|
| |
|
Loan relationships and derivative contracts |
| |
48 | Loan relationships: miscellaneous amendments |
| |
Schedule 8 to this Act (which makes amendments relating to loan |
| |
relationships) shall have effect. |
| |
49 | Derivative contracts: miscellaneous amendments |
| 5 |
Schedule 9 to this Act (which makes amendments relating to derivative |
| |
contracts) shall have effect. |
| |
| |
50 | Generally accepted accounting practice |
| |
(1) | In the Tax Acts “generally accepted accounting practice” means— |
| 10 |
(a) | in relation to the affairs of a company or other entity that prepares |
| |
accounts in accordance with international accounting standards (“IAS |
| |
accounts”), generally accepted accounting practice with respect to such |
| |
| |
(b) | in any other case, UK generally accepted accounting practice. |
| 15 |
(2) | In the Tax Acts “international accounting standards” means the international |
| |
accounting standards, within the meaning of Regulation (EC) No. 1606/2002 |
| |
of the European Parliament and the Council of 19 July 2002 on the application |
| |
of international accounting standards, adopted from time to time by the |
| |
European Commission in accordance with that Regulation. |
| 20 |
(3) | Where the European Commission has not adopted a particular international |
| |
accounting standard, then as regards the matters covered by that standard— |
| |
(a) | generally accepted accounting practice with respect to IAS accounts |
| |
shall be regarded as permitting the use either of the unadopted |
| |
standard or of UK generally accepted accounting practice, and |
| 25 |
(b) | accounts prepared on either basis shall be regarded for the purposes of |
| |
the Tax Acts as prepared in accordance with international accounting |
| |
| |
(4) | In the Tax Acts “UK generally accepted accounting practice”— |
| |
(a) | means generally accepted accounting practice with respect to accounts |
| 30 |
of UK companies (other than IAS accounts) that are intended to give a |
| |
| |
(b) | has the same meaning in relation to— |
| |
| |
(ii) | entities other than companies, and |
| 35 |
(iii) | companies that are not UK companies, |
| |
| as it has in relation to UK companies. |
| |
| In this subsection “UK companies” means companies incorporated or formed |
| |
under the law of a part of the United Kingdom. |
| |
(5) | In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts)— |
| 40 |
|
| |
|
| |
|
(a) | in the definition of “generally accepted accounting practice” for “has |
| |
the meaning given by section 836A” substitute “has the meaning given |
| |
by section 50(1) of the Finance Act 2004”; |
| |
(b) | at the appropriate place insert— |
| |
| ““international accounting standards” has the meaning given by |
| 5 |
section 50(2) of the Finance Act 2004;”; and |
| |
| ““UK generally accepted accounting practice” has the meaning |
| |
given by section 50(4) of the Finance Act 2004;”. |
| |
(6) | This section has effect in relation to— |
| |
(a) | periods of account beginning on or after 1st January 2005, and |
| 10 |
(b) | in the case of a company required to prepare accounts under the |
| |
Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order |
| |
1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before |
| |
that date for which the company is required or permitted to prepare |
| |
such accounts in accordance with international accounting standards. |
| 15 |
51 | Use of different accounting practices within a group of companies |
| |
(1) | This section applies where— |
| |
(a) | a company (company A) prepares accounts in accordance with |
| |
international accounting standards, |
| |
(b) | another company (company B) in the same group of companies |
| 20 |
prepares accounts in accordance with UK generally accepted |
| |
| |
(c) | there is a transaction between, or a series of transactions involving, |
| |
company A and company B, and |
| |
(d) | a tax advantage would (apart from this section) be obtained by either |
| 25 |
or both of those companies in relation to the transaction or series of |
| |
transactions as a result of the use of different accounting practices. |
| |
(2) | In that case the Tax Acts apply in relation to that transaction or series of |
| |
transactions as if both companies prepared accounts in accordance with UK |
| |
generally accepted accounting practice. |
| 30 |
(3) | The provisions of section 170(3) to (6) of the Taxation of Chargeable Gains Act |
| |
1992 (c. 12) apply to determine for the purposes of this section whether |
| |
companies are in the same group of companies. |
| |
(4) | A series of transactions is not prevented from being a series of transactions |
| |
involving company A and company B by reason only of the fact that one or |
| 35 |
more of the following is the case— |
| |
(a) | there is no transaction in the series to which both those companies are |
| |
| |
(b) | that parties to any arrangement in pursuance of which the transactions |
| |
in the series are entered into do not include one or both of those |
| 40 |
| |
(c) | there are one or more transactions in the series to which neither of those |
| |
| |
(5) | In this section “tax advantage” has the same meaning as in Chapter 1 of Part 17 |
| |
of the Taxes Act 1988 (see section 709 of that Act). |
| 45 |
(6) | This section has effect in relation to— |
| |
(a) | periods of account beginning on or after 1st January 2005, and |
| |
|
| |
|
| |
|
(b) | in the case of a company required to prepare accounts under the |
| |
Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order |
| |
1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before |
| |
that date for which the company is required or permitted to prepare |
| |
such accounts in accordance with international accounting standards. |
| 5 |
52 | Amendment of enactments that operate by reference to accounting practice |
| |
(1) | Schedule 10 makes amendments of provisions of the Tax Acts that operate by |
| |
reference to accounting practice. |
| |
| |
| Part 1 makes amendments relating to loan relationships; |
| 10 |
| Part 2 makes amendments relating to derivative contracts; |
| |
| Part 3 makes amendments relating to intangible fixed assets; |
| |
| Part 4 makes amendments relating to foreign currency accounting. |
| |
(3) | The amendments have effect in relation to— |
| |
(a) | periods of account beginning on or after 1st January 2005, and |
| 15 |
(b) | in the case of a company required to prepare accounts under the |
| |
Companies Act 1985 or the Companies (Northern Ireland) Order 1986, |
| |
any period of account beginning before that date for which the |
| |
company is required or permitted to prepare such accounts in |
| |
accordance with international accounting standards. |
| 20 |
53 | Treatment of expenditure on research and development |
| |
(1) | Expenditure by a company on research and development, if not of a capital |
| |
nature, is not prevented from being regarded for tax purposes as deductible in |
| |
computing profits by reason of the fact that for accounting purposes it is |
| |
brought into account by the company in determining the value of an intangible |
| 25 |
| |
(2) | Subsection (1) applies, in particular, for the purposes of— |
| |
| section 82A of the Taxes Act 1988 (deduction of expenditure on research |
| |
| |
| Schedule 20 to the Finance Act 2000 (c. 17) (R&D tax relief), |
| 30 |
| Schedule 12 to the Finance Act 2002 (c. 23) (tax relief for expenditure on |
| |
research and development), and |
| |
| Schedule 13 to that Act (tax relief for expenditure on vaccine research etc.). |
| |
(3) | Where expenditure is brought into account by a company for tax purposes in |
| |
accordance with subsection (1), no deduction may be made in computing for |
| 35 |
tax purposes the profits of the company in respect of the writing down of so |
| |
much of the value of an intangible asset as is attributable to that expenditure. |
| |
(4) | Expenditure shall not be regarded by virtue of subsection (1) as deductible in |
| |
computing a company’s profits for an accounting period to the extent that— |
| |
(a) | a deduction has been made in respect of it in computing the company’s |
| 40 |
profits for a previous accounting period, or |
| |
(b) | the company has benefited from a tax relief in respect of it for a |
| |
previous accounting period under any of the provisions specified in |
| |
| |
| 45 |
|
| |
|
| |
|
| “intangible asset” has the meaning it has for accounting purposes; and |
| |
| “research and development” has the meaning given by section 837A of the |
| |
| |
(6) | This section shall come into force in accordance with provision made by the |
| |
Treasury by order made by statutory instrument. |
| 5 |
54 | Trading profits etc. from securities: taxation of amounts taken to reserves |
| |
(1) | Before section 473 of the Taxes Act 1988 insert— |
| |
“472A | Trading profits etc. from securities: taxation of amounts taken to |
| |
| |
(1) | This section applies in relation to securities— |
| 10 |
(a) | which are held by a person carrying on a banking business, an |
| |
insurance business or a business consisting wholly or partly in |
| |
dealing in securities; and |
| |
(b) | which are such that a profit on their sale would form part of the |
| |
trading profits of that business. |
| 15 |
(2) | Profits and losses arising from such securities that in accordance with |
| |
generally accepted accounting practice are— |
| |
(a) | calculated by reference to the fair value of the securities, and |
| |
(b) | recognised in that person’s statement of recognised gains and |
| |
losses or statement of changes in equity, |
| 20 |
| shall be brought into account in computing the profits or losses of a |
| |
business in accordance with the provisions of this Act applicable to |
| |
| |
(3) | Subsection (2) does not apply— |
| |
(a) | to an amount to the extent that it derives from or otherwise |
| 25 |
relates to an amount brought into account under that subsection |
| |
in an earlier period of account, or |
| |
(b) | to an amount recognised for accounting purposes by way of |
| |
correction of a fundamental error. |
| |
(4) | In this section, “securities”— |
| 30 |
(a) | includes shares and any rights, interests or options that by |
| |
virtue of section 99, 135(5) or 136(5) of the Taxation of |
| |
Chargeable Gains Act 1992 are treated as shares for the |
| |
purposes of sections 126 to 136 of that Act; but |
| |
(b) | does not include a loan relationship (within the meaning of |
| 35 |
Chapter 2 of Part 4 of the Finance Act 1996).”. |
| |
(2) | This section has effect in relation to— |
| |
(a) | periods of account beginning on or after 1st January 2005, and |
| |
(b) | in the case of a company required to prepare accounts under the |
| |
Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order |
| 40 |
1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before |
| |
that date for which the company is required or permitted to prepare |
| |
such accounts in accordance with international accounting standards. |
| |
|
| |
|