Railways Bill

House of Commons

Session 2004 - 05
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Railways Bill

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 2 — Other transfers under section 1(2) schemes
119


but so that transfers in accordance with the scheme, so far as they relate to
assets in use for the purposes of the trade, shall not be treated as giving rise
to an allowance or charge.
Capital allowances: transfer of part of a trade
13    (1)
Where a person (“the predecessor”) is carrying on a trade and, in
5
consequence of a scheme made under section 1(2)—
(a)
the predecessor ceases to carry on a trade, and
(b)
a person who is not a national authority (“the successor”) begins to
carry on activities of that trade as part of a trade carried on by the
successor,
10

then that part of the trade carried on by the successor shall be treated for the
purposes of paragraph 12 as a separate trade.
      (2)
Where a person (“the predecessor”) is carrying on a trade and, in
consequence of a scheme made under section 1(2)—
(a)
the predecessor ceases to carry on a part of a trade, and
15
(b)
a person who is not a national authority begins to carry on activities
of that part of that trade,

then the predecessor shall be treated for the purposes of paragraph 12 and
sub-paragraph (1) of this paragraph as having carried on that part of its trade
as a separate trade.
20
      (3)
Where activities fall to be treated for the purposes of this paragraph as a
separate trade, such apportionments of receipts, expenses, assets and
liabilities shall be made for the purposes of the 2001 Act as may be just and
reasonable.
Capital allowances: transfer of plant or machinery
25
14    (1)
This paragraph applies where—
(a)
there is a relevant transfer of plant or machinery;
(b)
paragraph 12 does not apply in relation to that transfer;
(c)
the plant or machinery would be treated for the purposes of the 2001
Act as disposed of by the transferor to the transferee on the transfer
30
taking effect; and
(d)
the scheme in accordance with which the transfer is made contains
provision for the disposal value of the plant or machinery to be
treated for the purposes of that Act as an amount specified in or
determined in accordance with the scheme.
35
      (2)
For the purposes of the 2001 Act—
(a)
the provision mentioned in sub-paragraph (1)(d) is to have effect
(instead of section 61(2) to (4), 72(3) to (5), 88, 171, 196 or 423 of that
Act) for determining an amount as the disposal value of the plant or
machinery or the price at which a fixture is to be treated as sold;
40
(b)
the transferee is to be treated as having incurred capital expenditure
of that amount on the provision of the plant or machinery for the
purposes for which it is used by the transferee on and after the taking
effect of the transfer;
(c)
the property is to be treated as belonging to the transferee in
45
consequence of the transferee having incurred that expenditure; and

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 2 — Other transfers under section 1(2) schemes
120

(d)
in the case of a fixture, the expenditure which falls to be treated as
incurred by the transferee is to be treated for the purposes of sections
181(1) and 182(1) of that Act to be incurred by the giving of a
consideration consisting in a capital sum of that amount.
      (3)
The provision mentioned in sub-paragraph (1)(d) for the determination of
5
an amount may include provision for a determination—
(a)
to be made by the Secretary of State in a manner described in the
scheme;
(b)
to be made by reference to factors so described or to the opinion of a
person so described; and
10
(c)
to be capable of being modified (on one or more occasions) in a
manner and in circumstances so described.
      (4)
The consent of the Treasury is required for the making or modification of a
determination under the provision mentioned in sub-paragraph (1)(d).
      (5)
The consent of the transferee is required for the modification of a
15
determination under the provision mentioned in sub-paragraph (1)(d).
      (6)
If there is a determination or a modification of a determination under the
provision mentioned in sub-paragraph (1)(d), all necessary adjustments—
(a)
must be made by making assessments or by repayment or discharge
of tax; and
20
(b)
must be made despite any limitation on the time within which
assessments may be made.
      (7)
Expressions used in this paragraph and in Part 2 of the 2001 Act have the
same meanings in this paragraph as in that Part.
Capital allowances: determination of capital value of industrial buildings etc.
25
15    (1)
This paragraph applies for the purposes of Part 3 of the 2001 Act, and the
other provisions of that Act which are relevant to that Part, to a relevant
transfer of the relevant interest in an industrial building or structure.
      (2)
Section 573 of that Act is not to have effect in relation to that transfer.
Chargeable gains: assets to be treated as disposed of without a gain or a loss
30
16
For the purposes of the 1992 Act, a relevant transfer of an asset is to be
treated as a disposal of that asset to the transferee for a consideration of such
amount as would secure that, on the disposal, neither a gain nor a loss
accrues to the transferor.
Continuity in relation to transfer of intangible assets
35
17    (1)
For the purposes of Schedule 29 to the Finance Act 2002 (c. 23)—
(a)
a relevant transfer of a chargeable intangible asset of the transferor is
to be treated as a tax-neutral transfer; and
(b)
an intangible fixed asset which is an existing asset of the transferor at
the time of the transfer is to be treated, on and after the transfer, as
40
an existing asset in the hands of the transferee.
      (2)
Expressions used in this paragraph and in that Schedule have the same
meanings in this paragraph as in that Schedule.

