|
| |
|
(6) | For sub-paragraph (5) substitute— |
| |
“(5) | The second case is where the following conditions are met.”. |
| |
(7) | In sub-paragraph (7) for “departure shall be allowed” substitute |
| |
“impairment loss may be brought into account”. |
| |
25 (1) | Paragraph 6C (bad debts etc.: cessation of connection) is amended as |
| 5 |
| |
(2) | In the heading for “Bad debt etc: departure not permitted by paragraph 6” |
| |
substitute “Impairment losses:”. |
| |
(3) | For sub-paragraph (1)(a) substitute— |
| |
“(a) | an impairment loss is excluded by paragraph 6(3) in any |
| 10 |
| |
(4) | In sub-paragraph (2) omit “by virtue of paragraph 5(2) above”. |
| |
26 | In paragraph 8 (restriction on writing off overseas sovereign debts etc.), for |
| |
sub-paragraphs (1) and (2) substitute— |
| |
“(1) | This paragraph applies as respects the debits and credits to be |
| 15 |
brought into account for the purposes of this Chapter in respect of |
| |
the impairment of a financial asset representing a relevant |
| |
| |
| This paragraph does not apply where fair value accounting is |
| |
| 20 |
(2) | Where this paragraph applies the debits and credits to be so |
| |
brought into account for any accounting period shall be |
| |
determined on the basis that it is not permissible for the asset to be |
| |
impaired by more than the relevant percentage.”. |
| |
27 (1) | Paragraph 9 (further restriction on bringing into account losses on overseas |
| 25 |
sovereign debt etc.) is amended as follows. |
| |
(2) | In sub-paragraph (1) for paragraphs (a) and (b) substitute— |
| |
“(a) | an impairment loss falls to be brought into account for the |
| |
purposes of this Chapter in respect of a relevant overseas |
| |
debt in relation to which any of the conditions in sub- |
| 30 |
| |
(b) | in the accounting period in which that loss falls to be so |
| |
brought into account (“the loss period”) the company |
| |
ceases to be a party to the loan relationship,”. |
| |
(3) | In sub-paragraph (2)— |
| 35 |
(a) | for the opening words down to “if—” substitute “The conditions |
| |
referred to in sub-paragraph (1)(a) are—”; |
| |
| |
(i) | after “Chapter” insert “for a period of account of the company |
| |
beginning before 1st January 2005”, and |
| 40 |
(ii) | for “paragraph 5(1)(a) to (c) above” substitute “paragraph |
| |
5(1)(a) to (c) of this Schedule as it had effect before its |
| |
amendment by Schedule 10 to the Finance Act 2004”; |
| |
(c) | omit the “or” at the end of paragraph (b); |
| |
(d) | after that paragraph insert— |
| 45 |
“(ba) | an impairment loss in respect of the debt has been |
| |
brought into account for the purposes of this |
| |
|
| |
|
| |
|
Chapter for a period of account of the company |
| |
beginning on or after 1st January 2005; or”. |
| |
28 | In paragraph 10 (imported losses etc.), for sub-paragraph (1) substitute— |
| |
“(1) | This paragraph applies in the case of a company (“the chargeable |
| |
company”) for an accounting period (“the loss period”) where— |
| 5 |
(a) | there is a loss arising in connection with a loan relationship |
| |
of the company which apart from this paragraph would |
| |
fall to be brought into account for the purposes of this |
| |
| |
(b) | that loss is referable in whole or in part to a time when the |
| 10 |
relationship was not subject to United Kingdom taxation. |
| |
| This paragraph does not apply where fair value accounting is |
| |
| |
29 | In paragraph 10A (deemed disposal on company ceasing to be resident in |
| |
UK etc.), omit sub-paragraph (5). |
| 15 |
30 | In paragraph 11 (transactions not at arm’s length), for sub-paragraph (1) |
| |
| |
| |
(a) | debits or credits in respect of a loan relationship of a |
| |
company fall to be brought into account for the purposes |
| 20 |
of this Chapter in respect of a related transaction, and |
| |
(b) | that transaction is not a transaction at arm’s length, |
| |
| the debits or credits to be brought into account shall be |
| |
determined on the assumption that the transaction was entered |
| |
into on the terms on which it would have been entered into |
| 25 |
between independent persons. |
| |
| This is subject to the exceptions in sub-paragraphs (1A), (2), (3) |
| |
| |
31 | In paragraph 12 (continuity of treatment: groups etc.), in sub-paragraph |
| |
| 30 |
(a) | in the opening words for “an authorised mark to market basis of |
| |
accounting” substitute “fair value accounting”; |
| |
(b) | at the end of paragraph (a) insert “; and”; and |
| |
(c) | omit paragraph (b) and the word “and” preceding it. |
| |
32 | In paragraph 13 (loan relationships for unallowable purposes), in the closing |
