|
| |
|
(b) | in subsection (4), for “on trusts” substitute “in a trust”. |
| |
| |
(a) | in subsection (1), for “those trusts are qualifying trusts if they are” |
| |
substitute “the property is held in qualifying trust if the trust is”, |
| |
(b) | in that subsection, for paragraph (a) substitute— |
| 5 |
“(a) | constituted by the appointment of an executor dative to |
| |
administer an intestate estate where the relevant minor |
| |
has a right to any of the estate,”, and |
| |
(c) | in subsection (2), before “which” insert “the purposes of”. |
| |
(6) | In section 36, for “the trusts on which it is held are qualifying trusts” substitute |
| 10 |
“it is held in qualifying trust”. |
| |
| |
(a) | in subsection (1), for paragraph (b) substitute— |
| |
“(b) | property held in the trust in relation to which the |
| |
election is made is held in qualifying trust.”, |
| 15 |
(b) | in subsection (3)(b), for “the trusts in relation to which the election is |
| |
made are qualifying trusts” substitute “property held in the trust in |
| |
relation to which the election is made is held in qualifying trust”, and |
| |
(c) | in subsection (5), for paragraph (b) substitute— |
| |
“(b) | property held in the trust in relation to which the |
| 20 |
election is made ceases to be held in qualifying trust,”. |
| |
(8) | Sections 34(3) and 35(4) do not apply to Scotland |
| |
(9) | Unless otherwise modified by this section, any reference to anything being |
| |
held on trusts is to be construed as a reference to it being held in trust. |
| |
(10) | Unless otherwise modified or disapplied by this section, any reference to trusts |
| 25 |
is to be construed as a reference to a trust or the trust (as appropriate). |
| |
43 | Penalties under TMA 1970 |
| |
(1) | Section 98 of TMA 1970 (special returns, etc) is amended as follows. |
| |
(2) | In the first column of the table insert at the appropriate place— |
| |
“section 40(1) of the Finance Act 2005”. |
| 30 |
(3) | In the second column of the table insert at the appropriate place— |
| |
“section 37(3) of the Finance Act 2005;”, and |
| |
“section 37(6) of the Finance Act 2005;”. |
| |
(4) | For the purposes of that section, any information, statements or declarations |
| |
given or made jointly by trustees and a vulnerable person are to be treated as |
| 35 |
given or made by the trustees. |
| |
44 | Consequential amendments |
| |
(1) | In section 687(3) of ICTA (payments under discretionary trusts: amounts to be |
| |
set off against income tax assessable on trustees in respect of tax credit), after |
| |
| 40 |
“(l) | the amount of any income tax determined in accordance with |
| |
section 26 of the Finance Act 2005.” |
| |
|
| |
|
| |
|
(2) | In Schedule 4B to TCGA 1992 (transfers of value by trustees linked with trustee |
| |
borrowing), in paragraph 3(2), after “in that year” insert “(otherwise than by |
| |
virtue of section 31 of the Finance Act 2005)”. |
| |
| |
This Chapter has effect for the tax year beginning on 6th April 2004 and |
| 5 |
| |
| |
Alternative finance arrangements |
| |
| |
46 | Alternative finance arrangements |
| 10 |
(1) | In this Chapter “alternative finance arrangements” means arrangements falling |
| |
| |
(2) | In this Chapter “financial institution” means— |
| |
(a) | a bank as defined by section 840A of ICTA, |
| |
(b) | a building society within the meaning of the Building Societies Act 1986 |
| 15 |
| |
(c) | a wholly-owned subsidiary of a bank within paragraph (a) or a |
| |
building society within paragraph (b), |
| |
(d) | a person authorised by a licence under Part 3 of the Consumer Credit |
| |
Act 1974 (c. 39) to carry on a consumer credit business or consumer hire |
| 20 |
business within the meaning of that Act, or |
| |
(e) | a person authorised in a jurisdiction outside the United Kingdom to |
| |
receive deposits or other repayable funds from the public and to grant |
| |
credits for its own account. |
| |
(3) | For the purposes of subsection (2)(c) a company is a wholly-owned subsidiary |
| 25 |
of a bank or building society (“the parent”) if it has no members except the |
| |
parent and the parent’s wholly-owned subsidiaries or persons acting on behalf |
| |
of the parent or the parent’s wholly-owned subsidiaries. |
| |
Arrangements giving rise to alternative finance return |
| |
47 | Alternative finance arrangements: alternative finance return |
| 30 |
(1) | Subject to subsection (3) and section 52, arrangements fall within this section if |
| |
they are arrangements entered into between two persons under which— |
| |
(a) | a person (“X”) purchases an asset and sells it, either immediately or in |
| |
circumstances in which the conditions in subsection (2) are met, to the |
| |
| 35 |
(b) | the amount payable by Y in respect of the sale (“the sale price”) is |
| |
greater than the amount paid by X in respect of the purchase (“the |
| |
| |
(c) | all or part of the sale price is not required to be paid until a date later |
| |
than that of the sale, and |
| 40 |
|
| |
|
| |
|
(d) | the difference between the sale price and the purchase price equates, in |
| |
substance, to the return on an investment of money at interest. |
| |
(2) | The conditions referred to in subsection (1)(a) are— |
| |
(a) | that X is a financial institution, and |
| |
(b) | that the asset referred to in that provision was purchased by X for the |
| 5 |
