Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 1 — Conditions to be satisfied by individuals
332

94A
Meaning of “accounts” and “return of accounts”
(1)
References in sections 93 and 93A to a company’s “accounts” are to—
(a)
the annual accounts of the company required by Part 7 of the
Companies Act 1985 or Part 8 of the Companies (Northern
Ireland) Order 1986; or
5
(b)
if the company is not required to prepare such accounts, the
accounts which it is required to keep under the law of the
country or territory under whose laws the company is
incorporated; or
(c)
if the company is not so required to keep accounts, such of its
10
accounts as most closely correspond to accounts which it
would have been required to prepare if the provisions of that
Part applied to it.
(2)
The reference in section 93(3) to a “return of accounts” for the
permanent establishment of a company not resident in the United
15
Kingdom is to a return of such accounts of the permanent
establishment as may be required by the Inland Revenue under
paragraph 3 of Schedule 18 to the Finance Act 1998 (company tax
returns).”.
Consequential amendments
20
78    (1)
Section 730BB of the Taxes Act 1988 (exchange gains and losses on sale and
repurchase of securities) is amended as follows.
      (2)
In subsection (2)(c) for the words from “section 93 of the Finance Act 1993”
to “the company” substitute “section 93B of the Finance Act 1993 (functional
currency other than sterling) applies”.
25
      (3)
In subsection (3)—
(a)
in paragraph (a) for the words from “section 93” to “the company”
substitute “section 93B of the Finance Act 1993 applies”;
(b)
in paragraph (b) for the words from “relevant foreign currency” to
“the company” substitute “functional currency”;
30
(c)
in paragraph (c)(i) and (ii) for “relevant foreign” substitute
“functional”.
      (4)
Omit subsection (12).
Schedule 11
Section 64

Conditions for registration for gross payment
35
Part 1
Conditions to be satisfied by individuals
General
1     (1)
In the case of an application for an individual to be registered for gross
payment, the following conditions must be satisfied by the individual.
40

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 1 — Conditions to be satisfied by individuals
333

      (2)
But where the application is for the registration of the individual as a partner
in a firm, this Part of this Schedule has effect with the omission of
paragraphs 2 and 3.
The business test
2
The applicant must satisfy the Inland Revenue, by such evidence as may be
5
prescribed in regulations made by the Board of Inland Revenue, that he is
carrying on a business in the United Kingdom which—
(a)
consists of or includes the carrying out of construction operations or
the furnishing or arranging for the furnishing of labour in carrying
out construction operations, and
10
(b)
is, to a substantial extent, carried on by means of an account with a
bank.
The turnover test
3     (1)
The applicant must satisfy the Inland Revenue, by such evidence as may be
prescribed in regulations made by the Board of Inland Revenue, that the
15
carrying on of the business mentioned in paragraph 2 is likely to involve the
receipt in the year following the making of the application of an aggregate
amount by way of relevant payments which is not less than the amount
specified in regulations made by the Board as the minimum turnover for the
purposes of this sub-paragraph.
20
      (2)
In sub-paragraph (1) “relevant payments” means payments under contracts
relating to, or to the work of individuals participating in the carrying out of,
any operations which—
(a)
are of a description specified in subsection (2) of section 74; but
(b)
are not of a description specified in subsection (3) of that section,
25

other than so much of the payments as represents the direct cost to the
person receiving the payments of materials used or to be used in carrying
out the operations in question.
      (3)
The Board may make regulations for the purpose of enabling a person who
does not satisfy the condition in sub-paragraph (1) to be treated as satisfying
30
that condition in such circumstances as may be prescribed.
The compliance test
4     (1)
The applicant must, subject to sub-paragraphs (3) and (4), have complied
with—
(a)
all obligations imposed on him in the qualifying period (see
35
paragraph 14) by or under the Tax Acts or the Taxes Management
Act 1970 (c. 9), and
(b)
all requests made in the qualifying period to supply to the Inland
Revenue accounts of, or other information about, any business of his.
      (2)
An applicant who at any time in the qualifying period had control of a
40
company is to be taken not to satisfy the condition in sub-paragraph (1)
unless the company has satisfied that condition in relation to periods ending
at a time within that period when he had control of it; and for this purpose
“control” is to be construed in accordance with section 416(2) to (6) of the
Taxes Act 1988.
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Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 1 — Conditions to be satisfied by individuals
334

