|
| |
|
| |
(1) | This section has effect for the purposes of this Chapter. |
| |
(2) | For the purposes of this Chapter— |
| |
(a) | references to a scheme are references to any scheme, arrangements or |
| |
understanding of any kind whatever, whether or not legally |
| 5 |
enforceable, involving a single transaction or two or more transactions; |
| |
(b) | it shall be immaterial in determining whether any transactions have |
| |
formed or will form part of a series of transactions or scheme that the |
| |
parties to any of the transactions are different from the parties to |
| |
another of the transactions; and |
| 10 |
(c) | the cases in which any two or more transactions are to be taken as |
| |
forming part of a series of transactions or scheme shall include any case |
| |
in which it would be reasonable to assume that one or more of them— |
| |
(i) | would not have been entered into independently of the other or |
| |
| 15 |
(ii) | if entered into independently of the other or others, would not |
| |
have taken the same form or been on the same terms. |
| |
(3) | A scheme achieves a UK tax advantage for a person if in consequence of the |
| |
scheme the person is in a position to obtain, or has obtained— |
| |
(a) | a relief or increased relief from income tax or corporation tax, |
| 20 |
(b) | a repayment or increased repayment of income tax or corporation tax, |
| |
| |
(c) | the avoidance or reduction of a charge to income tax or corporation tax. |
| |
(4) | In subsection (3)(a) the reference to relief includes a reference to a tax credit. |
| |
(5) | For the purposes of subsection (3)(c) avoidance or reduction may in particular |
| 25 |
| |
(a) | receipts accruing in such a way that the recipient does not pay or bear |
| |
| |
(b) | a deduction in computing profits or gains. |
| |
| 30 |
(1) | The deduction cases provisions have effect in relation to accounting periods of |
| |
a company beginning on or after 16th March 2005. |
| |
(2) | Where an accounting period of a company begins before, and ends on or after |
| |
16th March 2005, it shall be assumed for the purposes of the deduction cases |
| |
provisions (and subsection (1) of this section) that that accounting period (“the |
| 35 |
straddling period”) consists of two separate accounting periods— |
| |
(a) | the first beginning with the straddling period and ending with the 15th |
| |
| |
(b) | the second beginning with 16th March 2005 and ending with the |
| |
| 40 |
| and the company’s profits and losses shall be computed accordingly for tax |
| |
| |
(3) | The deduction cases provisions do not have effect so far as regards a |
| |
transaction to which a company is party on 16th March 2005 and which on that |
| |
date forms part of a scheme, if— |
| 45 |
|
| |
|
| |
|
(a) | the company is not on 16th March 2005 connected with a person who is |
| |
on that date also party to, or concerned in, the scheme, and |
| |
(b) | the scheme ceases to exist before 1st July 2005. |
| |
| Section 839 of ICTA applies for the purposes of this subsection. |
| |
(4) | The receipts cases provisions have effect in relation to any contribution to the |
| 5 |
capital of a company resident in the United Kingdom that is made on or after |
| |
| |
| |
“the deduction cases provisions” means— |
| |
(a) | sections 104 and 105 and Schedule 6, and |
| 10 |
(b) | sections 108 and 109 so far as relating to the provisions in |
| |
| |
“the receipts cases provisions” means— |
| |
| |
(b) | sections 108 and 109 so far as relating to the provisions in |
| 15 |
| |
| |
Accounting practice and related matters |
| |
111 | Accounting practice and related matters |
| |
(1) | Schedule 7 (accounting practice and related matters) has effect. |
| 20 |
| |
Part 1 makes provision about bad debts and related matters; |
| |
Part 2 makes other provision connected with accounting practice. |
| |
(3) | Part 1 of the Schedule, so far as it amends provisions that have effect both for |
| |
income tax and corporation tax, has effect for the purposes of corporation tax |
| 25 |
| |
(4) | Except as otherwise provided, the provisions of the Schedule have effect for |
| |
periods of account beginning on or after 1st January 2005. |
| |
112 | Computation of profits: change of accounting basis |
| |
(1) | In section 64 of FA 2002 (computation of profits: adjustment on change of |
| 30 |
basis), for subsection (3) (meaning of “relevant change of accounting |
| |
| |
“(3) | A “relevant change of accounting approach” means— |
| |
(a) | a change of accounting principle or practice that, in accordance |
