House of Commons portcullis
House of Commons
Session 2005 - 06
Internet Publications
Other Bills before Parliament

Finance Bill


Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 5 — Chargeable gains

29

 

Chapter 5

Chargeable gains

Residence, location of assets etc

32      

Temporary non-residents

(1)   

Section 10A of TCGA 1992 is amended as follows.

5

(2)   

In subsection (3) (certain gains or losses to be excluded from being treated by

virtue of subsection (2) as accruing to the taxpayer in year of return)—

(a)   

in paragraph (a), for “he was neither resident nor ordinarily resident in

the United Kingdom” substitute—

“(i)   

he was neither resident nor ordinarily resident in

10

the United Kingdom, or

(ii)   

he was resident or ordinarily resident in the

United Kingdom but was Treaty non-resident;”;

(b)   

in paragraph (d), after “152(1)(b)” insert “, 153(1)(b)”.

(3)   

In subsection (8) (definitions) in the definition of “relevant disposal”, after

15

“United Kingdom” insert “and was not Treaty non-resident”.

(4)   

For subsection (9) substitute—

“(9)   

For the purposes of this section an individual satisfies the residence

requirements for a year of assessment—

(a)   

if, during any part of that year of assessment, he is resident in

20

the United Kingdom and not Treaty non-resident, or

(b)   

if he is ordinarily resident in the United Kingdom during that

year of assessment, unless he is Treaty non-resident during that

year of assessment.

(9A)   

For the purposes of this section an individual is Treaty non-resident at

25

any time if, at that time, he falls to be regarded as resident in a territory

outside the United Kingdom for the purposes of double taxation relief

arrangements having effect at that time.

(9B)   

Where this section applies in the case of any individual in

circumstances in which one or more intervening years would, but for

30

his being Treaty non-resident during some or all of that year or those

years, not be an intervening year, this section shall have effect in the

taxpayer’s case—

(a)   

as if subsection (2)(a) above did not apply in the case of any

amount treated by virtue of section 87 or 89(2) as an amount of

35

chargeable gains accruing to the taxpayer in any such

intervening year, and

(b)   

as if any such intervening year were not an intervening year for

the purposes of subsections (2)(b) and (c) and (6) above.”.

(5)   

After subsection (9B) (as inserted by subsection (4) above) insert—

40

“(9C)   

Nothing in any double taxation relief arrangements shall be read as

preventing the taxpayer from being chargeable to capital gains tax in

respect of any of the chargeable gains treated by virtue of subsection

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 5 — Chargeable gains

30

 

(2)(a) above as accruing to the taxpayer in the year of return (or as

preventing a charge to that tax from arising as a result).”.

(6)   

Omit subsection (10) (section to be without prejudice to right to claim relief

under double taxation relief arrangements).

(7)   

The amendments in subsections (2)(a), (4), (5) and (6) have effect—

5

(a)   

in any case in which the year of departure is, or (on the assumption that

the amendment in subsection (4) had always had effect) would be, the

year 2005-06 or a subsequent year of assessment; and

(b)   

in any case in which—

(i)   

the year of departure is, or (on that assumption) would be, the

10

year 2004-05, and

(ii)   

at a time in that year on or after 16th March 2005, the taxpayer

was resident or ordinarily resident in the United Kingdom and

was not Treaty non-resident (within the meaning given by

section 10A(9A) of TCGA 1992, as inserted by subsection (4)).

15

(8)   

The amendment in subsection (2)(b) has effect in relation to relevant disposals

made on or after 16th March 2005.

(9)   

The amendment in subsection (3) has effect for determining whether a disposal

of an asset is a relevant disposal for the purposes of section 10A of TCGA 1992

in any case in which the person making the disposal acquired the asset on or

20

after 16th March 2005.

