|
| |
|
(b) | for any subsequent accounting period, |
| |
| in accordance with rules A and B. |
| |
(3) | Rule A is that, in respect of the specified transaction, no amount is allowable as |
| |
a deduction for the purposes of the Corporation Tax Acts to the extent that, in |
| |
relation to the same expense, an amount may be deducted or otherwise |
| 5 |
allowed in computing any income, profits or losses for the purposes of any tax |
| |
(including any foreign tax) other than— |
| |
(a) | petroleum revenue tax, or |
| |
(b) | the tax chargeable under section 501A(1) of ICTA (supplementary |
| |
charge in respect of ring fence trades). |
| 10 |
(4) | The reference in subsection (3) to an amount deducted or otherwise allowed in |
| |
computing any income, profits or losses for the purposes there mentioned |
| |
includes a reference to an amount that would be so deducted or allowed but |
| |
for any rule that has the same effect as rule A. |
| |
(5) | For the purposes of subsection (4) “rule” means— |
| 15 |
(a) | a provision of the Tax Acts, or |
| |
(b) | a rule having effect under the tax law of any territory outside the |
| |
| |
| |
(a) | a transaction, or a series of transactions, forming part of the scheme by |
| 20 |
reference to which conditions A to D are satisfied makes or imposes |
| |
provision as a result of which one person (“the payer”) makes a |
| |
payment and another person (“the payee”) receives, or becomes |
| |
entitled to receive, a payment or payments, |
| |
(b) | in respect of the payment by the payer, an amount may be deducted or |
| 25 |
otherwise allowed to the payer, or to another person who is party to, or |
| |
concerned in, the scheme, in computing any profits or losses for tax |
| |
| |
(c) | in respect of the payment or payments that the payee receives or is |
| |
entitled to receive as a result of the transaction or series of transactions, |
| 30 |
or part of such payment or payments, the payee is not liable to tax or, if |
| |
liable, his liability to tax is reduced as a result of provision made or |
| |
| |
(7) | For the purposes of subsection (6)(c), the payee’s liability to tax in respect of the |
| |
payment or payments that he receives or is entitled to receive as a result of the |
| 35 |
transaction or series of transactions is reduced as a result of provision made or |
| |
imposed by the scheme if— |
| |
(a) | an amount arising from the transaction or series of transactions |
| |
forming part of the scheme, or from another transaction or series of |
| |
transactions forming part of the scheme, falls to be deducted or |
| 40 |
otherwise allowed to the payee in computing for tax purposes any |
| |
profits or losses arising from the payment or payments or the |
| |
entitlement to receive the payment or payments, or |
| |
(b) | an amount of relief arising from the transaction or series of transactions |
| |
forming part of the scheme, or from another transaction or series of |
| 45 |
transactions forming part of the scheme, may be deducted from the |
| |
amount of income or gains arising from the payment or payments or |
| |
the entitlement to receive the payment or payments. |
| |
|
| |
|
| |
|
(8) | The requirement in subsection (6)(c) is not satisfied if the payee is not liable to |
| |
tax because he is not liable to tax on any income or gains received by him or for |
| |
his benefit under the tax law of any territory. |
| |
(9) | The requirement in subsection (6)(c) is not satisfied if, or to the extent that, the |
| |
payee is not subject to tax because his liability to tax is subject to an exemption |
| 5 |
falling within subsection (10). |
| |
(10) | An exemption falls within this subsection if— |
| |
(a) | it exempts a person from being liable to tax in respect of income or |
| |
gains, without providing for that income or those gains to be treated as |
| |
the income or gains of one or more other persons, and |
| 10 |
(b) | it is conferred by a provision contained in or having the force of an Act |
| |
or by a provision of the tax law of any territory outside the United |
| |
| |
(11) | Rule B is that the aggregate of the amounts allowable as a deduction for the |
| |
purposes of the Corporation Tax Acts in computing any profits to the company |
| 15 |
| |
(a) | the specified transaction, and |
| |
(b) | any other transaction that forms part of the scheme and to which the |
| |
| |
| is to be reduced in accordance with subsections (12) and (13). |
| 20 |
(12) | If, in respect of the payment or payments that the payee receives or is entitled |
| |
to receive, the payee is not liable to tax for the purposes of the requirement in |
| |
subsection (6)(c), the aggregate is to be reduced to nil. |
| |
(13) | If, in respect of the payment or payments, the payee is liable to tax as regards |
