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Finance Bill
Schedule 23 — Finance leasebacks: transitional provision

393

 

“lessee acquisition expenditure” means the capital expenditure

incurred by the lessee in acquiring the plant or machinery as

described in paragraph 5(1)(b),

“restricted qualifying expenditure” means the qualifying expenditure

under section 226, and

5

“section 226 restriction” means—

(a)   

the lessee acquisition expenditure, minus

(b)   

the restricted qualifying expenditure.

Section 228D

6     (1)  

This paragraph applies if the pre-commencement rentals are greater than the

10

total of the actual taxed rentals for periods of account up to, but excluding,

the transitional period of account.

      (2)  

Section 228D shall not apply in relation to—

(a)   

the transitional period of account if the lessor’s excess rentals are

greater than the notional taxed rental for that period, or

15

(b)   

a subsequent period of account if the untaxed portion of the lessor’s

excess rentals is greater than the notional taxed rental for that period.

      (3)  

Section 228D is subject to sub-paragraph (4) in its application to—

(a)   

the transitional period of account if the lessor’s excess rentals are not

greater than the notional rental deduction for that period, or

20

(b)   

a subsequent period of account if the untaxed portion of the lessor’s

excess rentals is not greater than the notional rental deduction for

that period.

      (4)  

The permitted threshold for that period of account is the total of—

(a)   

the lessor’s excess rentals (in the case of the transitional period of

25

account) or the untaxed portion of the lessor’s excess rentals (in the

case of a subsequent period of account), and

(b)   

the amount given by this calculation—equation: times[char[B],char[a],char[s],char[i],char[c],cross[times[string[" "],char[A],char[

m],char[o],char[u],char[n],char[t]],over[id[plus[times[char[N],char[o],char[t],char[

i],char[o],char[n],char[a],char[l],string[" "],char[T],char[a],char[x],char[e],char[

d],string[" "],char[R],char[e],char[n],char[t],char[a],char[l]],minus[times[char[

D],char[e],char[d],char[u],char[c],char[t],char[i],char[b],char[l],char[e],string[

" "],char[E],char[x],char[c],char[e],char[s],char[s]]]]],times[char[N],char[o],char[

t],char[i],char[o],char[n],char[a],char[l],string[" "],char[T],char[a],char[x],char[

e],char[d],string[" "],char[R],char[e],char[n],char[t],char[a],char[l]]]]]

           

where—

“Basic Amount” means the amount calculated in accordance with

30

section 228D(2);

“Notional Taxed Rental” means the notional taxed rental for the

period of account in question, and

“Deductible Excess” means the amount included in the permitted

threshold by virtue of sub-paragraph (4)(a).

35

      (5)  

But where, in relation to the transitional period of account, the amount given

by sub-paragraph (4) is less than the appropriate fraction of the notional

taxed rental for that period, the permitted threshold shall be that fraction of

that deduction.

      (6)  

In this paragraph—

40

(a)   

“the lessor’s excess rentals” means—

(i)   

the pre-commencement rentals, minus

(ii)   

the total of the actual taxed rentals referred to in sub-

paragraph (1), and

 

 

Finance Bill
Schedule 23 — Finance leasebacks: transitional provision

394

 

(b)   

“the untaxed portion of the lessor’s excess rentals”, in relation to a

period of account means—

(i)   

the lessor’s excess rentals, minus

(ii)   

the total of the actual taxed rentals for periods of account

from and including the transitional period up to, but

5

excluding, the period in question.

      (7)  

In this paragraph—

“actual taxed rental”, in relation to a period of account, means the

amount that should be taken into consideration in respect of

amounts receivable under the existing leaseback in calculating the

10

lessor’s income or profits for that period of account for the purpose

of income tax or corporation tax;

“notional taxed rental”, in relation to a period of account, means the

amount that would, if section 228D did not apply, be taken into

consideration in respect of amounts receivable under the existing

15

leaseback in calculating the lessor’s income or profits for that

period of account for the purpose of income tax or corporation tax.

      (8)  

Nothing in sub-paragraphs (3) to (5) prevents the inclusion of an amount in

the permitted threshold by virtue of section 228D(5).

      (9)  

This paragraph does not apply in relation to any period of account later than

20

a period of account for which the permitted threshold has been determined

in accordance with sub-paragraph (3) to (5).

7     (1)  

This paragraph applies where—

(a)   

the existing leaseback terminates, and

(b)   

in the period of account immediately following that in which it

25

terminates, paragraph 6(2)(b) or 6(3)(b) would apply were it not for

the termination.