33      

Trustees both resident and non-resident in a year of assessment

(1)   

After section 83 of TCGA 1992 insert—

“83A    

Trustees both resident and non-resident in a year of assessment

(1)   

This section applies if a chargeable gain accrues to the trustees of a

25

settlement on the disposal by them of an asset in a year of assessment

and the trustees—

(a)   

are within the charge to capital gains tax in that year of

assessment, but

(b)   

are non-UK resident at the time of the disposal.

30

(2)   

Where this section applies, nothing in any double taxation relief

arrangements shall be read as preventing the trustees from being

chargeable to capital gains tax (or as preventing a charge to tax arising,

whether or not on the trustees) by virtue of the accrual of that gain.

(3)   

For the purposes of this section the trustees of a settlement are within

35

the charge to capital gains tax in a year of assessment—

(a)   

if, during any part of that year of assessment, they are resident

in the United Kingdom and not Treaty non-resident, or

(b)   

if they are ordinarily resident in the United Kingdom during

that year of assessment, unless they are Treaty non-resident

40

during that year of assessment.

(4)   

For the purposes of this section the trustees of a settlement are non-UK

resident at a particular time if, at that time,—

(a)   

they are neither resident nor ordinarily resident in the United

Kingdom, or

45

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 6 — Miscellaneous

31

 

(b)   

they are resident or ordinarily resident in the United Kingdom

but are Treaty non-resident.

(5)   

For the purposes of this section the trustees of a settlement are Treaty

non-resident at any time if, at that time, they fall to be regarded as

resident in a territory outside the United Kingdom for the purposes of

5

double taxation relief arrangements having effect at that time.”.

(2)   

The amendment made by this section has effect in relation to disposals made

on or after 16th March 2005.

34      

Location of assets etc

Schedule 4 (which makes provision in relation to the situation of assets for the

10

purposes of TCGA 1992 and which makes minor amendments in that Act in

relation to non-resident companies with United Kingdom permanent

establishments) has effect.

Miscellaneous

35      

Exercise of options etc

15

Schedule 5 (which makes provision, for the purposes of the taxation of

chargeable gains, in relation to options) has effect.

36      

Notional transfers within a group

(1)   

Section 171A of TCGA 1992 (notional transfers within a group) is amended as

follows.

20

(2)   

After subsection (3) insert—

“(3ZA)   

In a case where B—

(a)   

is not resident in the United Kingdom, but

(b)   

is carrying on a trade in the United Kingdom through a

permanent establishment there,

25

   

the asset or part deemed to be transferred to B by A is to be treated for

the purposes of subsections (2)(c) and (3) above as having been

acquired by B for use by or for the purposes of the permanent

establishment; but that shall not be taken to affect the question whether

or not the asset or part is situated in the United Kingdom at any time.”.

30

(3)   

The amendment made by this section has effect in relation to disposals made

on or after 16th March 2005.

Chapter 6

Miscellaneous

Accounting practice and related matters

35

37      

Accounting practice and related matters

   

Schedule 6 (accounting practice and related matters) has effect.

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 6 — Miscellaneous

32

 

Financial avoidance etc

38      

Charges on income for the purposes of corporation tax

(1)   

Section 338A of ICTA (meaning of “charges on income” for the purposes of

corporation tax) is amended as follows.

(2)   

In subsection (2) (what are charges on income) paragraph (a) (annuities or

5

other annual payments that meet the conditions in section 338B) shall cease to

have effect.

(3)   

In section 125(1) of ICTA (annual payments for non-taxable consideration) for

“income tax,” substitute “income tax and”.

(4)   

In section 434A(2)(a) of ICTA (loss resulting to insurance company from

10

computation in accordance with Case I of Schedule D: reduction by specified

amounts) omit sub-paragraph (i) (which relates to charges on income).

(5)   

The side-note to section 494 of ICTA (charges on income) becomes “Loan

relationships etc.”.

(6)   

The amendment made by subsection (4) has effect for accounting periods

15

beginning on or after 1st April 2004.