| |
part or his liability to tax is reduced as described in subsection (6)(c), the |
| 25 |
aggregate is to be reduced to such proportion of the aggregate as is equal to the |
| |
proportion of the payment or payments on which the payee is liable to tax; and |
| |
for this purpose the amount by which the payee’s liability is reduced is to be |
| |
treated as an amount on which the payee is not liable to tax. |
| |
(14) | The company may choose to incorporate in its company tax return for the |
| 30 |
specified accounting period such relevant adjustments as are necessary for |
| |
counteracting those effects of the scheme that are referable to the purpose |
| |
referred to in condition C. |
| |
(15) | If, as a consequence of incorporating relevant adjustments in that company tax |
| |
return, the company counteracts those effects of the scheme that are referable |
| 35 |
to the purpose referred to in condition C, the company is to be treated, so far |
| |
as regards the scheme, as having complied with subsection (2). |
| |
(16) | The following are relevant adjustments— |
| |
(a) | treating all or part of a deduction allowable for corporation tax |
| |
purposes as not being allowable; |
| 40 |
(b) | treating all or part of an amount that for corporation tax purposes may |
| |
be set off against profits in an accounting period as not falling to be set |
| |
| |
(17) | In this section, references to tax purposes include a reference to the purposes |
| |
of any foreign tax; and foreign tax has the meaning given by section 403D of |
| 45 |
| |
|
| |
|
| |
|
(18) | In this section, “company tax return” means the return required to be delivered |
| |
pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with |
| |
paragraph 4 of that Schedule. |
| |
| |
(1) | If the Commissioners for Her Majesty’s Revenue and Customs consider, on |
| 5 |
reasonable grounds, that conditions A to E are or may be satisfied in relation |
| |
to a company resident in the United Kingdom, they may give the company a |
| |
notice under this section. |
| |
(2) | Condition A is that a scheme makes or imposes provision (“the actual |
| |
provision”) as between the company and another person (“the paying party”) |
| 10 |
by means of a transaction or series of transactions. |
| |
(3) | Condition B is that the actual provision includes the making by the paying |
| |
party, by means of a transaction or series of transactions, of a payment that is |
| |
a qualifying payment in relation to the company. |
| |
(4) | Condition C is that, as regards the qualifying payment made by the paying |
| 15 |
party, there is an amount that— |
| |
(a) | is available as a deduction for the purposes of the Tax Acts, or |
| |
(b) | may be deducted or otherwise allowed in respect of the payment under |
| |
the tax law of any territory outside the United Kingdom, |
| |
| and does not fall to be disregarded as described in subsection (5). |
| 20 |
(5) | An amount is to be disregarded if or to the extent that it is, for tax purposes, set |
| |
against any income arising to the paying party from the transaction or |
| |
transactions forming part of the scheme. |
| |
(6) | Condition C is not to be treated as satisfied if— |
| |
(a) | the paying party is a dealer, |
| 25 |
(b) | in the ordinary course of his business, he incurs losses in respect of the |
| |
transaction or transactions forming part of the scheme to which he is |
| |
| |
(c) | the amount by reference to which condition C would, but for this |
| |
subsection, be satisfied is an amount in respect of those losses. |
| 30 |
(7) | In subsection (6), “dealer” means a person who is a dealer in relation to a |
| |
distribution within the meaning of section 95(2) of ICTA or who would, if he |
| |
were resident in the United Kingdom, be such a dealer. |
| |
(8) | Condition D is that at least part of the qualifying payment is not an amount to |
| |
which subsection (9) applies. |
| 35 |
(9) | This subsection applies to an amount that is, for the purposes of the |
| |
| |
(a) | income or gains arising to the company in the accounting period in |
| |
which the qualifying payment was made in relation to the company, |
| |
(b) | income arising to any other company resident in the United Kingdom |
| 40 |
in a corresponding accounting period, or |
| |
(c) | brought into account by a company as a credit for the purposes of |
| |
Chapter 2 of Part 2 of FA 1996 by virtue of section 91A of FA 1996 |
| |
(avoidance involving shares subject to outstanding third party |
| |
| 45 |
|
| |
|
| |
|
(10) | Condition E is that the company and the paying party expected on entering |
| |
into the scheme that a benefit would arise as a result of condition D being |
| |
satisfied (whether by reference to all or part of the qualifying payment). |
| |
