Finance Bill

House of Commons

Session 2003 - 04
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
502

(a)
in any post-commencement period (“the period of the
loss”) a qualifying company carrying on a ring fence trade
incurs a loss in the trade, and
(b)
some or all of the loss falls to be set off under section 393
against trading income from the trade in succeeding
5
accounting periods,

so much of the loss as falls to be so set off is a “ring fence loss” of
the company.
      (2)
In determining for the purposes of this Part of this Schedule how
much of a loss incurred in a ring fence trade falls to be set off as
10
mentioned in sub-paragraph (1)(b), it shall be assumed that every
claim is made that could be made by the company under section
393A to set losses incurred in the ring fence trade against ring
fence profits of earlier post-commencement periods.
      (3)
So much of a ring fence loss as is attributable to qualifying E&A
15
allowances for the period of the loss is a “qualifying E&A loss”.
      (4)
A ring fence loss is attributable to qualifying E&A allowances to
the extent that the amount of the ring fence loss does not exceed
the amount of the qualifying E&A allowances for the period of the
loss.
20
      (5)
But a claim for post-commencement supplement may include an
election for a ring fence loss to be treated—
(a)
as attributable to qualifying E&A allowances for the period
of the loss to such lesser extent as may be specified in the
election, or
25
(b)
as not attributable to such allowances.
      (6)
“Qualifying E&A allowances”, in the case of an accounting period,
means allowances for that period under Part 6 of the Capital
Allowances Act in respect of qualifying E&A expenditure
incurred by the company (including any pre-commencement
30
supplement treated under paragraph 9(2) as such an allowance).
      (7)
This paragraph has effect for the purposes of this Part of this
Schedule.
Ring fence losses and non-qualifying losses
18    (1)
So much of a ring fence loss as is not a qualifying E&A loss is a
35
non-qualifying loss.
      (2)
Where—
(a)
a loss was incurred by a qualifying company in its ring
fence trade in an accounting period ending on or before
31st December 2003, and
40
(b)
some or all of that loss falls to be set off under section 393
against profits of that trade in accounting periods ending
on or after that date,

so much of the loss as falls to be so set off is a ring fence loss and
that loss is a non-qualifying loss.
45
      (3)
This paragraph has effect for the purposes of this Part of this
Schedule.

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
503

The pool of qualifying E&A losses and the pool of non-qualifying losses
19    (1)
For the purpose of determining the amount of any post-
commencement supplement, a qualifying company shall be taken
at all times in its post-commencement periods to have—
(a)
a continuing pool of the company’s non-qualifying losses
5
(the “non-qualifying pool”), and
(b)
a continuing mixed pool of the company’s qualifying E&A
losses and post-commencement supplement (the
“qualifying pool”).
      (2)
A pool continues even if the amount in it is nil.
10
The non-qualifying pool
20    (1)
The non-qualifying pool consists of the company’s non-qualifying
losses, allocated to the pool in accordance with sub-paragraph (2).
      (2)
A non-qualifying loss is allocated to the pool by adding the
amount of the non-qualifying loss to the pool in the period of the
15
loss.
      (3)
In the case of a non-qualifying loss incurred in an accounting
period ending on or before 31st December 2003, the period of the
loss shall be taken for the purposes of sub-paragraph (2) to be the
first accounting period of the company that ends on or after 1st
20
January 2004.
      (4)
The amount in the non-qualifying pool is subject to reductions in
accordance with the following provisions of this Part of this
Schedule.
      (5)
Where a reduction in the amount in the non-qualifying pool falls
25
to be made in any accounting period—
(a)
the reduction is to be made after the addition to the pool of
any non-qualifying loss allocated to the pool in that period
in accordance with sub-paragraph (2), and
(b)
references to the amount in the non-qualifying pool shall
30
be construed accordingly.
The qualifying pool
21    (1)
The qualifying pool consists of—
(a)
the company’s qualifying E&A losses, allocated to the pool
in accordance with sub-paragraph (2)(a), and
35
(b)
the company’s post-commencement supplement,
allocated to the pool in accordance with sub-paragraph
(2)(b).
      (2)
The allocation of qualifying E&A losses and post-commencement
supplement to the pool is as follows—
40
(a)
the amount of a qualifying E&A loss is added to the pool
in the period of the loss, and
(b)
if any post-commencement supplement is allowed on a
claim in respect of a post-commencement period, the
amount of that supplement is added to the pool in that
45
period.

