of a transaction in relation to which the conditions in paragraph | |
3 are met except for the requirements of the 20% rule, this Schedule has effect | |
as if the requirements of that rule were met in relation to so much of the | |
chargeable profits of the non-resident company deriving from the | 40 |
transaction as do not represent relevant excluded income of the company to | |
which the investment manager or a person connected with him has or has | |
had any beneficial entitlement. | |
Investment managers: application of 20% rule to collective investment schemes | |
5 (1) This paragraph applies where amounts arise or accrue to the non-resident | 45 |
company as a participant in a collective investment scheme. | |
| |
| |
|
| |
| |
(2) The requirements of the 20% rule need not be met in relation to a transaction | |
carried out for the purposes of the scheme if the scheme is such that, if the | |
following assumptions applied— | |
(a) that all transactions carried out for the purposes of the scheme were | |
carried out on behalf of a company constituted for the purposes of | 5 |
the scheme and resident outside the United Kingdom, and | |
(b) that the participants did not have any rights in respect of the | |
amounts arising or accruing in respect of those transactions other | |
than the rights that, if they held shares in the company on whose | |
behalf the transactions are assumed to be carried out, would be their | 10 |
rights as shareholders, | |
the assumed company would not, in relation to the accounting period in | |
which the transaction was carried out, be regarded for tax purposes as | |
carrying on a trade in the United Kingdom. | |
(3) Where on those assumptions the assumed company would be regarded for | 15 |
tax purposes as carrying on a trade in the United Kingdom, paragraph 4 has | |
effect with the following modifications in relation to a transaction carried | |
out for the purposes of the scheme— | |
(a) for references to the non-resident company substitute references to | |
the assumed company; | 20 |
(b) for references to the non-resident company’s relevant excluded | |
income substitute references to the aggregate of the amounts that | |
would, for accounting periods comprised in the qualifying period, be | |
chargeable to tax on the assumed company as profits deriving from | |
the transactions carried out by the investment manager and assumed | 25 |
to be carried out on behalf of the company. | |
(4) In this paragraph “collective investment scheme” has the meaning given by | |
section 235 of the Financial Services and Markets Act 2000 (c. 8), and | |
“participant”, in relation to such a scheme, shall be construed in accordance | |
with that section. | 30 |
Lloyd’s agents | |
6 (1) Where a non-resident company is a member of Lloyd’s and the transaction | |
is carried out in the course of the company’s underwriting business, a | |
person who acts on behalf of the company in relation to the transaction is | |
regarded as an independent agent acting in the ordinary course of his | 35 |
business if he acts as members’ agent or as managing agent of the syndicate | |
in question. | |
(2) In sub-paragraph (1)— | |
(a) the reference to the non-resident company being a member of | |
Lloyd’s is to its being a corporate member within the meaning of | 40 |
Chapter 5 of Part 4 of the Finance Act 1994 (c. 9); and | |
(b) the references to a members’ agent and to a managing agent shall be | |
construed in accordance with section 230 of that Act. | |
General supplementary provisions | |
7 (1) For the purposes of this Schedule a person is regarded as carrying out a | 45 |
transaction on behalf of another where he undertakes the transaction | |
himself, whether on behalf of or to the account of that other, and also where | |
he gives instructions for it to be so carried out by another. | |
| |
| |
|
| |
| |
(2) For the purposes of this Schedule a person is regarded as acting in an | |
independent capacity on behalf of a company only if the relationship | |
between them, having regard to its legal, financial and commercial | |
characteristics, is a relationship between persons carrying on independent | |
businesses that deal with each other at arm’s length. | 5 |
(3) Section 839 of the Taxes Act 1988 (connected persons) applies for the | |
purposes of this Schedule. | |
(4) This Schedule has effect in the case of a person who acts as a broker or | |
provides investment services as part only of a business as if that part were a | |
separate business. | 10 |
Schedule 27 | |
Section 154 | |
Permanent establishment etc: consequential amendments | |
Taxes Act 1988 | |
1 (1) The Taxes Act 1988 is amended as follows. | |
(2) In section 606 (persons responsible in case of default of administrator of | 15 |
retirement benefits scheme), for subsection (13) substitute— | |
“(13) References in this section to the employer include, where the | |
employer is not resident in the United Kingdom, any person who is | |
treated as UK representative of the employer under section 126 of the | |
Finance Act 1995 or section 149 of the Finance Act 2003.”. | 20 |
(3) In section 806L (carry forward or carry back of unrelieved foreign tax), for | |
subsection (7) substitute— | |
“(7) In this section— | |
“overseas permanent establishment” means a permanent | |
establishment through which a company carries on a trade in | 25 |