(11) | A notice under this section is a notice— |
| |
(a) | informing the company of the Commissioners’ view under subsection |
| 5 |
| |
(b) | specifying the qualifying payment by reference to which the |
| |
Commissioners consider conditions B to E are or may be satisfied, |
| |
(c) | specifying the accounting period of the company in which the payment |
| |
| 10 |
(d) | informing the company that as a consequence section 27 has effect in |
| |
| |
(12) | For the purposes of this section a payment is a qualifying payment in relation |
| |
to a company if it constitutes a contribution to the capital of the company. |
| |
(13) | For the purposes of this section the accounting period of a company (“company |
| 15 |
A”) corresponds to the accounting period of another company (“company B”) |
| |
if at least one day of company A’s accounting period falls within company B’s |
| |
| |
27 | Rule as to qualifying payment |
| |
(1) | The following provisions of this section apply in relation to a payment that is |
| 20 |
a qualifying payment in relation to a company if— |
| |
(a) | a notice specifying that payment is given to the company under section |
| |
| |
(b) | when the notice is given, conditions A to E of section 26 are satisfied in |
| |
| 25 |
(2) | The company must compute (or recompute) for the purposes of corporation |
| |
tax for the accounting period specified in the notice its income or chargeable |
| |
gains, or its liability to corporation tax, as if the relevant part of the qualifying |
| |
payment were an amount of income chargeable under Case VI of Schedule D |
| |
arising to the company in that period. |
| 30 |
(3) | The relevant part of the qualifying payment is the part by reference to which |
| |
conditions C and D are satisfied; and, where conditions C and D are satisfied |
| |
in relation to the whole of the qualifying payment, the relevant part is the |
| |
whole of the qualifying payment. |
| |
(4) | In this section “qualifying payment” has the same meaning as in section 26. |
| 35 |
28 | Notices under sections 24 and 26 |
| |
(1) | Subsection (2) applies if the Commissioners for Her Majesty’s Revenue and |
| |
Customs give a notice to a company under section 24 or 26 before the company |
| |
has made its company tax return for the accounting period specified in the |
| |
| 40 |
(2) | If the company makes its return for that period before the end of the period of |
| |
90 days beginning with the day on which the notice is given, it may— |
| |
(a) | make a return that disregards the notice, and |
| |
|
| |
|
| |
|
(b) | at any time after making the return and before the end of the period of |
| |
90 days, amend the return for the purpose of complying with the |
| |
provision referred to in the notice. |
| |
(3) | If a company has made a company tax return for an accounting period, the |
| |
Commissioners may only give the company a notice under section 24 or 26 in |
| 5 |
relation to that period if a notice of enquiry has been given to the company in |
| |
respect of its return for that period. |
| |
(4) | After any enquiries into the return for that period have been completed, the |
| |
Commissioners may only give the company a notice under section 24 or 26 if |
| |
the requirements in subsections (5) and (7) are satisfied. |
| 10 |
(5) | The first requirement is that at the time the enquiries into the return were |
| |
completed, the Commissioners could not have been reasonably expected, on |
| |
the basis of information made available to them or to an officer of Revenue and |
| |
Customs before that time, to have been aware that the circumstances were such |
| |
that a notice under section 24 or 26 could have been given to the company in |
| 15 |
| |
(6) | Paragraph 44(2) and (3) of Schedule 18 to FA 1998 (information made available) |
| |
applies for the purposes of subsection (5) as it applies for the purposes of |
| |
| |
(7) | The second requirement is that— |
| 20 |
(a) | the company was requested to produce or provide information during |
| |
an enquiry into the return for that period, and |
| |
(b) | if the company had duly complied with the request, the Commissioners |
| |
could have been reasonably expected to give the company a notice |
| |
under section 24 or 26 in relation to that period. |
| 25 |
(8) | If a company is given a notice under section 24 or 26 in relation to an |
| |
accounting period after having made a company tax return for that period, the |
| |
company may amend the return for the purpose of complying with the |
| |
provision referred to in the notice at any time before the end of the period of 90 |
| |
days beginning with the day on which the notice is given. |
| 30 |
(9) | If the notice under section 24 or 26 is given to the company after it has been |
| |
