|
| |
|
(9) | The following rules have effect for determining for the purposes of |
| |
Step 1 the expenses that are referable to an accounting period. |
| |
| |
| Where a period of account coincides with an accounting period, the |
| |
expenses brought into account for the period of account are the |
| 5 |
expenses referable to the accounting period. |
| |
| |
| |
(a) | two or more accounting periods fall within the same period of |
| |
| 10 |
(b) | that period of account is longer than 12 months, |
| |
| section 834(4) (apportionment on time basis) is to apply. |
| |
| |
| In any other case where two or more accounting periods fall within the |
| |
same period of account, the expenses referable to any of those |
| 15 |
accounting periods are the expenses that would have been referable to |
| |
that accounting period if— |
| |
(a) | the accounting period had coincided with a period of account, |
| |
| |
(b) | a separate periodical return had been made for that period of |
| 20 |
| |
| and section 834(4) (apportionment on time basis) is not to apply. |
| |
| |
| Rules A to C are subject to any provision of the Corporation Tax Acts |
| |
which provides for an amount to be treated as expenses payable for, or |
| 25 |
referable to, a particular period. |
| |
(10) | The amount D1 in Step 9 is the amount that would be the profits of the |
| |
company’s life assurance business for the accounting period if— |
| |
(a) | computed in accordance with the provisions applicable to Case |
| |
| 30 |
(b) | adjusted in respect of losses. |
| |
| The adjustment in respect of losses is a deduction of the amount which, |
| |
disregarding section 434A(2) and 440B, would fall to be set off under |
| |
section 393 against the company’s income for that period if the |
| |
company had always been charged to tax under Case I of Schedule D |
| 35 |
in respect of its life assurance business. |
| |
(11) | The amount R in Step 9 (which may be a negative amount) is found for |
| |
the accounting period by— |
| |
(a) | taking the company’s relevant income, and |
| |
(b) | deducting from it the relevant aggregate. |
| 40 |
| The “relevant income” is the sum of— |
| |
(a) | the income and gains referable by virtue of section 432A to the |
| |
company’s basic life assurance and general annuity business; |
| |
(b) | distributions received by the company from companies resident |
| |
in the United Kingdom which are referable by virtue of section |
| 45 |
432A to its basic life assurance and general annuity business; |
| |
|
| |
|
| |
|
(c) | profits chargeable under Case VI of Schedule D under section |
| |
| |
| The “relevant aggregate” is the sum of— |
| |
(a) | the basic deduction (see Step 8); |
| |
(b) | any non-trading deficit on the company’s loan relationships |
| 5 |
which is produced for the period in relation to the company’s |
| |
basic life assurance and general annuity business by a separate |
| |
computation under paragraph 2 of Schedule 11 to the Finance |
| |
| |
(c) | any amount which in pursuance of a claim under paragraph |
| 10 |
4(3) of that Schedule is carried back to the period and (in |
| |
accordance with paragraph 4(5) of that Schedule) applied in |
| |
reducing profits of the company for that period. |
| |
(12) | Where for any accounting period— |
| |
(a) | the amount of the expenses deduction (see Step 10),
|
| 15 |
| |
(b) | the amount from which that deduction is to be made (see |
| |
| |
| the excess is to be carried forward to the next accounting period and |
| |
brought into account for that period in accordance with Step 7. |
| 20 |
(13) | Subject to paragraph 4(11) to (13) of Schedule 11 to the Finance Act |
| |
1996, where for any accounting period— |
| |
(a) | the basic deduction (see Step 8),
|
| |
| |
(b) | the expenses deduction (see Step 10), |
| 25 |
| the excess is to be carried forward to the next accounting period and |
| |
brought into account for that period in accordance with Step 7. |
| |
(14) | In this section any reference to— |
| |
(a) | life assurance business, or |
| |
(b) | basic life assurance and general annuity business, |
| 30 |
| includes a reference to capital redemption business. |
| |
| |
| “capital redemption business” means any capital redemption |
| |
business, within the meaning of section 458, which is business |
| |
to which that section applies; |
| 35 |
| “expenses payable” has the meaning given by subsection (3) |
| |
| |
| and other expressions have the same meaning as in Chapter 1 of |
| |
| |
(2) | This section has effect in accordance with sections 42 and 44 (commencement |
| 40 |
and transitional provisions). |
| |
41 | Related amendments to other enactments |
| |
(1) | The enactments mentioned in Schedule 6 to this Act shall have effect with the |
| |
amendments specified in that Schedule. |
| |