| |
with generally accepted accounting practice, gives rise to a prior |
| 35 |
| |
(b) | a change from using UK generally accepted accounting practice |
| |
to using generally accepted accounting practice with respect to |
| |
accounts drawn up in accordance with international accounting |
| |
| 40 |
|
| |
|
| |
|
(2) | In paragraphs 4(3) and 5(2) of Schedule 22 to FA 2002 (adjustments treated as |
| |
arising on the last day of the first period of account for which the new basis is |
| |
adopted), for “last day” substitute “first day”. |
| |
(3) | The amendments in this section have effect for periods of account beginning on |
| |
or after 1st January 2005. |
| 5 |
113 | Change of accounting practice: deferment of transitional adjustments |
| |
(1) | This section applies where— |
| |
(a) | a company enters into a transaction on or after 14th December 2004, |
| |
otherwise than in the ordinary course of its business, |
| |
(b) | as a result of the transaction it incurs a loss in respect of a loan |
| 10 |
relationship or derivative contract in respect of which, apart from this |
| |
section, a debit would fall to be brought into account for tax purposes |
| |
in a period of account beginning before 1st January 2005, |
| |
(c) | the sole or main purpose of the company in entering into the |
| |
transaction at the time it did was to enable it to bring a debit into |
| 15 |
account for tax purposes in such a period, and |
| |
(d) | if the company had continued to hold the asset or liability representing |
| |
the loan relationship or derivative contract, as it was held immediately |
| |
before the transaction referred to in paragraph (a), in its first period of |
| |
account beginning on or after 1st January 2005, a debit would have |
| 20 |
arisen in respect of the loan relationship or derivative contract in that |
| |
period that was a prescribed debit for the purposes of regulation 3 of |
| |
the Loan Relationship and Derivative Contracts (Change of Accounting |
| |
Practice) Regulations 2004 (SI 2004/3271) (debits not to be brought into |
| |
account until the company’s first period beginning on or after 1st |
| 25 |
| |
(2) | Where this section applies no such debit as is mentioned in subsection (1)(b) |
| |
shall be brought into account in the period of account mentioned there, but a |
| |
debit of the same amount shall instead be brought into account as if it were a |
| |
prescribed debit for the purposes of the regulation referred to in subsection |
| 30 |
(1)(d) (even though the loss giving rise to the debit was incurred before 1st |
| |
| |
(3) | In determining the sole or main purpose of a company for the purposes of |
| |
subsection (1)(c) regard shall be had to anything done by a connected company |
| |
that would be relevant for the purposes of that determination if done by the |
| 35 |
| |
| For this purpose companies are connected if they are connected persons within |
| |
the meaning of section 839 of ICTA. |
| |
(4) | For the purposes of subsection (1)(d) it shall be assumed that the loan |
| |
relationship or derivative contract has the same value at the beginning of the |
| 40 |
company’s first period of account beginning on or after 1st January 2005 as it |
| |
had at the time of the transaction referred to in subsection (1)(a). |
| |
(5) | This section does not apply where the transaction is entered into in pursuance |
| |
of legally binding arrangements entered into before 14th December 2004. |
| |
(6) | In this section, references to a company entering into a transaction include a |
| 45 |
reference to the company, or the directors of the company, taking a decision |
| |
about a loan relationship or derivative contract that affects its treatment for |
| |
|
| |
|
| |
|
accounting purposes (other than a decision to prepare some or all of the |
| |
company’s accounts in accordance with international accounting standards). |
| |
114 | Application of accounting standards to securitisation companies |
| |
(1) | For the purposes of the Corporation Tax Acts as they apply to a securitisation |
| |
company in relation to a period of account— |
| 5 |
(a) | beginning on or after 1st January 2005, and |
| |
(b) | ending before 1st January 2007, |
| |
| generally accepted accounting practice shall be taken to be UK generally |
| |
accepted accounting practice as it applied for a period of account ending on |
| |
| 10 |
(2) | For the purposes of this section a “securitisation company” means a company |
| |
| |
(a) | a note-issuing company, |
| |