purpose of entering into arrangements falling within this section. |
| |
(3) | Arrangements do not fall within this section unless at least one of the parties is |
| |
| |
(4) | For the purposes of this section “the effective return” is so much of the sale |
| |
price as exceeds the purchase price. |
| 10 |
(5) | In this Chapter references to “alternative finance return” are to be read in |
| |
accordance with subsections (6) and (7). |
| |
(6) | If under arrangements falling within this section the whole of the sale price is |
| |
paid on one day, that sale price is to be taken to include alternative finance |
| |
return equal to the effective return. |
| 15 |
(7) | If under arrangements falling within this section the sale price is paid by |
| |
instalments, each instalment is to be taken to include alternative finance return |
| |
equal to the appropriate amount. |
| |
(8) | The appropriate amount, in relation to any instalment, is an amount equal to |
| |
the interest that would have been included in the instalment if— |
| 20 |
(a) | the effective return were the total interest payable on a loan by X to Y |
| |
of an amount equal to the purchase price, |
| |
(b) | the instalment were a part repayment of the principal with interest, and |
| |
(c) | the loan were made on arm’s length terms and accounted for under |
| |
generally accepted accounting practice. |
| 25 |
48 | Arrangements within section 47: foreign currency and non-residents |
| |
(1) | If alternative finance return is paid in a currency other than sterling— |
| |
(a) | by or to a person other than a company, and |
| |
(b) | otherwise than for the purposes of a trade, profession or vocation or a |
| |
| 30 |
| then, as respects that person, the effective return for the purposes of section 47 |
| |
and the appropriate amount for the purposes of subsection (7) of that section |
| |
are to be calculated in the other currency and the amount of each payment of |
| |
alternative finance return is to be translated into sterling at a spot rate of |
| |
exchange for the day on which the payment is made. |
| 35 |
(2) | In section 148 of FA 2003 (meaning of “permanent establishment”) after |
| |
| |
“(5A) | Where alternative finance return as defined by subsection (5) of section |
| |
47 of the Finance Act 2005 is paid to a company that is not resident in |
| |
the United Kingdom, the company is not regarded as having a |
| 40 |
permanent establishment in the United Kingdom merely by virtue of |
| |
anything done for the purposes of the arrangements falling within that |
| |
section by the other party to the arrangements or by any other person |
| |
acting for the company in relation to the arrangements.” |
| |
(3) | In section 127 of FA 1995 (persons not treated as UK representatives) in |
| 45 |
|
| |
|
| |
|
subsection (1), at the end of paragraph (c) but before the “and” insert— |
| |
“(cc) | where the income consists of alternative finance return, as |
| |
defined by subsection (5) of section 47 of the Finance Act 2005, |
| |
the other party to the arrangements falling within that section or |
| |
any other person acting for the non-resident in relation to the |
| 5 |
| |
Arrangements giving rise to profit share return |
| |
49 | Alternative finance arrangements: profit share return |
| |
(1) | Subject to section 52, arrangements fall within this section if they are |
| |
arrangements under which— |
| 10 |
(a) | a person (“the depositor”) deposits money with a financial institution, |
| |
(b) | the money, together with money deposited with the institution by |
| |
other persons, is used by the institution with a view to producing a |
| |
| |
(c) | from time to time the institution makes or credits a payment to the |
| 15 |
depositor, in proportion to the amount deposited by him, out of any |
| |
profit resulting from the use of the money, and |
| |
(d) | the payments so made or credited by the institution equate, in |
| |
substance, to the return on an investment of money at interest. |
| |
(2) | In this Chapter references to “profit share return” are references to amounts |
| 20 |
paid or credited as mentioned in subsection (1)(c) by a financial institution |
| |
under arrangements falling within this section. |
| |
Treatment of alternative finance arrangements |
| |
50 | Treatment of alternative finance arrangements: companies |
| |
(1) | Where a company is a party to arrangements falling within section 47, Chapter |
| 25 |
2 of Part 4 of FA 1996 (loan relationships) has effect in relation to the |
| |
| |
(a) | the arrangements were a loan relationship to which the company is a |
| |
| |
(b) | any amount which is the purchase price for the purposes of section |
| 30 |
47(1)(b) were the amount of a loan made (as the case requires) to the |
| |
company by, or by the company to, the other party to the arrangements, |
| |
| |
(c) | alternative finance return payable to or by the company under the |
| |
arrangements were interest payable under that loan relationship. |
| 35 |
(2) | Where a company is a party to arrangements falling within section 49, Chapter |
| |
2 of Part 4 of FA 1996 (loan relationships) has effect in relation to the |
| |
| |
(a) | the arrangements were a loan relationship to which the company is a |
| |
| 40 |
(b) | any amount deposited under the arrangements were— |
| |
(i) | in relation to a company which is the depositor under the |