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
504

      (3)
The amount in the qualifying pool is subject to reductions in
accordance with the following provisions of this Part of this
Schedule.
      (4)
Where a reduction in the amount in the qualifying pool falls to be
made in any accounting period, the reduction is to be made—
5
(a)
after the addition to the pool of the amount of any
qualifying E&A losses allocated to the pool in that period
in accordance with sub-paragraph (2)(a), but
(b)
before determining, and adding to the pool, the amount of
any supplement claimed in respect of the period,
10

and references to the amount in the pool shall be construed
accordingly.
Reductions in respect of utilised ring fence losses
22    (1)
If one or more ring fence losses are set off under section 393 against
any profits of a post-commencement period, reductions shall be
15
made in that period in accordance with this paragraph.
      (2)
The amount in the non-qualifying pool shall be reduced (but not
below nil) by setting against it a sum equal to the total amount so
set off.
      (3)
If any of that sum remains after being so set against the amount in
20
the non-qualifying pool, the amount in the qualifying pool shall be
reduced (but not below nil) by setting against it so much of that
sum as so remains.
Reductions in respect of unrelieved group ring fence profits
23    (1)
If there is an amount of unrelieved group ring fence profits for a
25
post-commencement period, reductions shall be made in that
period in accordance with this paragraph.
      (2)
In the following provisions of this paragraph, references to the
remaining amount in a pool are references to so much (if any) of
the amount in the pool as remains after making any reductions
30
that fall to be made in accordance with paragraph 22.
      (3)
The remaining amount in the non-qualifying pool shall be
reduced (but not below nil) by setting against it a sum equal to the
aggregate of the amounts of unrelieved group ring fence profits
for the period.
35
      (4)
If any of that sum remains after being so set against the remaining
amount in the non-qualifying pool, the remaining amount in the
qualifying pool shall be reduced (but not below nil) by setting
against it so much of that sum as so remains.
The reference amount for a post-commencement period
40
24
For the purposes of this Part of this Schedule the reference amount
for a post-commencement period is so much of the amount in the
qualifying pool as remains after making any reductions required
by paragraph 22 or 23.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
505

Schedule 37
Section 282

Stamp duty land tax and stamp duty
Part 1
Amendments to Part 4 of the Finance Act 2003: general
Introduction
5
1
Part 4 of the Finance Act 2003 (stamp duty land tax) is amended in
accordance with this Part of this Schedule.
Variation of lease
2
In section 43 (land transactions)—
(a)
in paragraph (c) of subsection (3) (variation of chargeable interest),
10
after “interest” insert “(other than a lease)”;
(b)
after that paragraph insert—
“(d)
the variation of a lease is an acquisition and disposal
of a chargeable interest only where it takes effect, or is
treated for the purposes of this Part, as the grant of a
15
new lease.”.
Agreement for lease
3
In section 44 (contract and conveyance), after subsection (9) insert—
“(9A)
Where—
(a)
paragraph 12A of Schedule 17A applies (agreement for
20
lease), or
(b)
paragraph 19(3) to (6) of Schedule 17A applies (missives of let
etc in Scotland),

it applies in place of subsections (4), (8) and (9).”.
Contract providing for conveyance to third party
25
4     (1)
After section 44 insert—
“44A
Contract providing for conveyance to third party
(1)
This section applies where a contract is entered into under which a
chargeable interest is to be conveyed by one party to the contract (A)
at the direction or request of the other (B)—
30
(a)
to a person (C) who is not a party to the contract, or
(b)
either to such a person or to B.
(2)
B is not regarded as entering into a land transaction by reason of
entering into the contract, but the following provisions have effect.
(3)
If the contract is substantially performed B is treated for the purposes
35
of this Part as acquiring a chargeable interest, and accordingly as
entering into a land transaction.

The effective date of the transaction is when the contract is
substantially performed.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
506

(4)
Where the contract is (to any extent) afterwards rescinded or
annulled, or is for any other reason not carried into effect, the tax
paid by virtue of subsection (3) shall (to that extent) be repaid by the
Inland Revenue.

Repayment must be claimed by amendment of the land transaction
5
return made in respect of the contract.
(5)
Subject to subsection (6), section 44 (contract and conveyance) does
not apply (except so far as it defines “substantial performance”) in
relation to the contract.
(6)
Where—
10
(a)
this section applies by virtue of subsection (1)(b), and
(b)
by reason of B’s direction or request, A becomes obliged to
convey a chargeable interest to B,

section 44 applies to that obligation as it applies to a contract for a
land transaction that is to be completed by a conveyance.
15
(7)
Section 44 applies in relation to any contract between B and C, in
respect of the chargeable interest referred to in subsection (1) above,
that is to be completed by a conveyance.

