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Finance Bill
Schedule 7 — Accounting practice and related matters
Part 2 — Other provisions connected with accounting practice

189

 

Exclusion of debits or credits brought into account under other provisions

116G       

A debit or credit is not required to be brought into account under

this Part of this Schedule to the extent that a debit or credit

representing the accounting difference in question is brought into

account for tax purposes under—

5

(a)   

paragraph 12 (reversal of accounting gain),

(b)   

paragraph 15 (gain on revaluation), or

(c)   

paragraph 17 (reversal of accounting loss).

Subsequent events affecting asset subject to adjustment under this Part

116H  (1)  

On a further change of accounting policy affecting an intangible

10

fixed asset in relation to which this Part of this Schedule has

applied, the preceding provisions of this Part apply again.

      (2)  

On a subsequent part realisation affecting the asset in question,

paragraph 29 applies.”.

46    (1)  

Paragraph 134 of Schedule 29 to FA 2002 (intangible fixed assets: references

15

to amounts recognised in profit and loss account) is amended as follows.

      (2)  

In the paragraph heading for “profit and loss account” substitute “determining

profit or loss”.

      (3)  

Make the existing provision sub-paragraph (1).

      (4)  

In that sub-paragraph—

20

(a)   

in the opening words, for “a company’s profit and loss account”

substitute “determining a company’s profit or loss” and for

“include” substitute “are to”;

(b)   

in sub-paragraph (a) after “recognised in” insert “the company’s

profit and loss account or income statement,”; and

25

(c)   

omit the words following paragraph (b).

      (5)  

After that sub-paragraph insert—

    “(2)  

An amount that in accordance with generally accepted accounting

practice is shown as a prior period adjustment in any such

statement as is mentioned in sub-paragraph (1) shall be brought

30

into account for the purposes of this Schedule in computing the

company’s profits and losses for the period to which the statement

relates.

           

This does not apply to an amount recognised for accounting

purposes by way of correction of a fundamental error.”.

35

47         

In paragraph 143 of Schedule 29 to FA 2002 (intangible fixed assets: index of

defined expressions) for “profit and loss account (amounts recognised in)”

substitute “profit and loss (amounts recognised in determining)”.

ITEPA 2003

48         

In Schedule 5 to ITEPA 2003 (enterprise management incentives), in

40

paragraph 59 (index of defined expressions), in the entry relating to the

expression “generally accepted accounting practice”, for “section 836A of

ICTA” substitute “section 50(1) of the Finance Act 2004”.

 

 

Finance Bill
Schedule 7 — Accounting practice and related matters
Part 2 — Other provisions connected with accounting practice

190

 

FA 2004

49         

In section 50 of FA 2004 (generally accepted accounting practice), for

subsections (2) and (3) substitute—

“(2)   

In the Tax Acts “international accounting standards” has the same

meaning as in Regulation (EC) No 1606/2002 of the European

5

Parliament and the Council of 19 July 2002 on the application of

international accounting standards.

(3)   

Where the European Commission has in accordance with that

Regulation adopted an international accounting standard with

modifications, then as regards matters covered by that standard—

10

(a)   

generally accepted accounting practice with respect to IAS

accounts shall be regarded as permitting the use of the

standard either with or without the modifications, and

(b)   

accounts prepared on either basis shall be regarded for the

purposes of the Tax Acts as prepared in accordance with

15

international accounting standards.”.

50         

In sections 50(6), 51(6), 52(3) and 54(2) of FA 2004 (periods of account in

relation to which the sections have effect), omit paragraph (b) and the word

“and” preceding it.

           

This amendment shall be deemed always to have had effect.

