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Finance Bill
Schedule 7 — Insurance companies etc

298

 

scheme takes place, or the relevant financial reinsurance contract is entered

into, before or on or after that date).

Chargeable gains

6     (1)  

In section 210A(10) of the Taxation of Chargeable Gains Act 1992 (c. 12)

(ring-fencing of losses: policy holders’ share of chargeable gains or losses),

5

in paragraph (b) (case where policy holders’ share of relevant profits does

not exceed BLAGAB profits), for “of the company for the accounting period

bears to those relevant profits” substitute “for the accounting period bears to

those BLAGAB profits”.

      (2)  

Sub-paragraph (1) has effect in relation to accounting periods beginning on

10

or after 17th March 2004.

Double taxation

7          

In section 804B of the Taxes Act 1988 (double taxation relief: insurance

companies carrying on more than one category of business), after subsection

(7) insert—

15

“(7A)   

The Treasury may by regulations amend subsection (7); and the

regulations may include amendments having effect in relation to

accounting periods during which they are made.”.

Meaning of “referable”

8     (1)  

Section 432A of the Taxes Act 1988 (apportionment of income and gains) is

20

amended as follows.

      (2)  

In subsection (1), for “where in any period an insurance company carries on

more than one category of business and it is necessary for the purposes of

the Corporation Tax Acts to determine in relation to the period” substitute

“for determining for the purposes of any provision of the Corporation Tax

25

Acts in relation to any period for which an insurance company carries on

business”.

      (3)  

After that subsection insert—

“(1A)   

If the company carries on only one category of business in the period,

all of the income and gains or losses referred to in subsection (1)

30

above shall be referable to that category of business; but if the

company carries on more than one category of business in the period,

the following provisions shall apply.”.

      (4)  

In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”.

9     (1)  

In the following provisions of the Taxes Act 1988—

35

(a)   

section 438(1) (pension business), and

(b)   

section 439B(6) (life reinsurance business),

           

after “referable” insert “(in accordance with section 432A)”.

      (2)  

In the following provisions of the Finance Act 1989 (c. 26) (which relate to

the policy holders’ share of profits)—

40

(a)   

section 88(3A)(a),

(b)   

the words within quotation marks in the portion of section 88(3B)

preceding paragraph (a),

(c)   

the portion of section 89(1B) preceding paragraph (a), and

 

 

Finance Bill
Schedule 8 — Loan relationships: miscellaneous amendments

299

 

(d)   

section 89(2)(b),

           

after “referable” insert “(in accordance with section 432A of the Taxes Act

1988)”; and, in consequence of the amendment made by paragraph (b), in

section 88(3B), for “referable to that business” substitute “so referable”.

      (3)  

In the following provisions of the Taxation of Chargeable Gains Act 1992

5

(c. 12)—

(a)   

the definitions of “BLAGAB allowable losses” and “BLAGAB

chargeable gains” in section 210A(13) (ring-fencing of losses),

(b)   

section 211ZA(10) (transfers of business: transfer of unused losses),

and

10

(c)   

section 213(1A)(a) (spreading of gains and losses under section 212),

           

after “referable” insert “(in accordance with section 432A of the Taxes Act)”.

 

 

Finance Bill
Schedule 8 — Loan relationships: miscellaneous amendments

301

 

Schedule 8

Section 48

 

Loan relationships: miscellaneous amendments

Introductory

1          

Schedule 9 to the Finance Act 1996 (c. 8) (loan relationships: special

computational provisions) is amended as follows.

5

Late interest: close companies where limited partnership is collective investment scheme etc

2     (1)  

Paragraph 2 (late interest) is amended as follows.

      (2)  

In sub-paragraph (1B) (case where debtor is close company and creditor is

participator etc)—

(a)   

in the opening words, after “close company” insert “, but not a CIS-

10

based close company,”; and

(b)   

in the closing words, for the words from “a limited partnership” to

the end of the sub-paragraph substitute “a CIS limited partnership”.

      (3)  

In sub-paragraph (6) (definitions) insert the following definitions at the

appropriate place—

15

   

“ “CIS-based close company” means a company that would not

be a close company apart from the attribution, under section

416(6) of the Taxes Act 1988 by virtue of section 417(3)(a) of

that Act, of the rights and powers of one or more partners in

a CIS limited partnership to another of the partners;”;

20

   

“ “CIS limited partnership” means a limited partnership—

(a)   

which is a collective investment scheme, or

(b)   

which would be a collective investment scheme if it

were not a body corporate;”;

   

“ “collective investment scheme” means a collective investment

25

scheme within the meaning of section 235 of the Financial

Services and Markets Act 2000;”.

      (4)  

The amendments made by this paragraph have effect for accounting periods

ending on or after 10th December 2003.

Bad debts etc: release of amount where creditor is subject to insolvency proceedings

30

3     (1)  

Paragraph 5 (bad debts etc) is amended as follows.

