|
| |
|
than the market value of the corporate strip on the day |
| |
| |
| and the obtaining of a tax advantage by any person is the main |
| |
benefit, or one of the main benefits, that might have been expected |
| |
to accrue from, or from any provision of, the scheme or |
| 5 |
| |
(2) | In a case falling within sub-paragraph (1)(a) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above on a |
| |
transfer of the corporate strip by him as if he had paid in respect |
| |
of his acquisition of the corporate strip an amount equal to the |
| 10 |
market value of the corporate strip at the time of that acquisition. |
| |
(3) | In a case falling within sub-paragraph (1)(b) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above as if |
| |
the amount payable to him on the transfer were an amount equal |
| |
to the market value of the corporate strip at the time of the |
| 15 |
| |
(4) | In a case falling within sub-paragraph (1)(c) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above as if |
| |
the amount payable to him on redemption were an amount equal |
| |
to the market value of the corporate strip on the day before |
| 20 |
| |
(5) | The market value of a corporate strip at any time shall be |
| |
determined for the purposes of this paragraph without regard to |
| |
any increase or diminution in the value of the corporate strip as a |
| |
result of the scheme or arrangement mentioned in sub-paragraph |
| 25 |
| |
(6) | For the purposes of this paragraph, no account shall be taken of |
| |
any costs incurred in connection with any transfer or redemption |
| |
of a corporate strip or its acquisition. |
| |
(7) | In this paragraph “tax advantage” has the meaning given by |
| 30 |
section 709(1) of the Taxes Act 1988. |
| |
Corporate strips: manipulation of price: associated payment giving rise to CGT loss |
| |
| |
(a) | as a result of any scheme or arrangement which has an |
| |
unallowable purpose, the circumstances are, or might have |
| 35 |
been, as mentioned in paragraph (a), (b) or (c) of paragraph |
| |
| |
(b) | under the scheme or arrangement, a payment falls to be |
| |
made otherwise than in respect of the acquisition or |
| |
disposal of a corporate strip, and |
| 40 |
(c) | as a result of that payment or the circumstances in which it |
| |
is made, a loss accrues to any person for the purposes of |
| |
| |
| the loss shall not be an allowable loss for the purposes of capital |
| |
| 45 |
(2) | For the purposes of this paragraph a scheme or arrangement has |
| |
an unallowable purpose if the main benefit, or one of the main |
| |
benefits, that might have been expected to result from, or from any |
| |
|
| |
|
| |
|
provision of, the scheme or arrangement (apart from paragraph |
| |
13C above and this paragraph) is— |
| |
(a) | the obtaining of a tax advantage by any person, or |
| |
(b) | the accrual to any person of an allowable loss for the |
| |
purposes of capital gains tax. |
| 5 |
(3) | In this paragraph “tax advantage” has the meaning given by |
| |
section 709(1) of the Taxes Act 1988.”. |
| |
(6) | In paragraph 15(1) (general interpretation) insert each of the following |
| |
definitions at the appropriate place— |
| |
“ “corporate strip” has the meaning given by paragraph 13A |
| 10 |
| |
“ “interest-bearing corporate security” means any interest- |
| |
bearing security other than— |
| |
(a) | a security issued by the government of a territory; |
| |
(b) | a share in a company;”; |
| 15 |
“ “interest-bearing security” includes any loan stock or similar |
| |
| |
| |
(a) | in the definition of “relevant discounted security”, after “paragraphs |
| |
| 20 |
(b) | in the definition of “strip”, after ““strip”” insert “, except in the |
| |
expression “corporate strip”,”. |
| |
(8) | The amendments made by this paragraph have effect in any case where a |
| |
person acquires a corporate strip on or after 2nd December 2004 otherwise |
| |
than in pursuance of an agreement entered into before that date. |
| 25 |
Transactions within groups: treatment of transferee company |
| |
20 (1) | In Schedule 26 to FA 2002 (derivative contracts) paragraph 28 (transactions |
| |
within groups) is amended as follows. |
| |
(2) | For sub-paragraph (3) (the credits and debits to be brought into account) |
| |
| 30 |
“(3) | For the purpose of determining the credits and debits to be |
| |
