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Part 2 | |
Transitional provisions | |
Transitional provisions | |
6 (1) In Schedule 25 to the Finance Act 2002 (c. 23) (loan relationships) in Part 3 | |
(transitional provisions) after paragraph 61 insert— | 5 |
“Non-trading deficit carried forward from last old accounting period | |
61A Any amount carried forward to a new accounting period under | |
subsection (3) of section 83 of the Finance Act 1996 (carry forward | |
of so much of the non-trading deficit on a company’s loan | |
relationships as is not the subject of a claim under subsection (2) of | 10 |
that section)— | |
(a) shall be disregarded for the purposes of any claim under | |
subsection (2) of that section; and | |
(b) shall not be surrendered as group relief by virtue of section | |
403 of the Taxes Act 1988.”. | 15 |
(2) The Finance Act 2002 (c. 23) shall be taken to have been originally enacted | |
with the amendment made by this paragraph. | |
Schedule 38 | |
Section 180 | |
Sale and repurchase of securities etc | |
Increase of repurchase price of UK securities by amount of deemed manufactured dividend | 20 |
1 In section 737C of the Taxes Act 1988 (deemed manufactured payments)— | |
(a) in subsection (3)(b) (repurchase price of UK equities to be treated as | |
increased by gross amount of deemed manufactured dividend), omit | |
“gross”, and | |
(b) omit subsection (4) (definition of gross amount). | 25 |
Deemed manufactured payment where transferor or connected person makes payment | |
representative of dividend | |
2 (1) Section 737A of the Taxes Act 1988 (deemed manufactured payments) is | |
amended as follows. | |
(2) In subsection (1), for “the conditions set out in subsection (2) below” | 30 |
substitute “either the conditions set out in subsection (2) below or the | |
conditions set out in subsection (2A) below”. | |
(3) In subsection (2), for “conditions” substitute “first set of conditions referred | |
to in subsection (1) above”. | |
(4) After that subsection insert— | 35 |
“(2A) The second set of conditions referred to in subsection (1) above are | |
that— | |
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(a) a dividend which becomes payable in respect of the securities | |
is receivable otherwise than by the transferor, | |
(b) the transferor or a person connected with him is required | |
under any agreement mentioned in subsection (1) above to | |
make a payment representative of the dividend, | 5 |
(c) there is no requirement under any such agreement for a | |
person to pay to the transferor on or before the relevant date | |
an amount representative of the dividend, and | |
(d) it is reasonable to assume that, in arriving at the repurchase | |
price of the securities, account is taken of the circumstances | 10 |
referred to in paragraphs (a) to (c).”. | |
(5) In subsection (3), for “subsection (2)” substitute “subsections (2) and (2A)”. | |
(6) In subsection (5)(a), after “(2)(a)” insert “or (2A)(a)”. | |
3 In section 737C of the Taxes Act 1988 (deemed manufactured payments: | |
further provisions), after “737A(2)(a)” (in each place) insert “or (2A)(a)”. | 15 |
Provisions to cover both “put” and “call” options | |
4 In section 727A(1) of the Taxes Act 1988 (accrued income scheme not to | |
apply to transfers of securities under repo agreements), for the words from | |
“and under” to the end of paragraph (b) substitute “and the transferor or a | |
person connected with him— | 20 |
(a) is required to buy them back in pursuance of an obligation | |
imposed by, or in consequence of the exercise of an option | |
acquired under, that agreement or any related agreement, or | |
(b) acquires an option to buy them back under that agreement or | |
any related agreement which he subsequently exercises,”. | 25 |
5 In section 730A(1) of the Taxes Act 1988 (treatment of price differential on | |
sale and repurchase of securities), for paragraph (b) substitute— | |
“(b) the original owner or a person connected with him— | |
(i) is required to buy them back in pursuance of an | |
obligation imposed by, or in consequence of the | 30 |
exercise of an option acquired under, that agreement | |
or any related agreement, or | |
(ii) acquires an option to buy them back under that | |
agreement or any related agreement which he | |
subsequently exercises; and”. | 35 |
6 In section 731(2D) of the Taxes Act 1988 (provisions about purchase and sale | |
of securities not to apply to repo agreements etc) for the words from “and, | |
in” to “is entitled” in paragraph (c) substitute “and the original owner— | |
(a) is required to buy them back in pursuance of an obligation | |
imposed by, or in consequence of the exercise of an option | 40 |
