Finance (No. 2) Bill

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Session 2004 - 05
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 5 — Section 804ZA: prescribed schemes and arrangements
124

Schedule 5
Section 87

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

Finance (No. 2) Bill
Schedule 5 — Section 804ZA: prescribed schemes and arrangements
125

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
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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
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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.
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      (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—
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(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
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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 (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001
126

transactions 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).
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      (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—
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(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
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transfer of money’s worth.
      (5)
Section 839 applies for the purposes of this paragraph.”
Schedule 6
Section 92

Capital allowances: renovation of business premises in disadvantaged areas
Part 1
25
New Part 3A of the Capital Allowances Act 2001
1
After Part 3 of CAA 2001 insert—
“PART 3A
BUSINESS PREMISES RENOVATION ALLOWANCES
CHAPTER 1
30
INTRODUCTION
360A
Business premises renovation allowances
(1)
Allowances are available under this Part if a person incurs qualifying
expenditure in respect of a qualifying building.
(2)
Allowances under this Part are made to the person who—
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(a)
incurred the expenditure, and

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001
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(b)
has the relevant interest in the qualifying building.
CHAPTER 2
QUALIFYING EXPENDITURE
360B
Meaning of “qualifying expenditure”
(1)
In this Part “qualifying expenditure” means capital expenditure
5
incurred before the expiry date on, or in connection with—
(a)
the conversion of a qualifying building into qualifying
business premises,
(b)
the renovation of a qualifying building if it is or will be
qualifying business premises, or
10
(c)
repairs to a qualifying building or, where the qualifying
building is part of a building, to the building of which the
qualifying building forms part, to the extent that the repairs
are incidental to expenditure within paragraph (a) or (b).
(2)
In subsection (1) “the expiry date” means—
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(a)
the fifth anniversary of the day appointed under section 92 of
the Finance Act 2005, or
(b)
such later date as the Treasury may prescribe by regulations.
(3)
Expenditure is not qualifying expenditure if it is incurred on or in
connection with—
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(a)
the acquisition of land or rights in or over land,
(b)
the extension of a qualifying building (except to the extent
required for the purpose of providing a means of getting to
or from qualifying business premises),
(c)
the development of land adjoining or adjacent to a qualifying
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building, or
(d)
the provision of plant and machinery, other than plant or
machinery which is or becomes a fixture as defined by section
173(1).
(4)
For the purposes of this section, expenditure incurred on repairs to a
30
building is to be treated as capital expenditure if it is not expenditure
that would be allowed to be deducted in calculating the profits of a
property business, or of a trade, profession or vocation, for tax
purposes.
(5)
The Treasury may by regulations make further provision as to
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expenditure which is, or is not, qualifying expenditure.
CHAPTER 3
QUALIFYING BUILDINGS AND QUALIFYING BUSINESS PREMISES
360C
Meaning of “qualifying building”
(1)
In this Part “qualifying building”, in relation to any conversion or
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renovation work, means any building or structure, or part of a
building or structure, which—

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001
128

(a)
is situated in an area which, on the date on which the
conversion or renovation work began, was a disadvantaged
area,
(b)
was unused throughout the period of one year ending
immediately before that date,
5
(c)
on that date, had last been used—
(i)
for the purposes of a trade, profession or vocation, or
(ii)
as an office or offices (whether or not for the purposes
of a trade, profession or vocation),
(d)
on that date, had not last been used as, or as part of, a
10
dwelling, and
(e)
in the case of part of a building or structure, on that date had
not last been occupied and used in common with any other
part of the building or structure other than a part—
(i)
as respects which the condition in paragraph (b) is
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met, or
(ii)
which had last been used as a dwelling.
(2)
In this section “disadvantaged area” means—
(a)
an area designated as a disadvantaged area for the purposes
of this section by regulations made by the Treasury, or
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(b)
if no regulations are made under paragraph (a), an area for
the time being designated as a disadvantaged area for the
purposes of Schedule 6 to the Finance Act 2003 (stamp duty
land tax: disadvantaged areas relief).
(3)
Regulations under subsection (2)(a) may—
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(a)
designate specified areas as disadvantaged areas, or
(b)
provide for areas of a description specified in the regulations
to be designated as disadvantaged areas.
(4)
If regulations under subsection (2)(a) so provide, the designation of
an area as a disadvantaged area shall have effect for such period as
30
may be specified in or determined in accordance with the
regulations.
(5)
Regulations under subsection (2)(a) may—
(a)
make different provision for different cases, and
(b)
contain such incidental, supplementary, consequential or
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transitional provision as appears to the Treasury to be
necessary or expedient.
(6)
Where a building or structure (or part of a building or structure)
which would otherwise be a qualifying building is on the date
mentioned in subsection (1)(a) situated partly in a disadvantaged
40
area and partly outside it, only so much of the expenditure incurred
in accordance with section 360B as, on a just and reasonable
apportionment, is attributable to the part of the building or structure
located in the disadvantaged area is to be treated as qualifying
expenditure.
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(7)
The Treasury may by regulations make further provision as to the
circumstances in which a building or structure or part of a building
or structure is, or is not, a qualifying building.