      (2)  

The permitted threshold for the period of account in which the leaseback

terminates shall also include an amount equal to the amount that the

untaxed portion of the lessor’s excess rentals would have been in the period

30

of account immediately following.

Section 228E

8          

Section 228E shall not apply where the existing leaseback terminates before

17 March 2004.

Interpretation

35

9     (1)  

In this Schedule—

“existing leaseback” means a leaseback the term of which began

before 17 March 2004;

“pre-commencement rentals”, in relation to an existing leaseback,

means—

40

(a)   

any amounts payable by the lessee to the lessor under the

leaseback before 17 March 2004,

(b)   

any amounts so payable on or after 17 March 2004 in respect

of a period that ends before 17 March 2004, or

(c)   

where any amounts are so payable on or after 17 March 2004

45

in respect of a period which begins before that date and

 

 

Finance Bill
Schedule 24 — Manufactured dividends

395

 

ends on or after that date, the appropriate fraction of each of

those amounts;

“transitional period of account” means a period of account that

includes 17 March 2004.

      (2)  

In this Schedule the “appropriate fraction”, in respect of an amount that

5

relates to a particular period, means this fraction—equation: over[(*s12.00s*)plus[(*n*)times[char[P],char[r],char[e]],minus[times[char[c],char[

o],char[m],char[m],char[e],char[n],char[c],char[e],char[m],char[e],char[n],char[

t],string[" "],char[P],char[e],char[r],char[i],char[o],char[d]]]],times[char[W],

char[h],char[o],char[l],char[e],string[" "],char[P],char[e],char[r],char[i],char[

o],char[d]]]

           

where—

           

“Pre-commencement Period” means the number of days in the part of

the period that falls before 17 March 2004, and

           

“Whole Period” means the number of days in the whole of the period.

10

Schedule 24

Section 128

 

Manufactured dividends

Amendments of sections 231AA, 231AB and 233 of the Taxes Act 1988

1     (1)  

In section 231AA of the Taxes Act 1988 (no tax credit for borrower under

stock lending arrangement or interim holder under repurchase agreement)

15

after subsection (1) insert—

“(1A)   

Where subsection (1) above applies to a relevant person in respect of

a qualifying distribution, section 233(1) (certain persons to be treated

as having paid income tax at Schedule F ordinary rate on certain

distributions etc) shall not apply in relation to that person in respect

20

of that distribution.

   

In this subsection “relevant person” means a person resident in the

United Kingdom, not being a company.”.

      (2)  

In section 231AB of that Act (no tax credit for original owner under

repurchase agreement in respect of certain manufactured dividends) after

25

subsection (1) insert—

“(1A)   

Where subsection (1) above applies to a relevant person in respect of

a qualifying distribution, section 233(1) (certain persons to be treated

as having paid income tax at Schedule F ordinary rate on certain

distributions etc) shall not apply in relation to that person in respect

30

of that distribution.

   

In this subsection “relevant person” means a person resident in the

United Kingdom, not being a company.”.

      (3)  

In section 233 of that Act (taxation of certain recipients of distributions etc)

in subsection (1) (person other than United Kingdom resident company who

35

is not entitled to tax credit on distribution: to be treated as having paid

income tax at Schedule F ordinary rate on the distribution etc) at the end

insert—

   

“But this subsection is subject to—

   

section 231AA(1A) (section 233(1) not to apply to borrower

40

under stock lending arrangement or interim holder under

repurchase agreement);

 

 

Finance Bill
Schedule 24 — Manufactured dividends

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section 231AB(1A) (section 233(1) not to apply to original

owner under repurchase agreement in respect of certain

manufactured dividends).”.

      (4)  

The amendment made by sub-paragraph (1) (and the amendment made by

sub-paragraph (3) so far as relating to that amendment) have effect in

5

relation to any qualifying distribution received by a relevant person on or

after the commencement date where a manufactured dividend

representative of that distribution is or was paid, or treated as paid, by him

on or after that date.

      (5)  

In sub-paragraph (4) “the commencement date” means—

10

(a)   

if the relevant person is an individual, 6th November 2003;

(b)   

if the relevant person is not an individual, 17th March 2004.

      (6)  

The amendment made by sub-paragraph (2) (and the amendment made by

sub-paragraph (3) so far as relating to that amendment) have effect in

relation to any qualifying distribution received by a relevant person on or

15

after the day on which this Act is passed.

Amendments of paragraph 2A of Schedule 23A to the Taxes Act 1988

2     (1)  

In Schedule 23A to the Taxes Act 1988 (manufactured dividends and

interest) paragraph 2A (deductibility of manufactured payment in the case

of the manufacturer) is amended as follows.