20

51         

In Part 4 of Schedule 10 to FA 2004 (amendments relating to foreign currency

accounting), after paragraph 78 insert—

“Transitional provision

79         

Where a company carries forward to its first period of account

beginning on or after 1st January 2005 an amount by way of—

25

(a)   

management expenses brought forward under section 75

of the Taxes Act 1988,

(b)   

losses brought forward under section 392B or 393 of that

Act, or

(c)   

non-trading deficits on loan relationships brought forward

30

under section 83 of the Finance Act 1996,

           

that amount shall be translated into sterling using the London

closing exchange rate for the last day of the previous period of

account.”.

Power to make certain regulations with limited retrospective effect

35

52    (1)  

This paragraph applies to regulations under any of the following

provisions—

(a)   

section 85B of FA 1996;

(b)   

paragraph 19B of Schedule 9 to FA 1996;

(c)   

paragraph 13 or 17C of Schedule 26 to FA 2002.

40

      (2)  

Any such regulations may be made so as to apply to periods of account

beginning before the regulations are made, but not earlier than the

beginning of the calendar year in which they are made.

 

 

Finance Bill
Schedule 8 — Section 804ZA: prescribed schemes and arrangements

191

 

Schedule 8

Section 119

 

Section 804ZA: prescribed schemes and arrangements

          

After Schedule 28AA to ICTA insert—

“Schedule 28AB

Section 804ZA: prescribed schemes and arrangements

5

Introductory

1     (1)  

A scheme or arrangement, other than a scheme or arrangement

falling within sub-paragraph (3), is a prescribed scheme or

arrangement if one or more of paragraphs 2 to 6 apply to it.

      (2)  

A scheme or arrangement falling within sub-paragraph (3) is a

10

prescribed scheme or arrangement if one or more of paragraphs 2

to 6 would, on the assumption in sub-paragraph (4), apply to it.

      (3)  

A scheme or arrangement falls within this sub-paragraph if its

main purpose, or one of its main purposes, is to cause an amount

of underlying tax allowable in respect of a dividend paid by a

15

body corporate resident in a territory outside the United Kingdom

to be taken into account in the case of a person.

      (4)  

The assumption is that the body corporate is resident in the United

Kingdom.

      (5)  

Nothing in sub-paragraph (4) requires it to be assumed that there

20

is any change in the place or places at which the body corporate

carries on its activities.

Attribution of foreign tax

2          

This paragraph applies to a scheme or arrangement if the scheme

or arrangement enables a person who is party to, or concerned in,

25

the scheme or arrangement to pay, in respect of a source of income

or chargeable gain, an amount of foreign tax all or part of which is

properly attributable to another source of income or chargeable

gain (or to more than one such other source).

Effect of paying foreign tax

30

3     (1)  

This paragraph applies to a scheme or arrangement if, under the

scheme or arrangement, sub-paragraph (2) is satisfied in relation

to a person who has claimed, or is in a position to claim, for a

chargeable period an allowance under any arrangements by way

of credit for foreign tax (“the claimant”).

35

      (2)  

This sub-paragraph is satisfied if—

(a)   

an amount of foreign tax is paid by the claimant, and

(b)   

at the time when the claimant entered into the scheme or

arrangement, it could reasonably be expected that the

effect of the payment of that amount of foreign tax on the

40

foreign tax total would be to increase it by less than the

 

 

Finance Bill
Schedule 8 — Section 804ZA: prescribed schemes and arrangements

192

 

amount allowable to the claimant as a credit in respect of

the payment of that amount of foreign tax.

      (3)  

The foreign tax total is the amount found by—

(a)   

aggregating the amounts of foreign tax paid or payable in

respect of the transaction or transactions forming part of

5

the scheme or arrangement by persons party to, or

concerned in, the scheme or arrangement, and

(b)   

taking into account any reliefs, deductions, reductions or

allowances against or in respect of any tax that arise to the

persons party to, or concerned in, the scheme or

10

arrangement (including any reliefs, deductions, reductions

or allowances arising to any one or more of those persons

as a consequence of the payment by the claimant of that

amount of foreign tax).