      (3)
An applicant or company that has failed to comply with such an obligation
or request as—
(a)
is referred to in sub-paragraph (1), and
(b)
is of a kind prescribed by regulations made by the Board of Inland
Revenue,
5

is, in such circumstances as may be prescribed by the regulations, to be
treated as satisfying the condition in that sub-paragraph as regards that
obligation or request.
      (4)
An applicant or company that has failed to comply with such an obligation
or request as is referred to in sub-paragraph (1) is to be treated as satisfying
10
the condition in that sub-paragraph as regards that obligation or request if
the Board of Inland Revenue are of the opinion that—
(a)
the applicant or company had a reasonable excuse for the failure to
comply, and
(b)
if the excuse ceased, he or it complied with the obligation or request
15
without unreasonable delay after the excuse had ceased.
      (5)
Where the applicant states, for the purpose of showing that he has complied
with all obligations imposed on him as mentioned in sub-paragraph (1), that
he was not subject to any of one or more obligations in respect of any period
ending within the qualifying period—
20
(a)
he must satisfy the Board of Inland Revenue of that fact by such
evidence as may be prescribed in regulations made by the Board; and
(b)
if for that purpose he states that he has been outside the United
Kingdom for the whole or any part of the qualifying period, he must
also satisfy them, by such evidence as may be so prescribed, that he
25
has complied with any obligations imposed under the tax laws of
any country in which he was living during that period which are
comparable to the obligations mentioned in sub-paragraph (1).
      (6)
The applicant must, if any contribution has at any time during the qualifying
period become due from him under—
30
(a)
Part 1 of the Social Security Contributions and Benefits Act 1992
(c. 4), or
(b)
Part 1 of the Social Security Contributions and Benefits (Northern
Ireland) Act 1992 (c. 7),

have paid the contribution when it became due.
35
      (7)
There must be reason to expect that the applicant will, in respect of periods
ending after the end of the qualifying period, comply with—
(a)
such obligations as are referred to in sub-paragraphs (1) to (6), and
(b)
such requests as are referred to in sub-paragraph (1).
      (8)
Subject to sub-paragraphs (3) and (4), a person is not to be taken for the
40
purposes of this paragraph to have complied with any such obligation or
request as is referred to in sub-paragraphs (1) to (5) if there has been a
contravention of a requirement as to—
(a)
the time at which, or
(b)
the period within which,
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the obligation or request was to be complied with.

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 2 — Conditions to be satisfied by firms
335

Part 2
Conditions to be satisfied by firms
General
5
In the case of an application for an individual or a company to be registered
for gross payment as a partner in a firm, the following conditions must be
5
satisfied by the firm.
The business test
6
The applicant must satisfy the Inland Revenue, by such evidence as may be
prescribed in regulations made by the Board of Inland Revenue, that the
firm’s business—
10
(a)
is carried on in the United Kingdom, and
(b)
satisfies the conditions mentioned in paragraph 2(a) and (b).
The turnover test
7     (1)
The partners must satisfy the Inland Revenue, by such evidence as may be
prescribed in regulations made by the Board of Inland Revenue, that the
15
carrying on of the firm’s business is likely to involve the receipt in the year
following the making of the application of an aggregate amount by way of
relevant payments which is not less than whichever is the smaller of—
(a)
the multiple turnover threshold; and
(b)
the amount specified for the purposes of this paragraph in
20
regulations made by the Board;