| |
arrangements, the amount of a loan made by the company to |
| |
the financial institution, and |
| |
|
| |
|
| |
|
(ii) | in relation to a company which is the financial institution with |
| |
which the depositor deposits money under the arrangements, |
| |
the amount of a loan made to it by the depositor, and |
| |
(c) | profit share return payable to or by the company under the |
| |
arrangements were interest payable under that loan relationship. |
| 5 |
(3) | Accordingly, references in the Corporation Tax Acts to a loan relationship |
| |
include references to alternative finance arrangements. |
| |
(4) | In subsection (2)(b), “depositor” is to be read in accordance with section |
| |
| |
51 | Treatment of alternative finance arrangements: persons other than companies |
| 10 |
(1) | Alternative finance return or profit share return is to be treated for the |
| |
purposes of ITTOIA 2005 as if it were interest. |
| |
(2) | Sections 353 to 368 of ICTA (relief for payments of interest) have effect as if— |
| |
(a) | arrangements falling within section 47 involved the making of a loan, |
| |
| 15 |
(b) | alternative finance return were interest; |
| |
| and section 366 (information) shall have effect accordingly. |
| |
(3) | Subsections (4) and (5) apply to the extent that a person other than a company |
| |
is a party to alternative finance arrangements for the purposes of a trade, |
| |
profession or vocation carried on by him or for the purposes of a property |
| 20 |
| |
(4) | Alternative finance return or profit share return paid by him is to be treated as |
| |
an expense of the trade, profession or vocation or of the property business. |
| |
(5) | Section 58 of ITTOIA 2005 (incidental costs of obtaining finance) has effect as |
| |
| 25 |
(a) | references to a loan included references to alternative finance |
| |
| |
(b) | references to interest included references to alternative finance return |
| |
| |
52 | Provision not at arm’s length |
| 30 |
(1) | This section applies where— |
| |
(a) | arrangements would apart from this section fall within section 47 or |
| |
| |
(b) | paragraph 1(2) of Schedule 28AA to ICTA (provision not at arm’s |
| |
length) requires the profits and losses of any person who is a party to |
| 35 |
the arrangements to be computed for tax purposes as if the arm’s length |
| |
provision referred to in paragraph 1(2)(a) of that Schedule had been |
| |
made or imposed instead of the arrangements, and |
| |
(c) | any person who is for the purposes of that Schedule an affected person |
| |
| 40 |
| |
(ii) | an amount representing relevant return, |
| |
| but is not subject to income tax or corporation tax, or any |
| |
corresponding tax under the law of a territory outside the United |
| |
Kingdom, on the relevant return or the amount representing it. |
| 45 |
|
| |
|
| |
|
(2) | In this section “relevant return”, in relation to any arrangements, means any |
| |
amount that would be alternative finance return or profit share return if the |
| |
arrangements were alternative finance arrangements. |
| |
(3) | The arrangements are not to be regarded as falling within section 47 or section |
| |
| 5 |
(4) | Where the arrangements would, but for subsection (3), fall within section 47, |
| |
the person paying relevant return under the arrangements is not entitled— |
| |
(a) | to any deduction in computing profits or gains for the purposes of |
| |
income tax or corporation tax, or |
| |
(b) | to any deduction against total income or, as the case may be, total |
| 10 |
| |
| in respect of the relevant return. |
| |
(5) | Where the arrangements would, but for subsection (3), fall within section 49, |
| |
the person paying relevant return under the arrangements is not entitled— |
| |
(a) | to any deduction in computing profits or gains for the purposes of |
| 15 |
income tax or corporation tax, or |
| |
(b) | to any deduction against total income or, as the case may be, total |
| |
| |
| in respect of the relevant return. |
| |
(6) | Where the person paying relevant return under the arrangements is a |
| 20 |
company, an amount may not be surrendered by way of group relief if a |
| |
deduction in respect of it is prohibited by subsection (4) or (5). |
| |
53 | Treatment of section 47 arrangements: sale and purchase of asset |
| |
(1) | Where under arrangements falling within section 47 an asset is sold by one |
| |
party to the arrangements to the other party, the effective return shall be |
| 25 |
excluded in determining for the purposes of the Tax Acts (apart from that |
| |
section) and of TCGA 1992 the consideration for the sale and purchase of the |
| |
| |
(2) | Subsection (1) does not affect the operation of any provision of the Tax Acts or |
| |
TCGA 1992 which provides that the consideration for a sale or purchase is to |
| 30 |
be taken for any purpose to be an amount other than the actual consideration. |
| |
54 | Section 49 arrangements: profit share return not to be treated as distribution |
| |
Profit share return is not to be treated by virtue of section 209(2)(e)(iii) of ICTA |
| |
as being a distribution for the purposes of the Corporation Tax Acts. |
| |
| 35 |
| |
Schedule 2 (which contains further provision about the treatment of alternative |
| |
finance arrangements for the purposes of income tax, corporation tax and |
| |
capital gains tax) has effect. |
| |
|
| |
|