Effect of claim, election or other arrangement

15

4     (1)  

This paragraph applies to a scheme or arrangement if under the

scheme or arrangement—

(a)   

a step is taken by a person who is party to, or concerned in,

the scheme or arrangement, or

(b)   

a step that could have been taken by such a person is not

20

taken,

           

and that action or that failure to act has the effect of increasing a

claim made by a person who is party to, or concerned, in the

scheme or arrangement for an allowance by way of credit in

accordance with this Part or of giving rise to such a claim.

25

      (2)  

The steps mentioned in sub-paragraph (1) are steps that may be

made—

(a)   

under the law of any territory, or

(b)   

under arrangements made in relation to any territory.

      (3)  

The steps mentioned in sub-paragraph (1) include—

30

(a)   

claiming, or otherwise securing the benefit of, reliefs,

deductions, reductions or allowances;

(b)   

making elections for tax purposes.

Effect attributable to scheme or arrangement

5     (1)  

This paragraph applies to a scheme or arrangement if, under the

35

scheme or arrangement, sub-paragraph (2) is satisfied in relation

to a person who has claimed, or is in a position to claim, for a

chargeable period an allowance under any arrangements by way

of credit for foreign tax.

      (2)  

This sub-paragraph is satisfied if amount A is less than amount B.

40

      (3)  

Amount A is the amount of United Kingdom taxes payable by the

person in respect of income and chargeable gains arising in the

chargeable period.

      (4)  

Amount B is the amount of United Kingdom taxes that would be

payable by the person in respect of income and chargeable gains

45

arising in the chargeable period if, in determining that amount, the

 

 

Finance Bill
Schedule 9 — Insurance companies etc

193

 

transactions constituting, including or forming part of the scheme

or arrangement were disregarded.

Tax deductible payments

6     (1)  

This paragraph applies to a scheme or arrangement if the scheme

or arrangement includes—

5

(a)   

the making by a person (“A”) of a relevant payment or

payments, and

(b)   

the giving, in respect of that payment or payments, of

consideration that satisfies the requirements of sub-

paragraph (3).

10

      (2)  

A payment made by A is a relevant payment if all or part of it may

be brought into account in computing A’s income for the purposes

of United Kingdom taxes.

      (3)  

Consideration given in respect of a payment or payments made by

A satisfies the requirements of this sub-paragraph if—

15

(a)   

all or part of it consists of a payment or payments made to

A or a person connected with A, and

(b)   

tax is chargeable in respect of the payment or payments

under the law of a territory outside the United Kingdom.

      (4)  

In this paragraph references to a payment include references to a

20

transfer of money’s worth.

      (5)  

Section 839 applies for the purposes of this paragraph.”

Schedule 9

Section 125

 

Insurance companies etc

Expenses of insurance companies

25

1     (1)  

Section 76 of ICTA is amended as follows.

      (2)  

In subsection (8) (expenses attributable to basic life assurance and general

annuity business for the purposes of Step 1 are to be those so attributable

under proper internal accounting practice) in the second sentence (meaning

of “proper internal accounting practice”) at the end of paragraph (b) insert

30

“, or

(c)   

the Integrated Prudential Sourcebook.”.

      (3)  

The amendment made by this paragraph has effect in relation to periods of

account ending on or after 31st December 2004.

Interpretative provisions relating to insurance companies

35

2     (1)  

Section 431(2) of ICTA is amended as follows.

      (2)  

Insert the following definition at the appropriate place—

““the Integrated Prudential Sourcebook” means the Integrated

Prudential Sourcebook made by the Financial Services

 

 

Finance Bill
Schedule 9 — Insurance companies etc

194

 

Authority under the Financial Services and Markets Act

2000;”.

      (3)  

For the definition of “liabilities” substitute—

““liabilities”, in relation to an insurance company, means—

(a)   

the mathematical reserves of the company as

5

determined in accordance with chapter 7.3 of the

Integrated Prudential Sourcebook, and

(b)   

liabilities of the company (whose value falls to be

determined in accordance with chapter 1.3 of that

Sourcebook) which arise from deposit back

10

arrangements (within the meaning given by that

Sourcebook);”.