a territory outside the United Kingdom; and | |
“permanent establishment”— | |
(a) if there are arrangements having effect under section | |
788 in relation to the territory concerned that define | |
the expression, has the meaning given by those | 30 |
arrangements, and | |
(b) if there are no such arrangements, or if they do not | |
define the expression, has the meaning given by | |
section 147 of the Finance Act 2003.”. | |
(4) In Schedule 15 (qualifying policies), in paragraph 24 (policies issued by non- | 35 |
resident companies), in sub-paragraph (3)(b) (twice) and (c) for “branch” | |
substitute “permanent establishment”. | |
Taxation of Chargeable Gains Act 1992 | |
2 (1) The Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows. | |
(2) In section 10 (non-resident with United Kingdom branch or agency)— | 40 |
(a) omit subsection (3); and | |
| |
| |
|
| |
| |
(b) in subsection (4), omit “or corporation tax”. | |
(3) In sections 13(5)(d), 25(7)(b), 106(10), 139(1A), 140A(2), 159(4)(b), 171(1A), | |
175(2AA), 179(1A), 190(2)(b) and (3)(b), 199(6)(b) and 228(6)(b), and in | |
Schedule 7A, paragraph 1(3A), for “10(3)” substitute “10B”. | |
Finance Act 1993 | 5 |
3 (1) In sections 93 and 93A of the Finance Act 1993 (c. 34) (use of currency other | |
than sterling) for “branch”, wherever occurring, substitute “permanent | |
establishment”. | |
(2) The provisions in which the above amendment is to be made are— | |
(a) in section 93, subsection (2)(b) and the definition of “return of | 10 |
accounts” in subsection (7) (twice); | |
(b) in section 93A, subsections (2)(b), (3)(b) and (7)(b). | |
Finance Act 1995 | |
4 (1) Section 126 of the Finance Act 1995 (c. 4) (UK representatives of non- | |
residents) is amended as follows. | 15 |
(2) In subsection (1), omit the words “, corporation tax”. | |
(3) In subsection (2)— | |
(a) after paragraph (b) insert “and”; | |
(b) in paragraph (c) omit the words from “or fall” to “non-resident”; and | |
(c) omit sub-paragraph (d) and the word “and” preceding it. | 20 |
(4) For subsection (8) substitute— | |
“(8) In this section, “branch or agency” means any factorship, agency, | |
receivership, branch or management.”. | |
(5) In subsection (9), omit paragraph (b) and the word “and” preceding it. | |
(6) After subsection (9) insert— | 25 |
“(10) This section does not apply in relation to income tax chargeable on | |
income of a company otherwise than as a trustee.”. | |
5 (1) Section 127 of the Finance Act 1995 (persons not treated as UK | |
representatives) is amended as follows. | |
(2) In subsection (1) for “(a) to (d)” substitute “(a) to (c)”. | 30 |
(3) In subsection (5)(b) omit “or 129”. | |
(4) In subsection (17), in the definition of “branch or agency” for “the | |
Management Act” substitute “section 126 above”. | |
(5) In subsection (19) omit paragraph (b) and the word “and” preceding it. | |
6 In section 128 of the Finance Act 1995 (limit on income chargeable on non- | 35 |
residents: income tax), after subsection (11) insert— | |
“(12) This section does not apply in relation to income tax chargeable on | |
income of a company otherwise than as a trustee.”. | |
7 Omit section 129 of the Finance Act 1995 (limit on income chargeable on non- | |
residents: corporation tax). | 40 |
| |
| |
|
| |
| |
Finance Act 1996 | |
8 In Schedule 15 to the Finance Act 1996 (c. 8) (loan relationships: transitional | |
provisions), in paragraph 8(6)(c)— | |
(a) for “10(3)” substitute “10B”, and | |
(b) for “on a disposal by a branch or agency” substitute “attributable to | 5 |
a permanent establishment”. | |
Finance Act 2000 | |
9 In Schedule 15 to the Finance Act 2000 (c. 17) (corporate venturing scheme), | |
in paragraph 79(5) (gain accruing on chargeable event), for “section 10” | |
substitute “section 10B”. | 10 |
Schedule 28 | |
Section 158 | |
Capital gains tax: reporting limits and annual exempt amount | |
Part 1 | |
Reporting limits | |
1 After section 3 of the Taxation of Chargeable Gains Act 1992 (c. 12) insert— | 15 |
“3A Reporting limits | |
(1) Where in the case of an individual— | |
(a) the amount of chargeable gains accruing to him in any year | |
of assessment does not exceed the exempt amount for that | |
year, and | 20 |
(b) the aggregate amount or value of the consideration for all | |
chargeable disposals of assets made by him in that year does | |
not exceed four times the exempt amount for that year, | |
a statement to that effect is sufficient compliance with so much of any | |
notice under section 8 of the Management Act as requires | 25 |
information for the purposes of establishing the amount in which he | |
is chargeable to capital gains tax for that year. | |
(2) For the purposes of subsection (1)(a) above— | |
(a) the amount of chargeable gains accruing to an individual in a | |
year of assessment for which no deduction falls to be made in | 30 |
respect of allowable losses is the amount after any reduction | |
for taper relief; | |
(b) the amount of chargeable gains accruing to an individual in a | |
year of assessment for which such a deduction does fall to be | |
made is the amount before deduction of losses or any | 35 |
reduction for taper relief. | |
(3) For the purposes of subsection (1)(b) above a “chargeable disposal” | |
is any disposal other than— | |
(a) a disposal on which any gain accruing is not a chargeable | |
gain, or | 40 |
| |
| |
|