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 3 — Transfers under section 12 schemes
121

Continuity in relation to loan relationships
18    (1)
For the purposes of the application of Chapter 2 of Part 4 of the Finance Act
1996 (c. 8) (loan relationships) in relation to a relevant transfer, the transferee
and the transferor are to be treated as if, at the time of the transfer, they were
members of the same group.
5
      (2)
In sub-paragraph (1), the reference to being members of the same group
must be construed in accordance with paragraph 12(8) of Schedule 9 to that
Act.
Continuity in relation to derivative contracts
19    (1)
For the purposes of the application of Schedule 26 to the Finance Act 2002
10
(c. 23) (derivative contracts) in relation to a relevant transfer, the transferee
and the transferor are to be treated as if, at the time of the transfer, they were
members of the same group.
      (2)
In sub-paragraph (1), the reference to being members of the same group
must be construed in accordance with paragraph 28(6) of that Schedule.
15
Leased assets
20    (1)
This paragraph applies for the purposes of section 781 of the Taxes Act
(assets leased to traders and others) where—
(a)
the interest of the lessor or the lessee under a lease, or any other
interest in an asset, is transferred under a relevant transfer; or
20
(b)
a lease, or any other interest in a lease, is granted to a person who is
not a national authority in accordance with provision contained by
virtue of paragraph 3 or 4 of Schedule 2 in a scheme made under
section 1(2).
      (2)
Section 783(4) of that Act is to be disregarded and the transfer or grant is to
25
be treated as made without any capital sum having been obtained in respect
of the interest or lease by the transferor or grantor.
      (3)
In the case of the transfer of an interest under a lease, payments made by the
transferor under the lease before the transfer takes effect are to be treated as
if they had been made under that lease by the transferee.
30
      (4)
Expressions used in this paragraph and in sections 781 to 785 of that Act
have the same meanings in this paragraph as in those sections.
Part 3
Transfers under section 12 schemes
Meaning of “relevant transfer” in Part 3 of Schedule
35
21
In this Part of this Schedule, “relevant transfer” means a transfer in
accordance with a scheme made under section 12.

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 3 — Transfers under section 12 schemes
122