(7)   

The other amendments made by this section have effect in relation to payments

made on or after the commencement date in respect of annuities or other

annual payments.

(8)   

Where—

20

(a)   

an accounting period of a company begins before, and ends on or after,

the commencement date,

(b)   

a payment in respect of an annuity or other annual payment is made by

the company in that period but before the commencement date, and

(c)   

the payment is deductible as a charge on income for the purposes of

25

corporation tax,

   

subsection (9) applies.

(9)   

In any such case, so much of any amount as represents that payment—

(a)   

is not deductible under section 75 of ICTA (expenses of management),

and

30

(b)   

is not to be brought into account under section 76 of that Act (expenses

of insurance companies) as expenses payable,

   

for that or any subsequent accounting period.

(10)   

Subsection (12) applies in any case where—

(a)   

a payment in respect of an annuity or other annual payment is made by

35

the company on or after the commencement date, and

(b)   

the condition in subsection (11) is satisfied.

(11)   

The condition is that the payment represents an amount which (apart from

subsection (12))—

(a)   

would not be deductible under section 75 of ICTA, or

40

(b)   

would not fall to be brought into account under section 76 of that Act,

   

by reason only of section 337A(1)(b) of that Act ( company’s income from any

source to be computed without any deduction in respect of charges on income)

as it applies by virtue of section 338A(2)(a) of that Act.

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 6 — Miscellaneous

33

 

(12)   

In any such case, the amount represented by the payment—

(a)   

is deductible under section 75 of ICTA, or

(b)   

falls to be brought into account under section 76 of that Act as expenses

payable,

   

for the accounting period in which the payment is made.

5

(13)   

In this section “the commencement date” means 16th March 2005.

39      

Avoidance involving financial arrangements

   

Schedule 7 (which makes provision in relation to tax avoidance involving

financial arrangements) has effect.

Financing of companies etc

10

40      

Transfer pricing and loan relationships

Schedule 8 (which amends Schedule 28AA to ICTA and Schedule 9 to FA 1996)

has effect.

Intangible fixed assets

41      

Intangible fixed assets

15

(1)   

Schedule 29 to FA 2002 (gains and losses of a company from intangible fixed

assets) is amended as set out in subsections (2) to (4).

(2)   

In paragraph 92 (transfer between company and related party treated as being

at market value)—

(a)   

in sub-paragraph (1), for “the following two exceptions” substitute “the

20

following four exceptions”;

(b)   

after sub-paragraph (4) insert—

   “(4A)  

The third exception is where—

(a)   

the asset is transferred from the company at less than

its market value, or to the company at more than its

25

market value,

(b)   

the related party—

(i)   

is not a company, or

(ii)   

is a company in relation to which the asset is

not a chargeable intangible asset immediately

30

after the transfer to it or (as the case may be)

immediately before the transfer from it,

   

and

(c)   

by virtue of any provision of—

(i)   

section 209 of the Taxes Act 1988 (meaning of

35

“distribution”), or

(ii)   

Part 3 of the Income Tax (Earnings and

Pensions) Act 2003 (employment income:

earnings and benefits etc treated as earnings),

   

the transfer gives rise (or would give rise but for sub-

40

paragraph (1)) to an amount to be taken into account

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 6 — Miscellaneous

34

 

in computing any person’s income, profits or losses

for tax purposes.

     (4B)  

Where the third exception applies, sub-paragraph (1) does

not apply, in relation to the computation mentioned in sub-

paragraph (4A)(c), for the purposes of any such provision as

5

is mentioned there.

     (4C)  

The fourth exception is where—

(a)   

the asset is transferred to the company, and

(b)   

on a claim for relief under section 165 of the Taxation

of Chargeable Gains Act 1992 (relief for gifts of

10

business assets) in respect of the transfer, a reduction

is made under subsection (4)(a) of that section.