      (2)  

In sub-paragraph (3) (cases where no credit is required to be brought into

account by the debtor on the release of a debt) for the words following

paragraph (b) substitute—

   

“no credit in respect of the release shall be required to be brought into

35

account in the case of that company if any of the four conditions set

out below is satisfied.”.

      (3)  

After sub-paragraph (3) insert—

     “(4)  

Condition 1 is that the release is part of a relevant arrangement or

compromise, within the meaning given by section 74(2) of the

40

Taxes Act 1988.

      (5)  

Condition 2 is that the debtor relationship is one as respects which

section 87 of this Act (accounting method where parties have a

 

 

Finance Bill
Schedule 8 — Loan relationships: miscellaneous amendments

302

 

connection) requires the use of an authorised accruals basis of

accounting.

      (6)  

Condition 3 is that—

(a)   

in the case of the company releasing the amount, the

circumstances are as described in any of paragraphs (a) to

5

(d) of paragraph 6A(1) below (insolvent liquidation etc),

(b)   

immediately before the time at which those circumstances

arose in the case of that company, the relationship was one

as respects which section 87 of this Act requires the use of

an authorised accruals basis of accounting, and

10

(c)   

immediately after that time, the relationship was not one

as respects which section 87 of this Act requires the use of

an authorised accruals basis of accounting.

           

In the application of paragraphs (a) to (d) of paragraph 6A(1)

below for the purposes of paragraph (a) above, references in those

15

paragraphs to the company which has the creditor relationship are

to be taken as references to the company releasing the amount.

      (7)  

Condition 4 is that—

(a)   

the relationship is not one as respects which section 87 of

this Act requires the use of an authorised accruals basis of

20

accounting, and

(b)   

in the case of the company which has the debtor

relationship, the circumstances are as described in any of

paragraphs (a) to (d) of paragraph 6A(1) below.

           

In the application of paragraphs (a) to (d) of paragraph 6A(1)

25

below for the purposes of paragraph (b) above, references in those

paragraphs to the company which has the creditor relationship are

to be taken as references to the company which has the debtor

relationship.”.

      (4)  

The amendments made by this paragraph have effect in relation to any

30

release made on or after 10th December 2003.

Bad debt etc: parties having connection and creditor in insolvent administrative receivership

4     (1)  

Paragraph 6A (bad debt etc: parties having connection and creditor in

insolvent liquidation etc) is amended as follows.

      (2)  

The amendments made to the paragraph by paragraph 29 of the Schedule to

35

the Enterprise Act 2002 (Insolvency) Order 2003 (S.I. 2003/2096) shall be

deemed never to have been made.

      (3)  

In sub-paragraph (1) (cases where paragraph 6A applies) after paragraph (b)

insert—

“(bb)   

the company is in insolvent administrative receivership;”.

40

      (4)  

In sub-paragraph (2) (cases where departure from assumption of full

payment allowed) after paragraph (b) insert—

“(bb)   

in a case falling within paragraph (bb) of that sub-paragraph,

at a time when the appointment of the administrative

receiver is in force;”.

45

      (5)  

In sub-paragraph (2)(d) (which refers to a time corresponding to that

described in paragraph (a), (b) or (c)) after “(b)” insert “, (bb)”.

 

 

Finance Bill
Schedule 8 — Loan relationships: miscellaneous amendments

303

 

      (6)  

After sub-paragraph (4) (company in insolvent administration) insert—

“(5)   

For the purposes of this paragraph a company is in insolvent

administrative receivership if—

(a)   

there is in force in relation to that company an appointment

of an administrative receiver, within the meaning of

5

Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of

the Insolvency (Northern Ireland) Order 1989, and

(b)   

the company was put into administrative receivership at a

time when its assets were insufficient for the payment of its

debts and other liabilities and the expenses of administrative

10

receivership.”.

      (7)  

The amendments made by sub-paragraphs (3) to (6) have effect in relation to

accounting periods ending on or after 10th December 2003.

Deemed assignment of assets and liabilities on company ceasing to be resident in UK etc

5     (1)  

After paragraph 10 (imported losses etc) insert—

15

“Deemed assignment of assets and liabilities on company ceasing to be resident in

UK etc

10A   (1)  

This paragraph applies if at any time (“the relevant time”)—

(a)   

a company ceases to be resident in the United Kingdom, or

(b)   

in the case of a company that is not resident in the United

20

Kingdom, an asset or liability representing a loan

relationship of the company ceases to be held for the

purposes of a permanent establishment of the company in

the United Kingdom in any circumstances not involving a

related transaction.

25

      (2)  

In a case falling within sub-paragraph (1)(a) above, this Schedule

shall have effect as if the company had—

(a)   

immediately before the relevant time, assigned the assets

and liabilities that represent its loan relationships for a

consideration of an amount equal to their fair value at that

30

time, and

(b)   

immediately reacquired them for a consideration of the

same amount.

      (3)  

Sub-paragraph (2) above does not apply in relation to an asset or

a liability to the extent that, immediately after the relevant time, it

35

is held or owed for the purposes of a permanent establishment of

the company in the United Kingdom.