20

      (2)  

For sub-paragraph (1) (amount of manufactured dividend paid allowable as

deduction against total income, subject to sub-paragraph (1A)) substitute—

“(1)       

Where, in the case of a manufactured dividend, the dividend

manufacturer is resident in the United Kingdom but is not a

company, an amount (“the relevant amount”) equal to the lesser

25

of—

(a)   

the amount of the manufactured dividend paid (so far as it

is not otherwise deductible), and

(b)   

the amount of the dividend of which the manufactured

dividend is representative,

30

           

shall be allowable as a deduction for the purposes of income tax

only under sub-paragraph (1ZA) or (1A) below.”.

      (3)  

After sub-paragraph (1) insert—

“(1ZA)     

The relevant amount shall be allowable under this sub-paragraph

as a deduction for the purposes of income tax to the extent that the

35

dividend manufacturer—

(a)   

receives the dividend on the equities which is represented

by the manufactured dividend or receives a payment

which is representative of that dividend, and

(b)   

is chargeable to income tax on the dividend or other

40

payment so received;

           

and that deduction shall be made against the amount of the

dividend or other payment so received on which the dividend

manufacturer is chargeable to income tax.

(1ZB)      

Sub-paragraph (1ZA) above shall apply only if the amount of the

45

dividend or other payment so received is received by the dividend

manufacturer in—

 

 

Finance Bill
Schedule 24 — Manufactured dividends

397

 

(a)   

the year of assessment in which he pays the manufactured

dividend, or

(b)   

the year of assessment immediately before, or immediately

after, that year.”.

      (4)  

In sub-paragraph (1A) (circumstances in which amount of manufactured

5

dividend paid is allowable as deduction against total income)—

(a)   

in the opening words, for the words from “An amount shall” to

“only” substitute “The relevant amount shall be allowable under this

sub-paragraph as a deduction for the purposes of income tax against

the total income of the dividend manufacturer”,

10

(b)   

omit paragraph (a),

(c)   

omit paragraph (c) and the word “or” before it, and

(d)   

omit the words following paragraph (c).

      (5)  

In sub-paragraph (1B) (no double deduction allowed)—

(a)   

for “sub-paragraph (1)” (in both places) substitute “sub-paragraph

15

(1ZA) or (1A)”,

(b)   

in paragraph (a), for “paragraph (a) of sub-paragraph (1A)”

substitute “sub-paragraph (1ZA)” and at the end insert “, or”,

(c)   

in paragraph (b) for “paragraph (b) of that sub-paragraph” substitute

“sub-paragraph (1A) above”,

20

(d)   

omit paragraph (c) and the word “or” before it, and

(e)   

for “, other payment or chargeable gain” (in both places) substitute

“or other payment”.

      (6)  

In sub-paragraph (4) (meaning of “deductible”)—

(a)   

in paragraph (a), omit “or corporation tax”, and

25

(b)   

in paragraph (b), omit “or, as the case may be, total profits”.

      (7)  

Subject to sub-paragraph (10), the amendments made by sub-paragraphs (3),

(4)(b) and (5)(b) (and the amendments made by sub-paragraphs (2) and

(5)(a) so far as relating to those amendments) have effect in relation to a

manufactured dividend paid, or treated as paid, by a dividend

30

manufacturer on or after the commencement date where the dividend or

other payment of which that manufactured dividend is representative is or

was received by him on or after that date.

      (8)  

In sub-paragraph (7) “the commencement date” means—

(a)   

if the dividend manufacturer is an individual, 6th November 2003;

35

(b)   

if the dividend manufacturer is not an individual, 17th March 2004.

      (9)  

Subject to sub-paragraph (10), the amendments made by sub-paragraphs

(4)(a) and (5)(c) (and the amendments made by sub-paragraphs (2) and (5)(a)

so far as relating to those amendments) have effect in relation to a

manufactured dividend paid, or treated as paid, by a dividend

40

manufacturer on or after 17th March 2004.

     (10)  

In relation to a manufactured dividend paid, or treated as paid, by a

dividend manufacturer before the day on which this Act is passed, the sub-

paragraph (1) of paragraph 2A of Schedule 23A to the Taxes Act 1988

substituted by sub-paragraph (2) of this paragraph shall have effect with the

45

omission of—

(a)   

the words “the lesser of”, and

(b)   

paragraph (b) and the word “and” before it.