     (4D)  

Where the fourth exception applies—

(a)   

the transfer is treated for the purposes of this

Schedule as being at market value less the amount of

15

the reduction;

(b)   

all such adjustments as may be required, by way of

assessment, amendment of returns or otherwise, may

be made (notwithstanding any time limit on the

making of an assessment or the amendment of a

20

return).”.

(3)   

In paragraph 95 (meaning of “related party”) for Case Three substitute—

        

“Case Three

         

C is a close company and P is, or is an associate of—

(a)   

a participator in C, or

25

(b)   

a participator in a company that has control of, or holds a

major interest in, C.”.

(4)   

In paragraph 132 (roll-over relief: transitory interaction with relief on

replacement of business asset), in sub-paragraph (5) (disapplication for certain

corporation tax purposes of Classes 4 to 7 in section 155 of TCGA 1992)—

30

(a)   

for “4 to 7” substitute “4 to 7A”;

(b)   

for “(goodwill and various types of quota)” substitute “(goodwill and

certain other intangible assets)”.

(5)   

In section 86(2) of FA 1993 (roll-over relief: power to amend section 155 of

TCGA 1992 by order) for the words after “may make such consequential

35

amendments” substitute “of—

(a)   

Schedule 7AB to the Taxation of Chargeable Gains Act 1992, or

(b)   

paragraph 132 of Schedule 29 to the Finance Act 2002,

   

as appear to the Treasury to be appropriate.”.

(6)   

The amendments made by subsection (2) have effect in relation to any transfer

40

of an asset made on or after 16th March 2005.

(7)   

The amendment made by subsection (3) has effect, for the purposes of

paragraph 92 of Schedule 29 to FA 2002 as it applies otherwise than for

determining the debits or credits to be brought into account under that

Schedule, in relation to any transfer of an asset made on or after 16th March

45

2005.

 
 

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 6 — Miscellaneous

35

 

(8)   

That amendment has effect, for all other purposes of that Schedule, in relation

to the debits or credits to be brought into account for accounting periods

beginning on or after 16th March 2005 (and, in relation to the debits or credits

to be brought into account for any such period, shall be deemed always to have

had effect).

5

(9)   

An accounting period beginning before, and ending on or after, that date is

treated for the purposes of subsection (8) as if so much of that period as falls

before that date, and so much of that period as falls on or after that date, were

separate accounting periods.

(10)   

The amendments made by subsection (4) have effect in relation to any such

10

acquisition as is referred to in paragraph 132(5) of Schedule 29 to FA 2002 made

on or after 22nd March 2005.

Insurance companies etc

42      

Insurance companies etc

Schedule 9 (which makes provision about insurance companies etc) has effect.

15

International matters

43      

Implementation of the amended Parent/Subsidiary Directive

(1)   

Section 801 of ICTA (dividends paid between related companies: relief for UK

and third country taxes) is amended as follows.

(2)   

After subsection (5) (meaning of one company being related to another)

20

insert—

“(5A)   

For the purposes of subsections (2) and (3) above (including any

determination of the extent to which underlying tax paid by the third,

fourth or subsequent company in question would be taken into account

under this Part if the conditions specified for the purpose in subsection

25

(2) above were satisfied) a company is also related to another company

if that other company—

(a)   

controls directly or indirectly, or

(b)   

is a subsidiary of a company which controls directly or

indirectly,

30

   

not less than 10% of the ordinary share capital of the first-mentioned

company.”.

(3)   

The amendment made by this section has effect where the dividend mentioned

in section 799(1) of ICTA is paid on or after 1st January 2005.

44      

Territories with a lower level of taxation: reduction of amount of local tax

35

(1)   

Section 750 of ICTA (controlled foreign companies: territories with a lower

level of taxation) is amended as follows.

(2)   

In subsection (1), after “if” insert “, after giving effect to subsections (1A) and

(1B) below,”.

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2005
Revised 24 May 2005