acquired under, that agreement or any related agreement, | |
(b) acquires an option to buy them back under that agreement or | |
any related agreement which he subsequently exercises, or | |
(c) under that agreement or any related agreement, is entitled”. | |
7 In section 737A(1) of the Taxes Act 1988 (deemed manufactured payments), | 45 |
for the words from “and under” to the end of paragraph (b) substitute “and | |
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the transferor or a person connected with him— | |
(a) is required to buy them back in pursuance of an obligation | |
imposed by, or in consequence of the exercise of an option | |
acquired under, that agreement or any related agreement, or | |
(b) acquires an option to buy them back under that agreement or | 5 |
any related agreement which he subsequently exercises;”. | |
8 In section 737E(8) of the Taxes Act 1988 (power to modify provisions about | |
repo arrangements), for paragraph (b) substitute— | |
“(b) that person or a person connected with him— | |
(i) is required to buy them back in pursuance of an | 10 |
obligation imposed by, or in consequence of the | |
exercise of an option acquired under, that agreement | |
or any related agreement, or | |
(ii) acquires an option to buy them back under that | |
agreement or any related agreement which he | 15 |
subsequently exercises.”. | |
9 In paragraph 12(4) of Schedule 7AC to the Taxation of Chargeable Gains Act | |
1992 (c. 12) (exemptions for disposals by companies with substantial | |
shareholding: effect of repurchase agreement), for paragraph (b) | |
substitute— | 20 |
“(b) the original owner or a person connected with him— | |
(i) is required to buy them back in pursuance of an | |
obligation imposed by, or in consequence of the | |
exercise of an option acquired under, that agreement | |
or any related agreement, or | 25 |
(ii) acquires an option to buy them back under that | |
agreement or any related agreement which he | |
subsequently exercises.”. | |
Option premium to be reflected in sale price unless brought into account under derivative | |
contracts provisions | 30 |
10 In section 730A of the Taxes Act 1988 (treatment of price differential on sale | |
and repurchase of securities), after subsection (8) insert— | |
“(8A) In this section references to the sale price are to be construed— | |
(a) in a case where the securities are bought back by the | |
transferor or a person connected with him in compliance | 35 |
with a requirement imposed in consequence of the exercise of | |
an option acquired under the agreement to sell the securities | |
or any related agreement, as references to what would | |
otherwise be the sale price plus the amount of any | |
consideration given for the option, and | 40 |
(b) in a case where the securities are so bought back in the | |
exercise of an option so acquired, as references to what would | |
otherwise be the sale price less the amount of any | |
consideration so given, | |
unless the consideration is brought into account under Schedule 26 | 45 |
to the Finance Act 2002 (derivative contracts).”. | |
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Exchange gains and losses | |
11 (1) Section 730A of the Taxes Act 1988 (treatment of price differential on sale | |
and repurchase of securities) is amended as follows. | |
(2) In subsection (4) (adjustment of repurchase price) for “this section and | |
sections 737A and 737C” substitute “the excepted provisions specified in | 5 |
subsection (4A) below”. | |
(3) At the end of that subsection add as a second sentence— | |
“This subsection is subject to subsection (4B) below.”. | |
(4) After that subsection insert— | |
“(4A) The excepted provisions are— | 10 |
(a) this section, | |
(b) section 730BB, apart from subsection (7), | |
(c) section 737A, and | |
(d) section 737C. | |
(4B) Where section 730BB(7) has effect (repurchase price to be treated as | 15 |
increased or reduced for certain purposes), subsection (4) above does | |
not have effect for any purpose other than that of determining the | |
amount that falls to be increased or reduced under section | |
730BB(7).”. | |
12 After section 730B of the Taxes Act 1988 insert— | 20 |
“730BB Exchange gains and losses on sale and repurchase of securities | |
(1) For the purposes of the Corporation Tax Acts, a company has a | |
relationship to which this section applies in any case where— | |
(a) the circumstances are as set out in section 730A(1)(a) and (b); | |
(b) the company is the repurchaser of the securities or (subject to | 25 |
subsection (11) below) the interim holder; | |
(c) the conditions in subsection (2) or (3) below are satisfied; and | |