      (4)  

In a case falling within sub-paragraph (1)(b) above, this Schedule

shall have effect as if the company had—

(a)   

immediately before the relevant time, assigned the asset or

40

liability, so far as ceasing to be held or owed for the

purposes of the permanent establishment, for a

consideration of an amount equal to its fair value at that

time, and

(b)   

immediately reacquired it for a consideration of the same

45

amount.

 

 

Finance Bill
Schedule 9 — Derivative contracts: miscellaneous amendments

304

 

      (5)  

In this paragraph “fair value” shall be construed in accordance

with section 85 of this Act.”.

      (2)  

The amendment made by this paragraph has effect where the cessation in

question occurs on or after 17th March 2004.

Discounted securities of close companies: limited partnership collective investment scheme etc

5

6     (1)  

Paragraph 18 (discounted securities of close companies) is amended as

follows.

      (2)  

In sub-paragraph (1) (application of paragraph) after paragraph (a) insert—

“(aa)   

the issuing company is not a CIS-based close company, as

defined in paragraph 2(6) above;”.

10

      (3)  

In paragraph (c) of that sub-paragraph (debt not owed to limited

partnership which is a collective investment scheme) for the words from “a

limited partnership” to the end of the sub-paragraph substitute “a CIS

limited partnership, as defined in paragraph 2(6) above”.

      (4)  

Omit sub-paragraph (3A) (meaning of connection between companies, an

15

expression no longer used in the paragraph).

      (5)  

The amendments made by this paragraph have effect for accounting periods

ending on or after 10th December 2003.

Interpretation of references to major interest

7     (1)  

Paragraph 20 (major interest) is amended as follows.

20

      (2)  

In sub-paragraph (1) (cases where one company has a major interest in

another) omit paragraph (c) (both controllers etc to satisfy the same

condition in sub-paragraph (2)).

      (3)  

Omit sub-paragraph (2) (both controllers etc are creditors, or both are

debtors, of the controlled company).

25

      (4)  

The amendments made by this paragraph have effect for accounting periods

beginning on or after 17th March 2004.

Schedule 9

Section 49

 

Derivative contracts: miscellaneous amendments

Introductory

30

1          

Schedule 26 to the Finance Act 2002 (c. 23) is amended as follows.

Power to amend provisions of Schedule 26

2     (1)  

Paragraph 13 is amended as follows.

      (2)  

For sub-paragraph (1) (power to amend paragraphs 2 to 12) substitute—

     “(1)  

The Treasury may by order amend—

35

(a)   

any of paragraphs 2 to 12, or

(b)   

Part 9 of this Schedule.”.

      (3)  

For sub-paragraph (4) (power to make certain orders so as to have effect in

 

 

Finance Bill
Schedule 9 — Derivative contracts: miscellaneous amendments

305

 

relation to accounting periods ending on or after day on which order comes

into force (whenever beginning)) substitute—

     “(4)  

An order under this paragraph may provide for any of its

provisions to have effect in relation to accounting periods ending

on or after the day on which the order comes into force (whenever

5

beginning).”.

      (4)  

In consequence of the amendment made by sub-paragraph (2), the heading

to the paragraph accordingly becomes “Power to amend paragraphs 2 to 12

and Part 9”.

Deemed assignment of derivative contracts on company ceasing to be resident in UK etc

10

3     (1)  

At the beginning of Part 6 (special computational provisions) insert—

“Deemed assignment of derivative contracts on company ceasing to be resident in

UK etc

22A   (1)  

This paragraph applies if at any time (“the relevant time”)—

(a)   

a company ceases to be resident in the United Kingdom, or

15

(b)   

in the case of a company not resident in the United

Kingdom, the rights and liabilities of the company under a

derivative contract to any extent cease to be held or owed

for the purposes of a permanent establishment of the

company in the United Kingdom in circumstances not

20

involving a related transaction.

      (2)  

In a case falling within sub-paragraph (1)(a), this Schedule shall

have effect as if the company had—

(a)   

immediately before the relevant time, assigned its rights

and liabilities under its derivative contracts for a

25

consideration of an amount equal to their fair value at that

time, and

(b)   

immediately reacquired them for a consideration of the

same amount.

      (3)  

Sub-paragraph (2) does not apply in relation to a derivative

30

contract to the extent that, immediately after the relevant time, the

company’s rights and liabilities under the contract are held or

owed for the purposes of a permanent establishment of the

company in the United Kingdom.

      (4)  

In a case falling within sub-paragraph (1)(b), this Schedule shall

35

have effect as if the company had—

(a)   

immediately before the relevant time, assigned the rights

and liabilities, so far as ceasing to be held or owed for the

purposes of the permanent establishment, for a

consideration of an amount equal to their fair value at that

40

time, and

(b)   

immediately reacquired them for a consideration of the

same amount.

      (5)  

In this paragraph “fair value” shall be construed in accordance

with paragraph 17.”.

45

      (2)  

The amendment made by this paragraph has effect where the cessation in

question occurs on or after 17th March 2004.

 

 

 
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