Finance Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 3 — Stamp taxes
41

Stamp duty and stamp duty reserve tax
50
Power to extend exceptions relating to recognised exchanges
(1)
The Treasury may by regulations extend the application of the provisions
mentioned in subsection (2) to any market (specified by name or by
description) which—
5
(a)
is not a recognised exchange, but
(b)
is a multilateral trading facility (or, assuming compliance with the
provisions of Title II of the Directive (authorisation and operating
conditions), would be such a facility).
(2)
The provisions referred to in subsection (1) are—
10
(a)
sections 80A and 80C of FA 1986 (stamp duty: exceptions for sales to
intermediaries and for repurchases and stock lending), and
(b)
sections 88A and 89AA of that Act (stamp duty reserve tax: exceptions
for intermediaries and for repurchases and stock lending).
(3)
In this section—
15
“the Directive” means Directive 2004/39/EC of the European Parliament
and of the Council of 21 April 2004 on markets in financial instruments;
“multilateral trading facility” has the same meaning as in the Directive
(see Article 4(15));
“recognised exchange” means any of the following—
20
(a)
an EEA exchange,
(b)
a recognised foreign exchange,
(c)
a recognised foreign options exchange,
within the meaning of the provisions mentioned in subsection (2).
(4)
Regulations under this section may provide for the application of the
25
provisions mentioned in subsection (2) subject to any adaptations appearing to
the Treasury to be necessary or expedient.
(5)
In subsection (1)(b) the words “(or, assuming compliance with the provisions
of Title II of the Directive (authorisation and operating conditions), would be
such a facility)” shall cease to have effect on such day as the Treasury may by
30
order appoint.
(6)
Section 117 of FA 2002 (power to extend the exceptions in subsection (2) to any
market prescribed by order under section 118(3) of the Financial Services and
Markets Act 2000) shall cease to have effect on such day as the Treasury may
by order appoint.
35
(7)
The power to make regulations or an order under this section is exercisable by
statutory instrument.
(8)
A statutory instrument containing—
(a)
regulations under this section, or
(b)
an order under subsection (5),
40

shall be subject to annulment in pursuance of a resolution of the House of
Commons.

Finance Bill
Part 4 — European company statute
42

Part 4
European company statute
51
Chargeable gains
(1)
After section 140D of TCGA 1992 (transfer of non-UK trade) insert—
“Formation of SE by merger
5
140E
Merger leaving assets within UK tax charge
(1)
This section applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
10
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
and
(d)
section 139 does not apply to any qualifying transferred assets.
15
(2)
Where this section applies, qualifying transferred assets shall be treated
for the purposes of corporation tax on chargeable gains as if acquired
by the SE for a consideration resulting in neither gain nor loss for the
transferor.
(3)
For the purposes of subsections (1) and (2) an asset is a qualifying
20
transferred asset if—
(a)
it is transferred to the SE as part of the process of the merger
forming it, and
(b)
subsections (4) and (5) are satisfied in respect of it.
(4)
This subsection is satisfied in respect of a transferred asset if—
25
(a)
the transferor is resident in the United Kingdom at the time of
the transfer, or
(b)
any gain that would have accrued to the transferor, had it
disposed of the asset immediately before the time of the
transfer, would have been a chargeable gain forming part of the
30
transferor’s chargeable profits in accordance with section 10B.
(5)
This subsection is satisfied in respect of a transferred asset if—
(a)
the transferee SE is resident in the United Kingdom on
formation, or
(b)
any gain that would accrue to the transferee SE were it to
35
dispose of the asset immediately after the transfer would be a
chargeable gain forming part of the SE’s chargeable profits in
accordance with section 10B.
(6)
For the purposes of this section a company is resident in a member State
if—
40
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and