(d) subsection (10) below does not prevent this section from | |
applying, | |
and references to a relationship to which this section applies, and to | 30 |
a company’s being a party to such a relationship, shall be construed | |
accordingly. | |
(2) The conditions in this subsection are that— | |
(a) the sale price and the repurchase price are expressed in a | |
currency other than sterling; | 35 |
(b) there is a difference between— | |
(i) the sterling equivalent of the sale price as at the date | |
of the transfer of the securities to the interim holder | |
(“the first sum”); and | |
(ii) the sterling equivalent of the sale price as at the date | 40 |
they are bought back by the repurchaser (“the second | |
sum”); and | |
(c) the case is not one where section 93 of the Finance Act 1993 | |
(accounts of a company in a currency other than sterling) | |
applies in relation to the company. | 45 |
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(3) The conditions in this subsection are that— | |
(a) the case is one where section 93 of the Finance Act 1993 | |
applies in relation to the company; | |
(b) the sale price and the repurchase price are expressed in a | |
currency other than the relevant foreign currency (within the | 5 |
meaning of that section) in relation to the company; and | |
(c) there is a difference between— | |
(i) the relevant foreign currency equivalent of the sale | |
price as at the date of the transfer of the securities to | |
the interim holder (“the first sum”); and | 10 |
(ii) the relevant foreign currency equivalent of the sale | |
price as at the date they are bought back by the | |
repurchaser (“the second sum”). | |
(4) Where a company has a relationship to which this section applies | |
and— | 15 |
(a) the company is the repurchaser and the first sum exceeds the | |
second sum; or | |
(b) the company is the interim holder and the second sum | |
exceeds the first sum, | |
the amount of the excess shall be treated for the purposes of the | 20 |
Corporation Tax Acts as an exchange gain (within the meaning of | |
Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) | |
arising to the company from the relationship. | |
(5) Where a company has a relationship to which this section applies | |
and— | 25 |
(a) the company is the repurchaser and the second sum exceeds | |
the first sum; or | |
(b) the company is the interim holder and the first sum exceeds | |
the second sum, | |
the amount of the excess shall be treated for the purposes of the | 30 |
Corporation Tax Acts as an exchange loss (within the meaning of | |
Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) | |
arising to the company from the relationship. | |
(6) Where an exchange gain or loss is treated by virtue of subsection (4) | |
or (5) above as arising to a company from a relationship to which this | 35 |
section applies— | |
(a) Chapter 2 of Part 4 of the Finance Act 1996 shall have effect in | |
relation to the exchange gain or loss as it would have effect if | |
it were an exchange gain or loss (as the case may be) arising | |
to the company from a loan relationship to which it is a party; | 40 |
but | |
(b) the only debits and credits to be brought into account for the | |
purposes of that Chapter by virtue of this section in respect of | |
the relationship to which this section applies are those | |
relating to the exchange gains and losses, | 45 |
and, subject to paragraph (b) above, references in the Corporation | |
Tax Acts to a loan relationship accordingly include a reference to a | |
relationship to which this section applies. | |
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(7) Where a company has a relationship to which this section applies, | |
the repurchase price shall be treated for the purposes of the Tax Acts | |
(other than this section and sections 730A, 737A and 737C) and (in | |
cases where section 263A of the 1992 Act does not apply) for the | |
purposes of the 1992 Act— | 5 |
(a) in a case where an exchange gain arises to the company by | |
virtue of subsection (4)(a) above or an exchange loss arises to | |
the company by virtue of subsection (5)(b) above, as | |
increased by the amount by which the first sum exceeds the | |
second sum, and | 10 |
(b) in a case where an exchange gain arises to the company by | |
virtue of subsection (4)(b) above or an exchange loss arises to | |
the company by virtue of subsection (5)(a) above, as reduced | |
by the amount by which the second sum exceeds the first | |
sum. | 15 |
(8) Any question whether debits or credits brought into account in | |
accordance with subsection (6) above in relation to any company— | |
(a) are to be brought into account under section 82(2) of the | |