      (4)  

Omit the definition of “long-term liabilities”.

      (5)  

For the definition of “value” substitute—

““value”, in relation to an asset of an insurance company, means

15

the value of the asset as determined in accordance with

chapter 1.3, as read with chapter 3.2, of the Integrated

Prudential Sourcebook;”.

      (6)  

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

of account ending on or after 31st December 2004.

20

Amendment of Chapter 1 of Part 12 of ICTA etc

3          

For section 431A of ICTA substitute—

“431A   

  Amendment of Chapter etc

(1)   

The Treasury may by order amend any of the following provisions—

(a)   

sections 432ZA, 432A and 432B to 432G and Schedules 19AA

25

and 19AC;

(b)   

sections 83A, 85, 88 and 89 of the Finance Act 1989.

(2)   

The Treasury may by order amend any other insurance company

taxation provision where it is expedient to do so in consequence of

the exercise of any power under the Financial Services and Markets

30

Act 2000, in so far as that Act relates to insurance companies.

(3)   

Any power conferred by this section to make an order includes

power to make—

(a)   

different provision for different cases or different purposes,

and

35

(b)   

incidental, supplemental, consequential or transitional

provision and savings.

(4)   

An order under subsection (1) above may provide for any of its

provisions to have effect in relation to accounting periods or periods

of account ending on or after the day on which the order comes into

40

force (whenever beginning).

(5)   

Where any exercise of a power under the Financial Services and

Markets Act 2000 has effect for a period ending on or before, or

beginning before and ending after, the day on which an order

containing an amendment in consequence of that exercise is made

45

 

 

Finance Bill
Schedule 9 — Insurance companies etc

195

 

under subsection (2) above, the power conferred by that subsection

includes power to provide for the amendment to have effect in

relation to that period.

(6)   

In this section “insurance company taxation provision” means any of

the following—

5

(a)   

a provision of this Chapter;

(b)   

any other provision of the Tax Acts so far as relating to

insurance companies.”.

Apportionment of income and gains

4     (1)  

Section 432A of ICTA is amended as follows.

10

      (2)  

In subsection (9A) (meaning of “net value”) for “long-term liabilities”

substitute “liabilities”.

      (3)  

The amendment made by this paragraph has effect in relation to periods of

account ending on or after 31st December 2004.

Section 432B apportionment: participating funds

15

5     (1)  

Section 432E of ICTA is amended as follows.

      (2)  

In subsection (2A) (increase in amount determined under subsection (2)

where amount is taken into account under subsection (2) of section 83 of FA

1989 by virtue of subsection (2B) of that section) in the opening words—

(a)   

for “an amount is” substitute “an amount or amounts are”;

20

(b)   

after “subsection (2B) of that section” insert “or by virtue of section

444ACA(2) of this Act”.

      (3)  

In that subsection, for the definition of “RP” substitute—

“RP is—

(a)   

the amount taken into account under subsection (2) of

25

section 83 of the Finance Act 1989 by virtue of

subsection (2B) of that section;

(b)   

the amount so taken into account by virtue of section

444ACA(2) of this Act; or

(c)   

where amounts are so taken into account by virtue of

30

both of those provisions, the aggregate of those

amounts.”.

      (4)  

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

business transfer schemes (within the meaning given by section 444AC(11)

of ICTA) taking place on or after 2nd December 2004.

35

Transfers of business: modification of section 444AC of ICTA

6     (1)  

Section 444AC of ICTA is amended as follows.

      (2)  

In subsection (2) (excess of element of the transferee’s line 15 (or 31) figure

representing the transferor’s long-term insurance fund over amount

specified in paragraph (b) not to be regarded as other income of transferee)

40

in paragraph (b) (amount of liabilities to policy holders and annuitants

transferred to transferee)—

(a)   

for “the amount” substitute “the aggregate amount”;

 

 

 
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