| 35 |
words of sub-paragraph (1) omit “given by the authorised accounting |
| |
| |
33 (1) | Paragraph 14 (debits and credits treated as relating to capital expenditure) is |
| |
| |
(2) | In sub-paragraph (1) omit “given by an authorised accounting method”. |
| 40 |
(3) | After sub-paragraph (3) add— |
| |
“(4) | Where a debit is brought into account by a company in accordance |
| |
with sub-paragraph (1), no debit shall be brought into account in |
| |
| |
(a) | the writing down of so much of the value of the fixed |
| 45 |
capital asset or project as is attributable to that debit, or |
| |
|
| |
|
| |
|
(b) | so much of any amortisation or depreciation as represents |
| |
a writing off of the interest component of the asset.”. |
| |
34 | In paragraph 16 (amounts imputed under Schedule 28AA to the Taxes Act |
| |
1988), in sub-paragraph (2) omit “, notwithstanding the provisions of any |
| |
authorised accounting method,”. |
| 5 |
35 (1) | Paragraph 19 (partnerships involving companies) is amended as follows. |
| |
(2) | Omit sub-paragraph (10). |
| |
(3) | For sub-paragraph (11) substitute— |
| |
“(11) | Where the company partner uses fair value accounting in relation |
| |
to its interest in the partnership, the debits and credits to be |
| 10 |
brought into account under this paragraph by that company must |
| |
be determined on the basis of fair value accounting.”. |
| |
(4) | In sub-paragraph (12) for the words from “carried to or sustained by a |
| |
reserve” to the end substitute “recognised in the firm’s statement of |
| |
recognised gains and losses or statement of changes in equity“. |
| 15 |
36 | After paragraph 19 insert— |
| |
“Adjustment on change of accounting policy |
| |
19A (1) | This paragraph applies where— |
| |
(a) | there is a change of accounting policy in drawing up a |
| |
company’s accounts from one period of account (the |
| 20 |
“earlier period”) to the next (the “later period”), and |
| |
(b) | the approach in each of those periods accorded with the |
| |
law and practice applicable in relation to that period. |
| |
(2) | This paragraph applies, in particular, where— |
| |
(a) | the company prepares accounts for the earlier period in |
| 25 |
accordance with UK generally accepted accounting |
| |
practice and for the later period in accordance with |
| |
international accounting standards, or |
| |
(b) | the company prepares accounts for the earlier period in |
| |
accordance with international accounting standards and |
| 30 |
for the later period in accordance with UK generally |
| |
accepted accounting practice. |
| |
(3) | If there is a difference between— |
| |
(a) | the accounting value of an asset or liability representing a |
| |
loan relationship of the company at the end of the earlier |
| 35 |
| |
(b) | the accounting value of that asset or liability at the |
| |
beginning of the later period, |
| |
| a corresponding debit or credit (as the case may be) shall be |
| |
brought into account for the purposes of this Chapter in the later |
| 40 |
| |
(4) | In sub-paragraph (3) “accounting value” means the carrying value |
| |
of the asset or liability recognised for accounting purposes. |
| |
(5) | This paragraph does not apply if or to the extent that such a debit |
| |
or credit as is mentioned in sub-paragraph (3) falls to be brought |
| 45 |
into account apart from this paragraph. |
| |
|
| |
|
| |
|
(6) | Where or to the extent that an adjustment is made under this |
| |
paragraph, no adjustment under Schedule 22 (computation of |
| |
profits: adjustment on change of basis) shall be made. |
| |
Power to make further provision by regulations |
| |
19B (1) | The Treasury may by regulations make provision for cases where |
| 5 |
there is a change of accounting policy in drawing up a company’s |
| |
accounts from one period of account to the next affecting the |
| |
amounts to be brought into account for accounting purposes in |
| |
respect of the company’s loan relationships. |
| |
(2) | The regulations may provide for any debits or credits that would |
| 10 |
otherwise be brought into account for the purposes of this |
| |
| |
(a) | not to be brought into account, |
| |
(b) | to be brought into account only to a prescribed extent, or |
| |
(c) | to be brought into account over a prescribed period or in |
| 15 |
prescribed circumstances. |
| |
(3) | Regulations under this paragraph may, in particular, modify the |
| |
operation of pargraph 19A. |
| |
(4) | The power to make regulations under this paragraph includes |
| |
| 20 |
(a) | to make different provison for different cases, and |
| |
(b) | to make such consequential, supplementary, incidental or |