(2) | Subsection (1) has effect in accordance with sections 42, 43 and 44 |
| 45 |
(commencement and transitional provisions). |
| |
|
| |
|
| |
|
42 | Commencement of sections 38 to 41 |
| |
(1) | The amendments made by sections 38 to 41 and Schedule 6 have effect for |
| |
accounting periods beginning on or after 1st April 2004. |
| |
(2) | This is subject to the transitional provisions in sections 43 and 44 and that |
| |
| 5 |
43 | Companies with investment business: transitional provisions |
| |
(1) | Any amount which, apart from this subsection, would have fallen to be treated |
| |
under the old section 75(3) as if it had been disbursed as expenses of |
| |
management for the first new accounting period of a company shall instead be |
| |
treated as if it were expenses of management deductible for that period by |
| 10 |
virtue of the new section 75(9). |
| |
(2) | To the extent that any amount was deductible under subsection (1) of section |
| |
75 for an old accounting period, the amount shall not again be deductible |
| |
under that subsection for a new accounting period. |
| |
(3) | Subsection (2) is without prejudice to the old section 75(3) and the new section |
| 15 |
75(9) (carry forward of unrelieved excess to later accounting period). |
| |
(4) | To the extent that an amount— |
| |
(a) | was not deductible under section 75(1) by an investment company for |
| |
any old accounting period, but |
| |
(b) | would have been deductible under the new section 75(1) for an old |
| 20 |
accounting period if the amendments made by sections 38 and 39 and |
| |
Schedule 6 or any order under section 41 (so far as having effect in |
| |
relation to the first new accounting period) had been in force in relation |
| |
| |
| the amount shall be deductible under section 75(1) for the first new accounting |
| 25 |
| |
(5) | Where there is an accounting period that begins before, and ends on or after, |
| |
1st April 2004 (“the commencement date”), it shall be assumed, for the purpose |
| |
of determining the amounts that are deductible for that period under section |
| |
75(1) of the Taxes Act 1988, that that accounting period (the “straddling |
| 30 |
period”) consists of two separate accounting periods— |
| |
(a) | the first beginning with the straddling period and ending with the day |
| |
preceding the commencement date, and |
| |
(b) | the second beginning with the commencement date and ending with |
| |
| 35 |
| but this is subject to subsection (6). |
| |
(6) | In the case of an investment company, subsection (5) does not have effect for |
| |
the purpose of determining the amounts that are deductible for the straddling |
| |
period under section 75(1) by virtue of— |
| |
(a) | subsection (3) of the old section 75, or |
| 40 |
(b) | any provision of the Corporation Tax Acts, apart from section 75 and |
| |
| |
(7) | Where, for the purposes of section 768B or 768C of the Taxes Act 1988, there is |
| |
a change in the ownership of a company during the straddling period, then for |
| |
the purposes of the section in question (and Schedule 28A to that Act), before |
| 45 |
|
| |
|
| |
|
making any such division as is required by section 768B(4) or 768C(3) of that |
| |
| |
(a) | the straddling period shall be divided into two parts in accordance with |
| |
| |
(b) | those parts shall be treated in accordance with that subsection as two |
| 5 |
separate accounting periods, but |
| |
(c) | subsection (6) shall be disregarded, |
| |
| and section 768B or 768C of, and Schedule 28A to, the Taxes Act 1988 shall have |
| |
| |
| 10 |
| “commencement date” shall be construed in accordance with subsection |
| |
| |
| “investment company” has the same meaning as in Part 4 of the Taxes Act |
| |
1988 (see section 130 of that Act); |
| |
| “new accounting period” means an accounting period beginning on or |
| 15 |
after the commencement date; |
| |
| “old accounting period” means an accounting period beginning before the |
| |
| |
| “the new section 75” means section 75 as it has effect in relation to a new |
| |
| 20 |
| “the old section 75” means section 75 as it has effect (apart from subsection |
| |
(5) above) in relation to an old accounting period; |
| |
| “section 75” means section 75 of the Taxes Act 1988.”. |
| |
44 | Insurance companies: transitional provisions |
| |
(1) | Step 7 has effect for the first new accounting period as if, in paragraph (b) of |
| 25 |
that step, the reference to amounts carried forward under subsection (12) or |
| |
(13) of the new section 76 (carry forward of unrelieved excess to later |
| |
accounting period) included— |
| |
(a) | a reference to amounts falling to be carried forward from the last old |
| |
accounting period under section 75(3) by virtue of the old section 76(1) |
| 30 |
(including any amounts falling to be so carried forward by virtue of the |