Capital allowances: determination of disposal value of plant or machinery
22    (1)
This paragraph applies to a relevant transfer of plant or machinery which is
a disposal event for the purposes of Part 2 of the 2001 Act (capital allowances
for plant and machinery).
      (2)
For the purposes of the application of section 61 of that Act in relation to the
5
transferor, the disposal value of the plant or machinery is to be treated—
(a)
if a capital sum is received by the transferor by way of consideration
or compensation in respect of the transfer, as an amount equal to that
sum; or
(b)
if no such sum is received, as nil.
10
      (3)
For the purposes of this paragraph a sum received by a person connected
with the transferor is to be treated as received by the transferor.
      (4)
Section 88 of the 2001 Act (sales at an undervalue) is to be disregarded.
      (5)
This paragraph is subject to sections 63(5) and 68 of the 2001 Act.
Capital allowances: determination of disposal value of fixtures
15
23    (1)
This paragraph applies to a relevant transfer if—
(a)
it is a disposal event for the purposes of Part 2 of the 2001 Act; and
(b)
by virtue of the transfer a person is treated by section 188 of that Act
as ceasing to own a fixture.
      (2)
For the purposes of the application of section 196 of that Act in relation to the
20
transferor, the disposal value of the fixture is to be treated—
(a)
if a capital sum is received by the transferor by way of consideration
or compensation in respect of the transfer, as an amount equal to that
portion of that sum which falls (or, if the person to whom the
disposal is made were entitled to an allowance, would fall) to be
25
treated for the purposes of Part 2 of that Act as expenditure incurred
by that person on the provision of the fixture; or
(b)
if no such sum is received, as nil.
      (3)
For the purposes of this paragraph a sum received by a person connected
with the transferor is to be treated as received by the transferor.
30
      (4)
This paragraph is subject to section 63(5) of the 2001 Act.
Capital allowances: determination of capital value of industrial buildings etc.
24    (1)
This paragraph applies for the purposes of Part 3 of the 2001 Act, and the
other provisions of that Act which are relevant to that Part, in relation to a
relevant transfer of the relevant interest in an industrial building or
35
structure.
      (2)
The transfer is to be treated as a sale of that relevant interest.
      (3)
The net proceeds of that sale, in relation to the transferor, are to be treated—
(a)
if a capital sum is received by the transferor by way of consideration
or compensation in respect of the transfer, as an amount equal to that
40
sum; or
(b)
if no such sum is received, as nil.

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 3 — Transfers under section 12 schemes
123

      (4)
Sections 567 to 570 of the 2001 Act (sales treated as being for alternative
amount) are not to have effect in relation to that sale.
      (5)
For the purposes of this paragraph a sum received by a person connected
with the transferor is to be treated as received by the transferor.
Chargeable gains: disposals not be treated as made at market value
5
25    (1)
Section 17 of the 1992 Act (disposals and acquisitions treated as made at
market value) is not to have effect in relation to—
(a)
a disposal constituted by a relevant transfer or a disposal in
accordance with provision contained by virtue of paragraph 3 or 4 of
Schedule 2 to this Act in a scheme made under section 12 of this Act;
10
or
(b)
the acquisition made by the person to whom the disposal is made.
      (2)
But sub-paragraph (1) does not apply—
(a)
if the person making the disposal is connected with the person
making the acquisition; or
15
(b)
in the case of a disposal in accordance with provision contained in a
scheme by virtue of paragraph 3 or 4 of Schedule 2, if the disposal is
made by or to a person other than the transferor or transferee.
      (3)
If sub-paragraph (1) applies to the disposal of an asset, the disposal is to be
taken (in relation to the person making the acquisition as well as the person
20
making the disposal) to be—
(a)
in a case where consideration in money or money’s worth is given by
the person making the acquisition or on his behalf in respect of the
vesting of the asset in him, for a consideration equal to the amount
or value of that consideration; or
25
(b)
in a case, where no such consideration is given, for a consideration of
nil.
Chargeable gains: degrouping charges
26    (1)
This paragraph applies if a company (“the degrouped company”)—
(a)
acquired an asset from another company at a time when both were
30
members of the same group of companies (“the old group”); and
(b)
ceases by virtue of a relevant transfer to be a member of the old
group.
      (2)
Section 179 of the 1992 Act (company ceasing to be member of group) is not
to treat the degrouped company as having by virtue of the transfer sold and
35
immediately reacquired the asset.
      (3)
Where sub-paragraph (2) has applied to an asset, section 179 of the 1992 Act
is to have effect on and after the first subsequent occasion on which the
degrouped company ceases to be a member of a group of companies (“the
new group”) otherwise than by virtue of a relevant transfer as if—
40
(a)
the degrouped company, and
(b)
the company from which it acquired the asset,

had been members of the new group at the time of acquisition.
      (4)
If, disregarding any preparatory transactions, a company would be
regarded for the purposes of section 179 of the 1992 Act (and, accordingly,
45