brought into account for the purposes of this Schedule in respect |
| |
of the derivative contract— |
| |
(a) | for the accounting period in which the transaction or, as |
| |
the case may be, the first of the series of transactions takes |
| 35 |
place, the transferor company shall be treated as having |
| |
entered into that transaction for a consideration equal to |
| |
the notional carrying value of the contract; and |
| |
(b) | for any accounting period in which it is a party to the |
| |
contract, the transferee company shall be treated as if it |
| 40 |
had acquired the contract for a consideration equal to its |
| |
| |
| For the purposes of this sub-paragraph the notional carrying value |
| |
is the amount that would have been the carrying value of the |
| |
derivative contract in the accounts of the transferor company if a |
| 45 |
period of account had ended immediately before the date when |
| |
the company ceased to be party to the contract.”. |
| |
|
| |
|
| |
|
(3) | In sub-paragraph (5), after “In this paragraph” insert the following |
| |
| |
““carrying value” has the same meaning as it has for the |
| |
purposes of paragraph 50A;”. |
| |
(4) | Where the period of account mentioned in the second sentence of the sub- |
| 5 |
paragraph (3) substituted by sub-paragraph (2) begins before 1st January |
| |
2005, “carrying value” shall be construed as if the period had begun on or |
| |
| |
(5) | The amendments made by this paragraph have effect in any case where the |
| |
relevant transaction is on or after 16th March 2005. |
| 10 |
(6) | In this paragraph “the relevant transaction” means— |
| |
(a) | the related transaction mentioned in sub-paragraph (2)(a) of |
| |
paragraph 28 of Schedule 26 to FA 2002, |
| |
(b) | the first of the series of related transactions mentioned in sub- |
| |
paragraph (2)(b) of that paragraph, or |
| 15 |
(c) | the transfer mentioned in sub-paragraph (2)(c) or (2)(d) of that |
| |
| |
| by virtue of which that paragraph applies or would apply apart from |
| |
paragraph 30 of that Schedule. |
| |
Transactions within groups: fair value accounting |
| 20 |
21 (1) | In Schedule 26 to FA 2002 (derivative contracts) paragraph 30 (transactions |
| |
with groups: fair value accounting) is amended as follows. |
| |
(2) | In sub-paragraph (1), for paragraph (b) (treatment of transferee in respect of |
| |
the transaction) substitute— |
| |
“(b) | paragraph 28(3)(b) shall have effect in relation to the |
| 25 |
| |
(3) | The amendment made by this paragraph has effect in any case where the |
| |
relevant transaction is on or after 16th March 2005. |
| |
(4) | In this paragraph “the relevant transaction” has the same meaning as in |
| |
| 30 |
Transferee leaving group after replacing transferor as party to derivative contract |
| |
22 (1) | In Schedule 26 to FA 2002 (derivative contracts) after paragraph 30 insert— |
| |
“Transferee leaving group after replacing transferor as party to derivative contract |
| |
30A (1) | This paragraph applies in any case where— |
| |
| 35 |
(i) | applies by virtue of sub-paragraph (2)(a) of that |
| |
| |
(ii) | applies by virtue of sub-paragraph (2)(b) of that |
| |
paragraph (“case B”), but |
| |
(b) | before the end of the relevant 6 year period, the transferee |
| 40 |
company ceases to be a member of the relevant group. |
| |
(2) | In any such case, this Schedule shall have effect as if the transferee |
| |
| |
|
| |
|
| |
|
(a) | immediately before that cessation, assigned its rights and |
| |
liabilities under the relevant derivative contract for a |
| |
consideration of an amount equal to their fair value at that |
| |
| |
(b) | immediately reacquired them for a consideration of the |
| 5 |
| |
| but only if a credit would in consequence of paragraph (a) fall to |
| |
be brought into account for the purposes of this Schedule by the |
| |
| |
| 10 |
“the relevant 6 year period” means the period of 6 years |
| |
| |
(a) | in case A, the transaction mentioned in paragraph |
| |
| |
(b) | in case B, the last of the series of transactions |
| 15 |
mentioned in paragraph 28(2)(b); |
| |
“the relevant derivative contract” means the derivative |
| |
contract mentioned in paragraph 28(1); |
| |
“the relevant group” means— |
| |
(a) | in case A, the group mentioned in paragraph 28(2)(a), |
| 20 |
| |
(b) | in case B, the group mentioned in paragraph 28(2)(b); |
| |