(b) | an asset-holding company, |
| |
(c) | an intermediate borrowing company, |
| 15 |
(d) | a warehouse company, or |
| |
(e) | a commercial paper funded company, |
| |
| |
(3) | A “note-issuing company” means a company in relation to which the following |
| |
| 20 |
(a) | it is party as debtor to a capital market investment, |
| |
(b) | the securities that represent the capital market investment are issued |
| |
wholly or mainly to independent persons, |
| |
(c) | the capital market investment is part of a capital market arrangement, |
| |
| 25 |
(d) | the total value of the capital market investments made under that |
| |
capital market arrangement is at least £50 million. |
| |
(4) | An “asset-holding company” means a company— |
| |
(a) | whose business (apart from any incidental activities) consists in |
| |
acquiring, holding and managing assets forming the whole or part of |
| 30 |
the security for a capital market arrangement entered into by a note- |
| |
| |
(b) | whose liabilities representing debtor relationships are owed wholly or |
| |
mainly to a note-issuing company or intermediate borrowing |
| |
| 35 |
(5) | An “intermediate borrowing company” means a company— |
| |
(a) | whose only business is to enter into and be a party to creditor |
| |
relationships with an asset-holding company, and |
| |
(b) | whose liabilities representing debtor relationships are owed wholly, or |
| |
substantially wholly, to a note-issuing company. |
| 40 |
(6) | A “warehouse company” means a company whose business consists wholly of |
| |
acquiring and holding financial assets for the purpose— |
| |
(a) | of transferring them to a company (whether or not yet in existence) that |
| |
at the time of the transfer is, or as a result of the transfer will become, |
| |
an asset-holding or note-issuing company, or |
| 45 |
(b) | of itself becoming an asset-holding or note-issuing company. |
| |
|
| |
|
| |
|
(7) | A “commercial paper funded company” means— |
| |
(a) | a company that was an asset-holding company but whose obligations |
| |
under debtor relationships to a note-issuing company or intermediate |
| |
| |
(i) | have been transferred to, or |
| 5 |
(ii) | have been replaced by obligations under debtor relationships |
| |
| |
| one or more companies carrying on a business of banking, or |
| |
(b) | a company that was an intermediate borrowing company but whose |
| |
obligations under debtor relationships to a note-issuing company— |
| 10 |
(i) | have been transferred to, or |
| |
(ii) | have been replaced by obligations under debtor relationships |
| |
| |
| one or more companies carrying on a business of banking. |
| |
| 15 |
“asset” includes any option, future or contract for differences as defined |
| |
for the purposes of Schedule 26 to FA 2002 (derivative contracts) (see |
| |
paragraph 12 of that Schedule); |
| |
“capital market investment” and “capital market arrangement” have the |
| |
same meaning as in section 72B(1) of the Insolvency Act 1986 (c. 45) (see |
| 20 |
paragraphs 1, 2 and 3 of Schedule 2A to that Act); |
| |
“company” includes a partnership; |
| |
“financial asset” has the meaning it has for accounting purposes; and |
| |
“independent persons” means persons who are not connected with the |
| |
| 25 |
(9) | Section 839 of ICTA (connected persons) applies for the purposes of the |
| |
definition above of “independent persons”, except that in applying the |
| |
definition of “control” in that section a person is not to be treated as a |
| |
participator in a company by reason only that he is a loan creditor of the |
| |
| 30 |
115 | Taxation of securitisation companies |
| |
(1) | The Treasury may make provision by regulations as to the application of the |
| |
Corporation Tax Acts in relation to a securitisation company. |
| |
(2) | For the purposes of this section a “securitisation company” means a |
| |
| 35 |
(a) | in relation to which the following conditions are met— |
| |
(i) | it is party as debtor to a capital market investment, |
| |
(ii) | securities representing that capital market investment are |
| |
| |
(iii) | the capital market investment is part of a capital market |
| 40 |
| |
| and which meets such other conditions as may be specified; or |
| |
(b) | of a description specified by reference to its relationship, direct or |
| |
indirect, with a company within paragraph (a). |
| |
(3) | The regulations may, in particular— |
| 45 |
(a) | provide for the application, modification or non-application of any of |
| |
the provisions of the Corporation Tax Acts; |