given a notice of enquiry in respect of its return for the period, no closure notice |
| |
may be given in relation to the company’s tax return until— |
| |
(a) | the end of the period of 90 days beginning with the day on which the |
| |
notice under section 24 or 26 is given, or |
| 35 |
(b) | the earlier amendment of the company tax return for the purpose of |
| |
complying with the provision referred to in the notice. |
| |
(10) | If the notice under section 24 or 26 is given to the company after any enquiries |
| |
into the return for the period are completed, no discovery assessment may be |
| |
made as regards the income or chargeable gain to which the notice relates |
| 40 |
| |
(a) | the end of the period of 90 days beginning with the day on which the |
| |
notice under section 24 or 26 is given, or |
| |
(b) | the earlier amendment of the company tax return for the purpose of |
| |
complying with the provision referred to in the notice. |
| 45 |
(11) | Subsections (2)(b) and (8) do not prevent a company tax return for a period |
| |
| |
|
| |
|
| |
|
(a) | a notice under section 24 or 26 is given to the company in relation to |
| |
| |
(b) | the return is not amended in accordance with subsection (2)(b) or (8) for |
| |
the purpose of complying with the provision referred to in the notice, |
| |
| 5 |
(c) | the return ought to have been so amended. |
| |
| |
“closure notice” means a notice under paragraph 32 of Schedule 18 to FA |
| |
| |
“company tax return” means the return required to be delivered pursuant |
| 10 |
to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with |
| |
paragraph 4 of that Schedule; |
| |
“discovery assessment” means an assessment under paragraph 41 of |
| |
| |
“notice of enquiry” means a notice under paragraph 24 of Schedule 18 to |
| 15 |
| |
29 | Amendments relating to company tax returns |
| |
(1) | In Schedule 18 to FA 1998 (company tax returns, assessments, etc), in |
| |
paragraph 25(1) (scope of enquiry) after “relief)” insert “or a notice under |
| |
section 24 or 26 of the Finance (No. 2) Act 2005 (avoidance involving tax |
| 20 |
| |
(2) | In paragraph 42 of that Schedule (restrictions on power to make discovery |
| |
assessment etc), in sub-paragraph (2A), after “1988” insert “or section 24 or 26 |
| |
of the Finance (No. 2) Act 2005”. |
| |
| 25 |
(1) | 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 |
| |
enforceable, involving a single transaction or two or more transactions; |
| |
(b) | it shall be immaterial in determining whether any transactions have |
| 30 |
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 |
| |
(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 |
| 35 |
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 |
| |
| |
(ii) | if entered into independently of the other or others, would not |
| |
have taken the same form or been on the same terms. |
| 40 |
(2) | For the purposes of this Chapter, 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 |
| |
| |
(a) | a relief or increased relief from income tax or corporation tax, |
| |
(b) | a repayment or increased repayment of income tax or corporation tax, |
| 45 |
| |
|
| |
|
| |
|
(c) | the avoidance or reduction of a charge to income tax or corporation tax. |
| |
(3) | In subsection (2)(a) the reference to relief includes a reference to a tax credit. |
| |
(4) | For the purposes of subsection (2)(c) avoidance or reduction may in particular |
| |
| |
(a) | receipts accruing in such a way that the recipient does not pay or bear |
| 5 |
| |
(b) | a deduction in computing profits or gains. |
| |
| |
(1) | The deduction cases provisions have effect in relation to accounting periods of |
| |
a company beginning on or after 16th March 2005. |
| 10 |
(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 |
| |
straddling period”) consists of two separate accounting periods— |
| |
(a) | the first beginning with the straddling period and ending with the 15th |
| 15 |
| |
(b) | the second beginning with 16th March 2005 and ending with the |
| |
| |
| and the company’s profits and losses shall be computed accordingly for tax |
| |
| 20 |
(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— |
| |
(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 |
| 25 |
(b) | the scheme ceases to exist before 31st August 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 |
| |
capital of a company resident in the United Kingdom that is made on or after |
| |
| 30 |
| |
“the deduction cases provisions” means— |
| |
(a) | sections 24 and 25 and Schedule 3, and |
| |
(b) | sections 28 to 30 so far as relating to the provisions in paragraph |
| |
| 35 |
“the receipts cases provisions” means— |
| |
(a) | sections 26 and 27, and |
| |
(b) | sections 28 to 30 so far as relating to the provisions in paragraph |
| |
| |
|
| |
|