| |
| |
(b) | a reference to so much of any pool under subsection (6) of section 87 of |
| |
the Finance Act 1989 (c. 26) (pre-1990 expenses) as remains after |
| |
making any reduction required by paragraph (c) of that subsection for |
| 35 |
the last old accounting period. |
| |
(2) | To the extent that an amount— |
| |
(a) | was not deductible under the old section 76(1) by a company for any |
| |
old accounting period, but |
| |
(b) | would have fallen to be taken into account by the company in |
| 40 |
determining the expenses deduction to be made under the new section |
| |
76(1) for an old accounting period if the amendments made by section |
| |
40 and Schedule 6 had been in force in relation to that period, |
| |
| the company’s basic deduction (see Step 8) for the first new accounting period |
| |
shall be increased by the addition of that amount. |
| 45 |
(3) | Where there is an accounting period that begins before, and ends on or after, |
| |
1st April 2004 (“the commencement date”), it shall be assumed, for the purpose |
| |
of determining the deduction to be made under section 76(1), that that |
| |
|
| |
|
| |
|
accounting period (“the straddling period”) consists of two separate |
| |
| |
(a) | the first beginning with the straddling period and ending with the day |
| |
preceding the commencement date (“the first notional period”), and |
| |
(b) | the second beginning with the commencement date and ending with |
| 5 |
the straddling period (“the second notional period”), |
| |
| and the deduction shall be determined in accordance with subsections (4) to |
| |
| |
(4) | For the purpose of determining the deduction to be made under section 76(1) |
| |
for the straddling period— |
| 10 |
| |
(i) | such amounts falling within the old section 76(1) as were |
| |
disbursed for the first notional period, but without deducting |
| |
amounts falling within the old section 76(1)(aa), |
| |
(ii) | the amounts falling to be brought into account at Step 1, as |
| 15 |
reduced at Step 2, for the second notional period, and |
| |
(iii) | amounts falling to be carried forward from the previous |
| |
accounting period under the old section 75(3) by virtue of the |
| |
old section 76(1) (including any amounts falling to be so carried |
| |
forward by virtue of the old section 76(5)), |
| 20 |
(b) | then reduce the aggregate of those amounts (but not below nil), by |
| |
deducting from that aggregate any amounts falling within the old |
| |
section 76(1)(aa) for the straddling period, |
| |
| and that aggregate, as so reduced, is deductible in accordance with the old |
| |
section 76(1)(e) but subject to the old section 76(2) to (2D). |
| 25 |
(5) | Subsection (3) does not have effect for the purpose of determining the amounts |
| |
that are deductible for the straddling period under section 76(1) by virtue of |
| |
any provision of the Corporation Tax Acts apart from— |
| |
| |
| 30 |
| |
| (so that, in particular, the old section 86 has effect for the straddling period). |
| |
(6) | No amount shall be brought into account in determining the deduction to be |
| |
made under section 76(1) for the straddling period except as provided by |
| |
| 35 |
(7) | Any reference in this section to a numbered Step is a reference to the Step so |
| |
numbered in subsection (7) of the new section 76. |
| |
| |
| “the commencement date” shall be construed in accordance with |
| |
| 40 |
| “new accounting period” means an accounting period beginning on or |
| |
after the commencement date; |
| |
| “old accounting period” means an accounting period beginning before the |
| |
| |
| “the new section 76” means section 76 as it has effect in relation to a new |
| 45 |
| |
| “the old section 76” means section 76 as it has effect (apart from subsection |
| |
(3) above) in relation to an old accounting period; |
| |
| “section 75” means section 75 of the Taxes Act 1988; |
| |
|
| |
|
| |
|
| “section 76” means section 76 of the Taxes Act 1988; |
| |
| “the old section 86” means section 86 of the Finance Act 1989 (c. 26) as it |
| |
has effect (apart from subsection (3) above) in relation to an old |
| |
| |
Amounts reversing expenses of management deducted |
| 5 |
45 | Amounts reversing expenses of management deducted: charge to tax |
| |
(1) | After section 75A of the Taxes Act 1988 (inserted by section 39) insert— |
| |
“75B | Amounts reversing expenses of management deducted: charge to tax |
| |
(1) | This paragraph applies in any case where the following conditions are |
| |
| 10 |
(a) | a credit is brought into account by a company in a period of |
| |
account (the “reversal period”) which ends on or after the |
| |
| |
(b) | the credit reverses (in whole or in part) a debit brought into |
| |
account in a previous period of account of the company |