“the transferee company” means the company referred to as |
| |
such in paragraph 28(1).”. |
| |
(2) | The amendment made by this paragraph has effect where a company ceases |
| 25 |
to be a member of a group on or after 16th March 2005. |
| |
Deeply discounted securities: corporate strips |
| |
23 (1) | Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted |
| |
securities) is amended as follows. |
| |
(2) | In section 430 (meaning of “deeply discounted security”) in subsection (6) |
| 30 |
(subjections) omit “and” before the entry relating to section 443(1) and at the |
| |
end of that entry add “; and |
| |
section 452A(1) (corporate strips).” |
| |
(3) | In section 437 (transactions which are disposals) after subsection (4) insert— |
| |
“(5) | In the case of interest-bearing corporate securities, further provision |
| 35 |
about occasions counting as disposals is made by section 452F(2)(a). |
| |
(6) | In the case of corporate strips, further provision about occasions |
| |
counting as disposals is made by section 452F(2)(a) and (3)(a).”. |
| |
(4) | In section 438 (timing of transfers and acquisitions) for subsection (4) |
| |
| 40 |
“(4) | This section is subject to— |
| |
section 445(7) (exchanges for and consolidation of strips); |
| |
section 452F(4) (conversion into and consolidations of corporate |
| |
| |
|
| |
|
| |
|
(5) | In section 440 (market value disposals) for subsection (5) substitute— |
| |
“(5) | Subsection (4) is subject to— |
| |
section 445(8) (exchanges for and consolidations of strips); |
| |
section 452F(5) (conversion into and consolidation of corporate |
| |
| 5 |
(6) | In section 441 (market value acquisitions) for subsection (3) substitute— |
| |
“(3) | Subsection (2) is subject to— |
| |
section 445(8) (exchanges for and consolidations of strips); |
| |
section 452F(5) (conversion into and consolidations of corporate |
| |
| 10 |
(7) | Section 444 (meaning of “strip” in Chapter 8) after subsection (5) insert— |
| |
“(6) | Nothing in this section affects the meaning of the expression |
| |
“corporate strip” in this Chapter (see section 452E).”. |
| |
(8) | After section 452 insert— |
| |
“Special rules for corporate strips |
| 15 |
“452A | Application of this Chapter to corporate strips |
| |
(1) | All corporate strips are treated as deeply discounted securities for |
| |
the purposes of this Chapter, whether or not they would otherwise |
| |
| |
(2) | This Chapter applies to corporate strips subject to the rules in— |
| 20 |
(a) | section 452F (corporate strips: acquisitions and disposals), |
| |
| |
(b) | section 452G (corporate strips: manipulation of acquisition, |
| |
transfer or redemption payments). |
| |
452B | Meaning of “interest-bearing corporate security” in Chapter 8 |
| 25 |
(1) | In this Chapter “interest-bearing corporate security” means any |
| |
interest-bearing security other than— |
| |
(a) | a security issued by the government of a territory, or |
| |
(b) | a share in a company. |
| |
(2) | In this section “interest-bearing security” includes any loan stock or |
| 30 |
| |
(3) | Section 452D(4)(a) gives an extended meaning to references to |
| |
converting an interest-bearing corporate security into corporate |
| |
strips (and related expressions). |
| |
452C | Conversion of interest-bearing corporate securities into corporate |
| 35 |
| |
(1) | For the purposes of this Chapter a person converts an interest- |
| |
bearing corporate security into corporate strips of the security if he |
| |
has an interest-bearing corporate security (“the converted corporate |
| |
| 40 |
(a) | as a result of any scheme or arrangements, he acquires two or |
| |
more separate assets in place of the converted corporate |
| |
| |
|
| |
|
| |
|
(b) | each of those separate assets satisfies condition A, |
| |
(c) | those separate assets, taken together, satisfy condition B, and |
| |
(d) | at least one of those separate assets is not prevented from |
| |
being a corporate strip by section 452E(2) or (3), |
| |
| and related expressions shall be construed accordingly. |
| 5 |
(2) | Condition A is that the asset— |
| |
(a) | represents the right to, or |
| |
| |
| one or more stripped payments. |
| |
(3) | For the purposes of this section, a “stripped payment” is— |
| 10 |
| |
(b) | a payment corresponding to, |
| |
| the whole or a part of one or more payments (whether of interest or |
| |