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 4 — Other provisions concerning transfers
124

of this paragraph) as ceasing to be a member of a group of companies by
virtue of a relevant transfer, it is to be regarded for those purposes as so
doing by virtue of the relevant transfer and not by virtue of any preparatory
transactions.
      (5)
In this paragraph, “preparatory transactions” means anything done under or
5
by virtue of the 1993 Act or this Act for the purpose of initiating, advancing
or facilitating the relevant transfer in question.
      (6)
Expressions used in this paragraph and in section 179 of the 1992 Act have
the same meanings in this paragraph as in that section.
Chargeable gains: disposal of debts
10
27    (1)
This paragraph applies to a relevant transfer of a debt owed to the transferor
if the transferor would (apart from this paragraph) be the original creditor
in relation to that debt for the purposes of section 251 of the 1992 Act
(disposal of debts).
      (2)
The 1992 Act is to have effect as if the transferee (and not the transferor) were
15
the original creditor for those purposes.
Loan relationships
28    (1)
Paragraph 11 of Schedule 9 to the Finance Act 1996 (c. 8) is not to have effect
where, as a result of a relevant transfer, the transferee replaces the transferor
as a party to a loan relationship.
20
      (2)
Expressions used in this paragraph and in Chapter 2 of Part 4 of the Finance
Act 1996 have the same meanings in this paragraph as in that Chapter.
Part 4
Other provisions concerning transfers
Stamp duty
25
29    (1)
Stamp duty is not to be chargeable—
(a)
on a scheme made under section 1(2); or
(b)
on an instrument certified by the Secretary of State to the
Commissioners of Inland Revenue as made for the purposes of such
a scheme, or as made for purposes connected with such a scheme.
30
      (2)
But where, by virtue of sub-paragraph (1), stamp duty is not chargeable on
a scheme or instrument, the scheme or instrument is to be treated as duly
stamped only if—
(a)
in accordance with section 12 of the Stamp Act 1891 (c. 39) it has been
stamped with a stamp denoting either that it is not chargeable to
35
duty or that it has been duly stamped; or
(b)
it is stamped with the duty to which it would be chargeable apart
from sub-paragraph (1).
      (3)
In this paragraph, “instrument” has the same meaning as in the Stamp Act
1891.
40

Railways Bill
Schedule 10 — Taxation provisions relating to transfer schemes
Part 5 — Interpretation of Schedule
125

Stamp duty land tax
30    (1)
No transfer in accordance with a scheme made under section 1(2) is to give
rise to any liability to stamp duty land tax.
      (2)
Relief under this paragraph must be claimed in a land transaction return or
in an amendment of a land transaction return.
5
      (3)
In sub-paragraph (2), “land transaction return” has the meaning given by
section 76(1) of the Finance Act 2003 (c. 14).
Chargeable gains: value shifting
31
No scheme made under section 1(2) or 12 is to be regarded as a scheme or
arrangement for the purposes of section 30 of the 1992 Act.
10
Group relief
32
Neither the power of the Secretary of State to make a scheme under section
1(2) nor the power of the Secretary of State or the Scottish Ministers to make
a scheme under section 12 is to be regarded as constituting—
(a)
arrangements falling within section 410(1) or (2) of the Taxes Act
15
(arrangements for transfer of company to another group or
consortium); or
(b)
option arrangements for the purposes of paragraph 5B of Schedule
18 to that Act.
Consequential amendment
20
33
In section 35(3)(d) of the 1992 Act (no gain no loss disposals), after sub-
paragraph (xv) insert—
“(xvi)
paragraph 5 or 16 of Schedule 10 to the Railways Act
2005.”
Part 5
25
Interpretation of Schedule
34    (1)
In this Schedule—
“the 1992 Act” means the Taxation of Chargeable Gains Act 1992 (c. 12);
“the 2001 Act” means the Capital Allowances Act 2001 (c. 2);
“national authority” means—
30
(a)
the Secretary of State;
(b)
the Scottish Ministers; or
(c)
the National Assembly for Wales;
“the Taxes Act” means the Income and Corporation Taxes Act 1988
(c. 1);
35
“transferee”, in relation to a transfer in accordance with a scheme made
under section 1(2) or 12, means the person to whom the transfer is
made;
“transferor”, in relation to a transfer in accordance with a scheme made
under section 1(2) or 12, means the person from whom the transfer is
40
made.