 

 

Finance Bill
Schedule 24 — Manufactured dividends

398

 

     (11)  

The amendments made by sub-paragraphs (4)(c) and (d) and (5)(d) and (e)

have effect in relation to cases where

(a)   

the manufactured dividend is or was paid, or treated as paid, by the

dividend manufacturer on or after 17th March 2004, or

(b)   

the chargeable gain accrues or accrued to the dividend manufacturer

5

on or after that date.

Amendment of the Taxation of Chargeable Gains Act 1992

3     (1)  

After section 263C of the Taxation of Chargeable Gains Act 1992 (c. 12)

insert—

“263D  Gains accruing to persons paying manufactured dividends

10

(1)   

This section applies where one of the following conditions is satisfied

in relation to a person who—

(a)   

is resident in the United Kingdom, but

(b)   

is not a company.

(2)   

Condition 1 is that—

15

(a)   

the person is the interim holder under a repurchase

agreement,

(b)   

he disposes of any United Kingdom equities transferred to

him under that agreement,

(c)   

a chargeable gain accrues to him on that disposal, and

20

(d)   

under that agreement, he pays a manufactured dividend

which is representative of a dividend on those United

Kingdom equities.

(3)   

Condition 2 is that—

(a)   

the person is the borrower under a stock lending

25

arrangement,

(b)   

he disposes of any United Kingdom equities transferred to

him under that arrangement,

(c)   

a chargeable gain accrues to him on that disposal, and

(d)   

under that arrangement, he pays a manufactured dividend

30

which is representative of a dividend on those United

Kingdom equities.

(4)   

Condition 3 is that—

(a)   

the person is a party to a contract or other arrangements for

the transfer of United Kingdom equities which is neither a

35

repurchase agreement nor a stock lending arrangement (“the

short sale transaction”),

(b)   

he disposes of the United Kingdom equities under the short

sale transaction,

(c)   

a chargeable gain accrues to him on that disposal, and

40

(d)   

under that transaction, he pays a manufactured dividend

which is representative of a dividend on those United

Kingdom equities.

(5)   

For the purposes of capital gains tax, a loss shall be treated as

accruing to the person on the date on which the chargeable gain

45

mentioned in Condition 1, 2 or 3 accrued to him.

 

 

Finance Bill
Schedule 24 — Manufactured dividends

399

 

(6)   

The amount of that loss shall be equal to the lesser of—

(a)   

the amount of that chargeable gain, and

(b)   

the adjusted amount.

(7)   

In subsection (6) above “the adjusted amount” means—equation: plus[char[A],minus[char[B]]]

   

where—

5

   

A is the lesser of—

(a)   

the amount of the manufactured dividend paid, and

(b)   

the amount of the dividend of which the

manufactured dividend is representative; and

   

B is an amount equal to so much of the manufactured

10

dividend paid as is allowable to the person as a deduction for

the purposes of income tax under paragraph 2A of Schedule

23A to the Taxes Act.

(8)   

But that loss shall not be deductible except from the chargeable gain

mentioned in Condition 1, 2 or 3.

15

(9)   

For the purposes of this section “manufactured dividend” has the

same meaning as in paragraph 2 of Schedule 23A to the Taxes Act;

and any reference to a manufactured dividend being paid—

(a)   

includes a reference to a payment falling by virtue of section

737A(5) of that Act to be treated for the purposes of Schedule

20

23A as if it were made, but

(b)   

does not include a reference to a payment falling by virtue of

section 736B(2) of that Act to be treated for the purposes of

that Schedule as if it were made.

(10)   

For the purposes of this section the cases where there is a repurchase

25

agreement are the following—

(a)   

any case falling within subsection (1) of section 730A of the

Taxes Act, and

(b)   

any case which would fall within that subsection if the sale

price and the repurchase price were different;

30

   

and, in any such case, any reference to the interim holder shall be

construed accordingly.

(11)   

In this section “stock lending arrangement” has the same meaning as

in section 263B of this Act; and, in relation to any such arrangement,

any reference to the borrower shall be construed accordingly.

35

(12)   

In this section “United Kingdom equities” has the meaning given by

paragraph 1(1) of Schedule 23A to the Taxes Act.”.

      (2)  

In section 737E of the Taxes Act 1988 (power to modify sections 727A, 730A,

730BB and 737A to 737C)—

(a)   

in subsection (4) (powers to modify also exercisable in relation to

40

section 263A of the Taxation of Chargeable Gains Act 1992) after

“263A” insert “or 263D”, and

(b)   

in subsection (6)(b) (particular power to modify in relation to section

263A of that Act) after “263A” insert “or 263D”.

      (3)  

The amendments made by sub-paragraphs (1) and (2) have effect in relation

45

to cases where

 

 

 
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