and in this sub-paragraph “relevant payments” has the meaning given by
paragraph 3(2).
      (2)
In sub-paragraph (1) “the multiple turnover threshold” means the sum of—
(a)
the amount obtained by multiplying the number of partners in the
25
firm who are individuals by the amount specified in regulations as
the minimum turnover for the purposes of paragraph 3(1); and
(b)
in respect of each partner in the firm which is a company (other than
one to which paragraph 11(1)(b) would apply), the amount equal to
what would have been the minimum turnover for the purposes of
30
paragraph 11(1) if the application had been for registration of that
company for gross payment.
      (3)
The Board may make regulations—
(a)
for determining the number of partners in the firm to be taken into
account for the purposes of sub-paragraph (2) (for example, where
35
the number of partners has fluctuated over a period);
(b)
for the purpose of enabling a firm which does not satisfy the
condition in sub-paragraph (1) to be treated as satisfying that
condition in such circumstances as may be prescribed.
The compliance test
40
8     (1)
Subject to sub-paragraphs (2) and (3), each of the persons who are partners
at the time of the application must have complied, so far as any such charge
to income tax or corporation tax is concerned as falls to be computed by
reference to the profits or gains of the firm’s business, with—

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 3 — Conditions to be satisfied by companies
336

(a)
all obligations imposed on him in the qualifying period (see
paragraph 14) by or under the Tax Acts or the Taxes Management
Act 1970 (c. 9); and
(b)
all requests made in the qualifying period to him as such a partner to
supply to the Inland Revenue accounts of, or other information
5
about, the firm’s business or his share of the profits or gains of that
business.
      (2)
Where a person has failed to comply with such an obligation or request as—
(a)
is referred to in sub-paragraph (1), and
(b)
is of a kind prescribed by regulations made by the Board of Inland
10
Revenue,

the firm is, in such circumstances as may be prescribed by the regulations, to
be treated, in relation to that partner, as satisfying the condition in that sub-
paragraph as regards that obligation or request.
      (3)
Where a person has failed to comply with such an obligation or request as is
15
referred to in sub-paragraph (1), the firm is to be treated, in relation to that
partner, as satisfying the condition in that sub-paragraph as regards that
obligation or request if the Board of Inland Revenue are of the opinion that—
(a)
the person had a reasonable excuse for the failure to comply, and
(b)
if the excuse ceased, he complied with the obligation or request
20
without unreasonable delay after the excuse had ceased.
      (4)
There must be reason to expect that each of the persons who are from time
to time partners in the firm will, in respect of periods ending after the end of
the qualifying period, comply with such obligations and requests as are
referred to in sub-paragraph (1).
25
      (5)
Subject to sub-paragraphs (2) and (3), a person is not to be taken for the
purposes of this paragraph to have complied with any such obligation or
request as is referred to in sub-paragraph (1) if there has been a
contravention of a requirement as to—
(a)
the time at which, or
30
(b)
the period within which,

the obligation or request was to be complied with.
Part 3
Conditions to be satisfied by companies
General
35
9
In the case of an application for a company to be registered for gross
payment (whether as a partner in a firm or otherwise), the following
conditions must be satisfied by the company.
The business test
10
The company must satisfy the Inland Revenue, by such evidence as may be
40
prescribed in regulations made by the Board of Inland Revenue, that—
(a)
it is carrying on (whether or not in partnership) a business in the
United Kingdom, and
(b)
that business satisfies the conditions mentioned in paragraph 2(a)
and (b).
45

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 3 — Conditions to be satisfied by companies
337

The turnover test
11    (1)
The company must either—
(a)
satisfy the Inland Revenue, by such evidence as may be prescribed in
regulations made by the Board of Inland Revenue, that the carrying
on of its business is likely to involve the receipt in the year following
5
the making of the application of an aggregate amount by way of
relevant payments which is not less than the amount which is the
minimum turnover for the purposes of this sub-paragraph; or
(b)
satisfy the Inland Revenue that the only persons with shares in the
company are companies which are limited by shares and themselves
10
are registered for gross payment;