| |
transitional provision, or savings, as appear to the |
| |
Treasury to be necessary or expedient.”. |
| |
Collective investment schemes etc. |
| 25 |
37 | Schedule 10 to the Finance Act 1996 (c. 8) (loan relationships: collective |
| |
investment schemes) is amended as follows. |
| |
38 | For paragraph 1A (investment trusts and venture capital trusts: capital |
| |
| |
“Investment trusts: capital profits, gains or losses |
| 30 |
1A (1) | Capital profits, gains or losses arising to an investment trust from |
| |
a creditor relationship must not be brought into account as credits |
| |
or debits for the purposes of this Chapter. |
| |
(2) | For the purposes of this paragraph “capital profits, gains or |
| |
| 35 |
(a) | in the case of an investment trust that prepares accounts in |
| |
accordance with UK generally accepted accounting |
| |
practice, has the meaning given by sub-paragraphs (3) and |
| |
| |
(b) | in the case of an investment trust that prepares accounts in |
| 40 |
accordance with international accounting standards, has |
| |
the meaning given by order made by the Treasury. |
| |
(3) | In the cases mentioned in sub-paragraph (2)(a) capital profits, |
| |
gains or losses arising from a creditor relationship in an |
| |
accounting period are profits, gains or losses that are carried to or |
| 45 |
|
| |
|
| |
|
sustained by a capital reserve in accordance with the Statement of |
| |
| |
(4) | For the purposes of this paragraph the Statement of |
| |
Recommended Practice is, for an accounting period for which it is |
| |
required or permitted to be used— |
| 5 |
(a) | the Statement of Recommended Practice relating to |
| |
Investment Trust Companies, issued by the Association of |
| |
Investment Trust Companies in January 2003, as from time |
| |
to time modified, amended or revised, or |
| |
(b) | any subsequent Statement of Recommended Practice |
| 10 |
relating to investment trusts, as from time to time |
| |
modified, amended or revised. |
| |
Venture capital trusts: capital profits, gains or losses |
| |
1B (1) | Capital profits, gains or losses arising to a venture capital trust |
| |
from a creditor relationship must not be brought into account as |
| 15 |
credits or debits for the purposes of this Chapter. |
| |
(2) | For the purposes of this paragraph “capital profits, gains or |
| |
| |
(a) | in the case of a venture capital trust that prepares accounts |
| |
in accordance with UK generally accepted accounting |
| 20 |
practice, has the meaning given by sub-paragraphs (3) and |
| |
| |
(b) | in the case of a venture capital trust that prepares accounts |
| |
in accordance with international accounting standards, |
| |
has the meaning given by order made by the Treasury. |
| 25 |
(3) | In the cases mentioned in sub-paragraph (2)(a) capital profits, |
| |
gains or losses arising from a creditor relationship in an |
| |
accounting period are profits, gains or losses that— |
| |
(a) | are carried to or sustained by a capital reserve in |
| |
accordance with the Statement of Recommended Practice |
| 30 |
as if the venture capital trust were an investment trust, or |
| |
(b) | would be so carried to or sustained by a capital reserve if |
| |
the venture capital trust were an investment trust and |
| |
were using the Statement of Recommended Practice. |
| |
(4) | For the purposes of this paragraph the Statement of |
| 35 |
Recommended Practice is, in relation to an accounting period for |
| |
which it is required or permitted to be used— |
| |
(a) | the Statement of Recommended Practice relating to |
| |
Investment Trust Companies, issued by the Association of |
| |
Investment Trust Companies in January 2003, as from time |
| 40 |
to time modified, amended or revised, or |
| |
(b) | any subsequent Statement of Recommended Practice |
| |
relating to investment trusts, as from time to time |
| |
modified, amended or revised.”. |
| |
39 (1) | Paragraph 2A (authorised unit trusts) is amended as follows. |
| 45 |
(2) | In the heading at the end add “: capital profits, gains or losses”. |
| |
(3) | In sub-paragraph (1) omit “notwithstanding section 84(2)(b) of this Act”. |
| |
|
| |
|
| |
|
(4) | After that sub-paragraph insert— |
| |
“(1A) | For the purposes of this paragraph “capital profits, gains or |
| |
| |
(a) | in the case of an authorised unit trust that prepares |
| |
accounts in accordance with UK generally accepted |
| 5 |
accounting practice, has the meaning given by sub- |
| |
paragraphs (2) to (4), and |
| |
(b) | in the case of an authorised unit trust that prepares |
| |
accounts in accordance with international accounting |
| |
standards, has the meaning given by order made by the |