References to completion in that section, as it so applies, include
references to conveyance by A to C of the subject matter of the
20
contract between B and C.
(8)
In this section “contract” includes any agreement and “conveyance”
includes any instrument.”.
      (2)
In section 48 (chargeable interests), after subsection (6) insert—
“(7)
This section has effect subject to subsection (3) of section 44A
25
(contract and conveyance to third party).”.
      (3)
In section 77 (notifiable transactions), after subsection (4) insert—
“(5)
A land transaction that a person is treated as entering into by virtue
of subsection (3) of section 44A (contract and conveyance to third
party) is notifiable.”.
30
Contract and conveyance: effect of transfer of rights
5     (1)
Section 45 (contract and conveyance: effect of transfer of rights) is amended
as follows.
      (2)
In subsection (1)—
(a)
after paragraph (b) insert “, and
35
(c)
paragraph 12B of Schedule 17A (assignment of
agreement for lease) does not apply.”;
(b)
at the end insert “, and references to the transferor and the transferee
shall be read accordingly”.
      (3)
For subsection (5) substitute—
40
“(5)
Where a transfer of rights relates to part only of the subject-matter of
the original contract (“the relevant part”)—
(a)
subsection (8)(b) of section 44 (restriction of charge to tax on
subsequent conveyance) has effect as if the reference to the

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
507

amount of tax chargeable on that contract were a reference to
an appropriate proportion of that amount, and
(b)
a reference in the second sentence of subsection (3) above to
the original contract, or a reference in subsection (4) above to
the secondary contract arising from an earlier transfer of
5
rights, is to that contract so far as relating to the relevant part
(and that contract so far as not relating to the relevant part
shall be treated as a separate contract).”.
      (4)
After that subsection insert—
“(5A)
In relation to a land transaction treated as taking place by virtue of
10
subsection (3)—
(a)
references in Schedule 7 (group relief) to the vendor shall be
read as references to the vendor under the original contract;
(b)
other references in this Part to the vendor shall be read,
where the context permits, as referring to either the vendor
15
under the original contract or the transferor.”.
      (5)
After section 45 insert—
“45A
Contract providing for conveyance to third party: effect of transfer of
rights
(1)
This section applies where—
20
(a)
a contract (“the original contract”) is entered into under
which a chargeable interest is to be conveyed by one party to
the contract (A) at the direction or request of the other (B)—
(i)
to a person (C) who is not a party to the contract, or
(ii)
either to such a person or to B,
25

and
(b)
there is an assignment or other transaction (relating to the
whole or part of the subject-matter of the original contract) as
a result of which a person (D) becomes entitled to exercise
any of B’s rights under the original contract in place of B.
30

References in the following provisions of this section to a transfer of
rights are to any such assignment or other transaction.
(2)
D is not regarded as entering into a land transaction by reason of the
transfer of rights, but section 44A (contract providing for conveyance
to third party) has effect in accordance with the following provisions
35
of this section.
(3)
That section applies as if—
(a)
D had entered into a contract (a “secondary contract”) in the
same terms as the original contract except with D as a party
instead of B, and
40
(b)
the consideration due from D under the secondary contract
were—
(i)
so much of the consideration under the original
contract as is referable to the subject-matter of the
transfer of rights and is to be given (directly or
45
indirectly) by D or a person connected with him, and
(ii)
the consideration given for the transfer of rights.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
508

(4)
The substantial performance of the original contract shall be
disregarded if—
(a)
it occurs at the same time as, and in connection with, the
substantial performance of the secondary contract, or
(b)
it occurs after the transfer of rights.
5
(5)
Where there are successive transfers of rights, subsection (3) has
effect in relation to each of them.
(6)
The substantial performance of the secondary contract arising from
an earlier transfer of rights shall be disregarded if—
(a)
it occurs at the same time as, and in connection with, the
10
substantial performance of the secondary contract arising
from a subsequent transfer of rights, or
(b)
it occurs after that subsequent transfer.
(7)
Where a transfer of rights relates to only part of the subject matter of
the original contract, or to only some of the rights under that
15
contract—
(a)
a reference in subsection (3)(a) or (4) to the original contract,
or a reference in subsection (6) to the secondary contract
arising from an earlier transfer, is to that contract so far as
relating to that part or those rights, and
20
(b)
that contract so far as not relating to that part or those rights
shall be treated as a separate contract.
(8)
The effective date of a land transaction treated as entered into by
virtue of subsection (3) is not earlier than the date of the transfer of
rights.
25
(9)
In relation to a such a transaction—
(a)
references in Schedule 7 (group relief) to the vendor shall be
read as references to A;
(b)
other references in this Part to the vendor shall be read,
where the context permits, as referring to either A or B.
30
(10)
Section 839 of the Taxes Act 1988 (connected persons) applies for the
purposes of subsection (3)(b).
(11)
In this section “contract” includes any agreement.”.
      (6)
In section 122 (index of defined expressions), in the entry for “vendor” insert
at the end “(see too sections 45(5A) and 45A(9))”.
35
Relief for sale and leaseback arrangements
6     (1)
Section 57A (sale and leaseback arrangements) (inserted by the Stamp Duty
and Stamp Duty Land Tax (Variation of the Finance Act 2003) (No. 2)
Regulations 2003 (S.I. 2003/2816)) is amended as follows.
      (2)
In subsection (3) (the qualifying conditions), for paragraph (b) substitute—
40
“(aa)
that the sale transaction is entered into wholly or partly in
consideration of the leaseback transaction being entered into,
(b)
that the only other consideration (if any) for the sale is the
payment of money or the assumption, satisfaction or release
of a debt (or both),”.
45