and in this sub-paragraph “relevant payments” has the meaning given by
paragraph 3(2).
      (2)
The minimum turnover for the purposes of sub-paragraph (1) is whichever
is the smaller of—
15
(a)
the amount obtained by multiplying the amount specified in
regulations as the minimum turnover for the purposes of paragraph
3(1) by the number of persons who are relevant persons in relation to
the company; and
(b)
the amount specified for the purposes of this paragraph in
20
regulations made by the Board of Inland Revenue.
      (3)
For the purposes of sub-paragraph (2) a person is a relevant person in
relation to the company—
(a)
where the company is a close company, if he is a director of the
company (within the meaning given by section 67 of the Income Tax
25
(Earnings and Pensions) Act 2003 (c. 1)) or a beneficial owner of
shares in the company; and
(b)
in any other case, if he is such a director of the company.
      (4)
The Board may make regulations—
(a)
for determining the number of relevant persons to be taken into
30
account for the purposes of sub-paragraph (2) (for example, where
the number of such persons has fluctuated over a period);
(b)
for the purpose of enabling a company which does not satisfy the
condition in sub-paragraph (1) to be treated as satisfying that
condition in such circumstances as may be prescribed.
35
The compliance test
12    (1)
The company must, subject to sub-paragraphs (2) and (3), have complied
with—
(a)
all obligations imposed on it in the qualifying period (see paragraph
14) by or under the Tax Acts or the Taxes Management Act 1970
40
(c. 9); and
(b)
all requests made in the qualifying period to supply to the Inland
Revenue accounts of, or other information about, its business.
      (2)
A company that has failed to comply with such an obligation or request as—
(a)
is referred to in sub-paragraph (1), and
45
(b)
is of a kind prescribed by regulations made by the Board of Inland
Revenue,

Finance Bill
Schedule 11 — Conditions for registration for gross payment
Part 3 — Conditions to be satisfied by companies
338


is, in such circumstances as may be prescribed by the regulations, to be
treated as satisfying the condition in that sub-paragraph as regards that
obligation or request.
      (3)
A company that has failed to comply with such an obligation or request as
is referred to in sub-paragraph (1) is to be treated as satisfying the condition
5
in that sub-paragraph as regards that obligation or request if the Board of
Inland Revenue are of the opinion that—
(a)
the company had a reasonable excuse for the failure to comply, and
(b)
if the excuse ceased, it complied with the obligation or request
without unreasonable delay after the excuse had ceased.
10
      (4)
The company must, if any contribution has at any time during the qualifying
period become due from the company under—
(a)
Part 1 of the Social Security Contributions and Benefits Act 1992
(c. 4), or
(b)
Part 1 of the Social Security Contributions and Benefits (Northern
15
Ireland) Act 1992 (c. 7),

have paid the contribution when it became due.
      (5)
The company must have complied with any obligations imposed on it by the
following provisions of the Companies Act 1985 (c. 6) in so far as those
obligations fell to be complied with within the qualifying period—
20
(a)
sections 226, 241 and 242 (contents, laying and delivery of annual
accounts);
(b)
section 288(2) (return of directors and secretary and notification of
changes therein);
(c)
sections 363 to 365 (annual returns);
25
(d)
section 691 (registration of constitutional documents and list of
directors and secretary of oversea company);
(e)
section 692 (notification of changes in constitution or directors or
secretary of oversea company);
(f)
section 693 (oversea company to state its name and country of
30
incorporation);
(g)
section 699 (obligations of companies incorporated in Channel
Islands or Isle of Man);
(h)
Chapter 2 of Part 23 (accounts of oversea company).
      (6)
The company must have complied with any obligations imposed on it by the
35
following provisions of the Companies (Northern Ireland) Order 1986
(S.I. 1986/1032 (N.I. 6)) in so far as those obligations fell to be complied with
within the qualifying period—
(a)
Articles 234, 249 and 250 (contents, laying and delivery of annual
accounts);
40
(b)
Article 296(2) (return of directors and secretary and notification of
changes therein);
(c)
Articles 371 to 373 (annual returns);
(d)
Article 641 (registration of constitutional documents and list of
directors and secretary of Part XXIII company);
45
(e)
Article 642 (notification of changes in constitution or directors or
secretary of Part XXIII company);
(f)
Article 643 (Part XXIII company to state its name and country of
incorporation);
(g)
Article 649 (accounts of Part XXIII company).
50