Finance Act 1996 (trading loan relationships); or | |
(b) are to be treated as non-trading debits or credits, | 20 |
shall be determined (subject to Schedule 11 to that Act (insurance | |
companies)) according to the extent (if any) to which the company is | |
a party to the repurchase in the course of activities forming an | |
integral part of a trade carried on by that company. | |
(9) To the extent that debits or credits fall to be brought into account by | 25 |
a company under section 82(2) of that Act in the case of a relationship | |
to which this section applies, the company shall be regarded for the | |
purposes of Chapter 2 of Part 4 of the Finance Act 1996 as being a | |
party to the relationship for the purposes of a trade carried on by the | |
company. | 30 |
(10) Except where regulations under section 737E otherwise provide, this | |
section does not apply if— | |
(a) the agreement or agreements under which provision is made | |
for the sale and repurchase are not such as would be entered | |
into by persons dealing with each other at arm’s length; or | 35 |
(b) all of the benefits and risks arising from fluctuations, before | |
the repurchase takes place, in the market value of the | |
securities sold accrue to, or fall on, the interim holder. | |
(11) Where— | |
(a) the repurchase price is more than the sale price, so that by | 40 |
virtue of section 730A(2)(a) a payment of interest is treated as | |
made by the repurchaser on a deemed loan from the interim | |
holder; but | |
(b) the payment of interest is treated as made to a person other | |
than the interim holder, | 45 |
references to the “interim holder” in subsections (1), (4) and (5) above | |
shall be read as references to the person to whom the payment of | |
interest is treated as made. | |
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(12) Any reference in this section to the “relevant foreign currency | |
equivalent” of an amount is, in the case of any company, a reference | |
to the amount’s equivalent expressed in the relevant foreign | |
currency (within the meaning of section 93 of the Finance Act 1993) | |
in relation to the company. | 5 |
(13) Expressions used in this section and in section 730A have the same | |
meaning in this section as in that section.”. | |
13 (1) Section 737E of the Taxes Act 1988 (power to modify sections 727A, 730A | |
and 737A to 737C) is amended as follows. | |
(2) In subsections (1) and (2), after “730A” insert “, 730BB”. | 10 |
(3) In subsection (3), after “730A” insert “or 730BB”. | |
(4) In consequence of the amendments made by this paragraph, the sidenote | |
becomes “Power to modify sections 727A, 730A, 730BB and 737A to 737C”. | |
14 In section 100 of the Finance Act 1996 (c. 8) (exchange gains and losses on | |
debts etc not arising from the lending of money), after subsection (2) insert— | 15 |
“(2A) Where— | |
(a) a company has a relationship to which section 730BB of the | |
Taxes Act 1988 applies (exchange gains and losses on sale | |
and repurchase of securities), | |
(b) in the case of that relationship the circumstances mentioned | 20 |
in section 730A(1)(b) of that Act are such as to give rise to a | |
money debt, and | |
(c) the company stands, or has stood, in the position of a creditor | |
or debtor as respects that money debt, | |
the company shall not be regarded for the purposes of the | 25 |
Corporation Tax Acts as having, by reason of that money debt, a | |
relationship to which this section applies, so far as relating to | |
exchange gains and losses.”. | |
Exceptions | |
15 In section 727A(1) of the Taxes Act 1988 (accrued income scheme not to | 30 |
apply to transfers of securities under repo agreements), insert at the end | |
“except in a case where section 730A of the Taxes Act 1988 is prevented from | |
applying by subsection (8) of that section.”. | |
16 In section 730A(8)(b) of the Taxes Act 1988 (treatment of price differential on | |
sale and repurchase: exclusion of cases where all benefits or risks are for | 35 |
interim holder), for “benefits or risks” substitute “benefits and risks”. | |
17 In section 737C(11A) of the Taxes Act 1988 (purposes for which deemed | |
increase of repurchase price has effect), insert at the end “or where that | |
section is prevented from applying by subsection (8) of that section.”. | |
18 (1) Paragraph 15 of Schedule 9 to the Finance Act 1996 (c. 8) (repo transactions | 40 |
not related transactions for purposes of loan relationship provisions) is | |
amended as follows. | |
(2) In sub-paragraph (3), after “means” insert “(subject to sub-paragraph (3A))”. | |
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