| 15 |
| |
(c) | the debit (in whole or in part) represents expenses of |
| |
management deductible under section 75(1) for an accounting |
| |
period of the company (“the period of deductibility”), |
| |
(d) | the expenses of management were so deductible for that period |
| 20 |
otherwise than by virtue of section 75(9) (carry forward of |
| |
| |
(e) | the period of deductibility ends before, or at the same time as, |
| |
| |
(f) | the reversal period does not coincide with an accounting period |
| 25 |
beginning before the commencement date. |
| |
(2) | In any such case, subsection (4) or (5) below (as the case may be) shall |
| |
apply in relation to the reversal amount. |
| |
(3) | In this section “the reversal amount” means so much of the credit as— |
| |
(a) | reverses so much of the debit as represents the expenses of |
| 30 |
| |
(b) | does not represent sums otherwise taken into account in |
| |
determining for the purposes of corporation tax the profits and |
| |
losses of the company for the relevant accounting period or any |
| |
earlier accounting period. |
| 35 |
| For this purpose the relevant accounting period is the latest accounting |
| |
period of the company that falls wholly or partly within the reversal |
| |
| |
(4) | If the reversal period coincides with an accounting period of the |
| |
company beginning on or after the commencement date, the reversal |
| 40 |
amount shall be dealt with for that period in accordance with |
| |
| |
(5) | If the reversal period does not coincide with an accounting period of |
| |
| |
(a) | the reversal amount shall be apportioned between any |
| 45 |
accounting periods that fall within the reversal period, and |
| |
|
| |
|
| |
|
(b) | any amount so apportioned to an accounting period beginning |
| |
on or after the commencement date shall be dealt with for that |
| |
period in accordance with subsection (7) below. |
| |
(6) | An apportionment under subsection (5) above shall be in accordance |
| |
with section 834(4) (time basis) unless it appears that that method |
| 5 |
would work unreasonably or unjustly, in which case such other |
| |
method shall be used as appears just and reasonable. |
| |
(7) | Where an amount falls to be dealt with in accordance with this |
| |
subsection for an accounting period— |
| |
(a) | it shall, so far as possible, be applied in reducing or further |
| 10 |
reducing (but not below nil) the company’s expenses of |
| |
management deductible for that period otherwise than by |
| |
virtue of section 75(9) (carry forward of unrelieved excess), and |
| |
(b) | so much of the amount as cannot be so applied shall be |
| |
regarded as income of the company chargeable under Case VI |
| 15 |
of Schedule D for that accounting period. |
| |
(8) | In subsection (1) above “brought into account”, in relation to a period |
| |
of account of a company, means brought into account in accordance |
| |
with generally accepted accounting practice in determining, for |
| |
accounting purposes, profit and loss for that period of account. |
| 20 |
(9) | If (apart from this subsection) an accounting period does not coincide |
| |
with, or fall within, any period of account, it shall be assumed for the |
| |
purposes of this section that there is a period of account of the company |
| |
that coincides with that accounting period. |
| |
(10) | It shall be assumed for the purposes of this section that, in determining |
| 25 |
for accounting purposes profit and loss for any period of account of any |
| |
company, amounts fall to be brought into account in accordance with |
| |
generally accepted accounting practice. |
| |
(11) | For the purposes of this section a credit reverses a debit in whole or in |
| |
part in any case where the sum represented in whole or in part by the |
| 30 |
debit is paid and then in whole or in part repaid (as well as in a case |
| |
where the sum represented by the debit is never paid). |
| |
| |
| “the commencement date” means 1st April 2004; |
| |
| “credit” means an amount which for accounting purposes |
| 35 |
increases or creates a profit, or reduces a loss, for a period of |
| |
| |
| “debit” means an amount which for accounting purposes reduces |
| |
a profit, or increases or creates a loss, for a period of account.”. |
| |
(2) | Where any such previous period as is referred to in subsection (1)(d) of section |
| 40 |
75B is an old accounting period, that section has effect so far as relating to that |
| |
previous period as if the reference to section 75(9) were a reference to |
| |
subsection (3) of the old section 75. |
| |
(3) | In subsection (2), “old accounting period” and “the old section 75” have the |
| |
same meaning as in section 43. |
| 45 |
(4) | In section 842 of the Taxes Act 1988 (investment trusts) after subsection (1AB) |
| |
|
| |
|