| 10 |
| |
(5) | In sub-paragraph (2) for the words “For the purposes of this paragraph” |
| |
substitute “In the cases mentioned in sub-paragraph (1A)(a)”. |
| |
(6) | In sub-paragraph (5) after “the definition of capital profits, gains or losses” |
| |
insert “in sub-paragraphs (2) to (4)”. |
| 15 |
40 (1) | Paragraph 2B (open-ended investment companies) is amended as follows. |
| |
(2) | In the heading at the end add “: capital profits, gains or losses”. |
| |
(3) | In sub-paragraph (1) omit “notwithstanding section 84(2)(b) of this Act”. |
| |
(4) | After that sub-paragraph insert— |
| |
“(1A) | For the purposes of this paragraph “capital profits, gains or |
| 20 |
| |
(a) | in the case of a company that prepares accounts in |
| |
accordance with UK generally accepted accounting |
| |
practice, has the meaning given by sub-paragraphs (2) to |
| |
| 25 |
(b) | in the case of a company that prepares accounts in |
| |
accordance with international accounting standards, has |
| |
the meaning given by order made by the Treasury.”. |
| |
(5) | In sub-paragraph (2) for the words “For the purposes of this paragraph” |
| |
substitute “In the cases mentioned in sub-paragraph (1A)(a)”. |
| 30 |
(6) | In sub-paragraph (5) after “the definition of capital profits, gains or losses” |
| |
insert “in sub-paragraphs (2) to (4)”. |
| |
41 (1) | Paragraph 4 (company holdings in unit trusts and offshore funds) is |
| |
| |
(2) | For sub-paragraph (3) substitute— |
| 35 |
“(3) | The debits and credits to be brought into account for the purposes |
| |
of this Chapter as respects the company’s relevant holdings must |
| |
be determined on the basis of fair value accounting.”. |
| |
(3) | In sub-paragraph (4) for the words from the beginning to “for the purposes |
| |
of this Chapter,” substitute “Sub-paragraph (3) shall not be taken, as respects |
| 40 |
| |
42 | In Schedule 11 to the Finance Act 1996 (c. 8) (loan relationships: special |
| |
provision for insurers), in paragraph 1(1A) for “sections 92(1)(f), 93(1)(a) and |
| |
(b) and 96(1)(b)” substitute “section 96(1)(b). |
| |
|
| |
|
| |
|
| |
43 | In section 440 of the Taxes Act 1988 (insurance companies: transfers of assets |
| |
etc.), in subsection (2A) (treatment of asset representing loan relationship), |
| |
for the words from “any authorised accounting method” to “shall be |
| |
applied” substitute “Chapter 2 of Part 4 of the Finance Act 1996 applies”. |
| 5 |
44 | In section 730A of that Act (treatment of price differential on sale and |
| |
repurchase of securities), in subsection (6) (treatment of loan |
| |
| |
(a) | omit paragraph (b) (but not the word “and” following it), and |
| |
(b) | in the closing words for “paragraphs (b) and (c)” substitute |
| 10 |
| |
45 | In Schedule 28A of that Act (change in ownership of investment company), |
| |
in paragraphs 7(1)(d)(ii) and (e)(ii), 11(1)(a) and (3)(c) and 16(1)(d)(ii) and |
| |
(e)(ii) for “authorised accruals” substitute “amortised cost”. |
| |
46 | In paragraph 7(3) of Schedule 26 to the Transport Act 2000 (c. 38) (transfers |
| 15 |
under that Act), for “an authorised accounting method” substitute “a basis |
| |
| |
| |
| |
| 20 |
47 (1) | In Schedule 26 to the Finance Act 2002 (c. 23) (derivative contracts: method |
| |
of taxation), paragraph 15 (credits and debits to be brought into account) is |
| |
| |
(2) | In sub-paragraph (1) omit “in accordance with an authorised accounting |
| |
| 25 |
(3) | Omit sub-paragraphs (2), (3) and (6). |
| |
(4) | In sub-paragraph (9) for “paragraph 16” substitute “the following provisions |
| |
| |
48 (1) | Paragraph 16 of that Schedule (exchange gains and losses arising from |
| |
derivative contracts) is amended as follows. |
| 30 |
(2) | For sub-paragraph (3) substitute— |
| |
“(3) | Sub-paragraph (1) does not apply to an exchange gain or loss of a |
| |
company to the extent that it— |
| |
(a) | arises in relation to a derivative contract whose underlying |
| |
subject matter consists wholly or partly of currency, or |
| 35 |
(b) | results from the translation from one currency to another of |
| |
the profit or loss of part of the company’s business, |
| |
| and is recognised in the company’s statement of recognised gains |
| |
and losses or statement of changes in equity. |
| |
(3A) | Sub-paragraph (1) above does not apply to so much of an exchange |
| 40 |
gain or loss arising to a company, in relation to a derivative contract |
| |
whose underlying subject matter consists wholly or partly of |
| |
currency, as falls within a description prescribed for the purpose in |
| |
regulations made by the Treasury.”. |
| |
|
| |
|