principal) remaining to be made under the converted corporate |
| |
| 15 |
(4) | Condition B is that the assets, taken together,— |
| |
(a) | represent the right to, or |
| |
| |
| every payment (whether of interest or principal) remaining to be |
| |
made under the converted corporate security (or payments |
| 20 |
corresponding to every such payment). |
| |
| |
(a) | has an interest-bearing corporate security, but |
| |
(b) | sells or transfers the right to one or more payments remaining |
| |
to be made under it (so that, as a result, there are two or more |
| 25 |
separate assets which, taken together, satisfy condition B), |
| |
| this Chapter has effect as if, as a result of a scheme or arrangements, |
| |
the person had acquired the separate assets in place of the security |
| |
immediately before the sale or transfer. |
| |
(6) | After a balance has been struck for a dividend on an interest-bearing |
| 30 |
corporate security, any payment to be made in respect of that |
| |
dividend shall, at times falling after that balance has been struck, be |
| |
treated for the purposes of this paragraph as not being a payment |
| |
remaining to be made under the security. |
| |
452D | Conversion into corporate strips: lower level conversions |
| 35 |
(1) | For the purposes of this Chapter, section 452C also has effect in |
| |
relation to each of the separate assets mentioned in subsection (1) of |
| |
that section as if that separate asset were itself an interest-bearing |
| |
corporate security (if that is not in fact the case). |
| |
(2) | In subsection (1), the reference to section 452C includes a reference to |
| 40 |
that section has it has effect by virtue of this section. |
| |
(3) | In the application of section 452C by virtue of this section, references |
| |
to payments the right to which a separate asset represents or secures |
| |
shall be construed in accordance with subsection (6) of that section. |
| |
(4) | Where section 452C has effect by virtue of subsection (1)— |
| 45 |
|
| |
|
| |
|
(a) | any reference in this Chapter to converting an interest- |
| |
bearing corporate security into corporate strips of the |
| |
security shall be construed accordingly, and |
| |
(b) | section 452E (meaning of “corporate strip”) has effect |
| |
| 5 |
452E | Meaning of “corporate strip” in Chapter 8 |
| |
(1) | In this Chapter “corporate strip” means any asset— |
| |
(a) | which is, or has at any time been, one of the separate assets |
| |
mentioned in section 452C(1), and |
| |
(b) | which is not prevented from being a corporate strip by |
| 10 |
| |
(2) | An asset is not a corporate strip if it— |
| |
(a) | represents the right to, or |
| |
| |
| payments of, or corresponding to, a part of every payment remaining |
| 15 |
to be made under an interest-bearing corporate security or a |
| |
| |
(3) | An asset is a corporate strip in the case of any person only if he |
| |
| |
(a) | on or after 2nd December 2004, and |
| 20 |
(b) | otherwise than in pursuance of an agreement entered into |
| |
| |
452F | Corporate strips: acquisitions and disposals |
| |
(1) | A person who converts an interest-bearing corporate security into |
| |
corporate strips of the security, is treated as having acquired each |
| 25 |
corporate strip by the payment of an amount equal to—![equation: cross[char[A],over[char[B],char[C]]]](missing.gif) |
| |
| |
A is acquisition cost of the converted corporate security; |
| |
B is the market value of the corporate strip; |
| |
C is the total of the market values of all the separate assets |
| 30 |
resulting from the conversion. |
| |
(2) | If the converted corporate security is a deeply discounted security— |
| |
(a) | its conversion into corporate strips is to be treated for the |
| |
purposes of this Chapter as a transfer of the security, but |
| |
(b) | the amount payable on the transfer is taken to be an amount |
| 35 |
equal to the acquisition cost of the converted corporate |
| |
| |
(3) | For the purposes of this Chapter— |
| |
(a) | the consolidation of a corporate strip with other corporate |
| |
strips into a single security is a disposal of the corporate strip |
| 40 |
by the person consolidating it (whether or not it would be |
| |
apart from this subsection), and |
| |
(b) | an amount equal to the market value of the corporate strip at |
| |
the consolidation is treated as payable on the disposal. |
| |
|
| |
|