| |
|
| |
|
| |
|
| |
(i) | that the amount of profits of any specified description (before |
| |
any such adjustments as are mentioned in paragraph (c)) is to be |
| |
taken to be such amount, or is to be calculated on such basis, as |
| |
| 5 |
(ii) | that that amount is to be brought into account for corporation |
| |
tax purposes instead of any specified amount that would |
| |
otherwise fall to be brought into account; |
| |
(c) | provide for specified adjustments to be made to the amount to be |
| |
brought into account for corporation tax purposes; |
| 10 |
| |
(i) | that the regulations apply to a company only if an election to |
| |
| |
(ii) | that any such election must be made in the company’s first |
| |
company tax return after the passing of this Act and has effect |
| 15 |
in relation to every period of account of the company beginning |
| |
on or after 1st January 2005, and |
| |
(iii) | that once subject to the regulations a company shall continue to |
| |
be so for all subsequent periods of account; |
| |
(e) | impose conditions that must be met if a company is to have, or continue |
| 20 |
to have, the benefit of the regulations; and |
| |
(f) | provide for the consequences of failing to meet any specified condition |
| |
(which may include recalculating, on the basis that the regulations did |
| |
not apply, the company’s profits for previous periods). |
| |
(4) | The regulations may make different provision for different descriptions of |
| 25 |
| |
(5) | Regulations under this section may— |
| |
| |
(i) | regulations made before 1st January 2006, or |
| |
(ii) | the first regulations under this section (if made on or after that |
| 30 |
| |
| make provision having effect for periods of account beginning on or |
| |
| |
(b) | in any case, make provision having effect from the beginning of periods |
| |
of account current when the regulations are made. |
| 35 |
| |
“capital market investment” and “capital market arrangement” have the |
| |
same meaning as in section 72B(1) of the Insolvency Act 1986 (c. 45) (see |
| |
paragraphs 1, 2 and 3 of Schedule 2A to that Act); and |
| |
“specified” means specified in regulations under this section. |
| 40 |
(7) | The first regulations under this section shall not be made unless a draft of the |
| |
regulations has been laid before and approved by a resolution of the House of |
| |
| |
|
| |
|
| |
|
| |
| |
Double taxation relief: general |
| |
116 | Dividends by reference to which a deduction is allowed: no underlying tax |
| |
(1) | In section 799 of ICTA (computation of underlying tax) after subsection (2) |
| 5 |
| |
“(2A) | No underlying tax shall be taken into account under subsection (1) |
| |
above in the case of a dividend if, under the law of any territory outside |
| |
the United Kingdom, a deduction is allowed to a resident of that |
| |
territory in respect of an amount determined by reference to the |
| 10 |
| |
(2) | The amendments made by this section have effect in relation to dividends paid |
| |
on or after 16th March 2005. |
| |
117 | Implementation of the amended Parent/Subsidiary Directive |
| |
(1) | Section 801 of ICTA (dividends paid between related companies: relief for UK |
| 15 |
and third country taxes) is amended as follows. |
| |
(2) | After subsection (5) (meaning of one company being related to another) |
| |
| |
“(5A) | For the purposes of subsections (2) and (3) above (including any |
| |
determination of the extent to which underlying tax paid by the third, |
| 20 |
fourth or subsequent company in question would be taken into account |
| |
under this Part if the conditions specified for the purpose in subsection |
| |
(2) above were satisfied) a company is also related to another company |
| |
| |
(a) | controls directly or indirectly, or |
| 25 |
(b) | is a subsidiary of a company which controls directly or |
| |
| |
| not less than 10% of the ordinary share capital of the first-mentioned |
| |
| |
(3) | The amendment made by this section has effect where the dividend mentioned |
| 30 |
in section 799(1) of ICTA is paid on or after 1st January 2005. |
| |
Double taxation relief: restrictions |
| |
118 | Limits on credit: income tax and corporation tax: trading profits |
| |
(1) | For sections 798 to 798B of ICTA (double taxation relief: foreign interest and |
| |
| 35 |
“798 | Section 796: trade income |
| |
(1) | This section has effect in relation to the application of section 796(1) to |
| |
the allowance of credit for foreign tax against income tax in respect of |
| |
| |
|
| |
|