Finance Bill
Part 4 — European company statute
43

(b)
it is not regarded, for the purposes of any double taxation relief
arrangements to which the State is a party, as resident in a
territory not within a member State.
(7)
This section does not apply to the formation of an SE by merger if—
(a)
it is not effected for bona fide commercial reasons, or
5
(b)
it forms part of a scheme or arrangements of which the main
purpose, or one of the main purposes, is avoiding liability to
corporation tax, capital gains tax or income tax;

and section 138 (clearance in advance) shall apply to this subsection as
it applies to section 137 (with any necessary modifications).
10
140F
Merger not leaving assets within UK tax charge
(1)
This section applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
15
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
(d)
in the course of the merger a company resident in the United
Kingdom (“company A”) transfers to a company resident in
20
another member State (“company B”) all assets and liabilities
relating to a business which company A carried on in a member
State other than the United Kingdom through a permanent
establishment, and
(e)
the aggregate of the chargeable gains accruing to company A on
25
the transfer exceeds the aggregate of any allowable losses so
accruing.
(2)
Where this section applies, for the purposes of this Act—
(a)
the allowable losses accruing to company A on the transfer shall
be set off against the chargeable gains so accruing, and
30
(b)
the transfer shall be treated as giving rise to a single chargeable
gain equal to the aggregate of those gains after deducting the
aggregate of those losses.
(3)
Where this section applies, section 815A of the Taxes Act shall also
apply.
35
(4)
Subsections (6) and (7) of section 140E apply for the purposes of this
section as they apply for the purposes of that section.
140G
Treatment of securities issued on merger
(1)
This section applies where—
(a)
an SE is formed by the merger of two or more companies in
40
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
45
and

Finance Bill
Part 4 — European company statute
44

(d)
the merger does not constitute or form part of a scheme of
reconstruction within the meaning of section 136.
(2)
Where this section applies, the merger shall be treated for the purposes
of section 136 as if it were a scheme of reconstruction.
(3)
Where section 136 applies by virtue of subsection (2) above section
5
136(6) (and section 137) shall not apply.
(4)
Subsections (6) and (7) of section 140E apply for the purposes of this
section as they apply for the purposes of that section.”
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
10
52
Intangible fixed assets
(1)
After paragraph 85 of Schedule 29 to FA 2002 (intangible fixed assets: gains and
losses: transfer of trade) insert—
“Formation of SE by merger
85A   (1)
This paragraph applies where—
15
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
20
(c)
the merging companies are not all resident in the same State,
and
(d)
paragraph 84 above does not apply to any qualifying
transferred assets.
      (2)
Where this paragraph applies a transfer of qualifying transferred
25
assets is treated for the purposes of this Schedule as tax-neutral (see
paragraph 140).
      (3)
For the purposes of sub-paragraphs (1) and (2) an asset is a
qualifying transferred asset if—
(a)
it is transferred as part of the process of the merger,
30
(b)
it is a chargeable intangible asset in relation to the transferor
immediately before the transfer, and
(c)
it is a chargeable intangible asset in relation to the transferee
immediately after the transfer.
      (4)
Sub-paragraph (2) shall apply in relation to the formation of an SE by
35
merger only if—
(a)
it is effected for bona fide commercial reasons, and
(b)
it does not form part of a scheme or arrangements of which
the main purpose, or one of the main purposes, is avoiding
liability to corporation tax, capital gains tax or income tax.
40
      (5)
Paragraph 84(6) (and therefore paragraph 88) shall apply, with any
necessary modifications, in relation to sub-paragraph (4) above as in
relation to paragraph 84(5).

Finance Bill
Part 4 — European company statute
45

      (6)
For the purposes of this paragraph a company is resident in a
member State if—
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded for the purposes of any double taxation
5
relief arrangements to which the State is a party, as resident
in a territory not within a member State.”
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
53
Intangible fixed assets: permanent establishment in another member State
10
(1)
After paragraph 87 of Schedule 29 to FA 2002 (intangible fixed assets: gains and
losses: transfer of non-UK trade) insert—
“Formation of SE by merger: transfer of non-UK trade
87A   (1)
This paragraph applies where—
(a)
an SE is formed by the merger of two or more companies in
15
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
20
(d)
in the course of the merger a company resident in the United
Kingdom (“the transferor”) transfers to a company resident
in another member State (“the transferee”) the whole or part
of a trade that, immediately before the transfer, the transferor
carried on in a member State other than the United Kingdom
25
through a permanent establishment,
(e)
the transfer includes the whole of the assets of the transferor
used for the purposes of the trade or part,
(f)
the transfer includes intangible fixed assets—
(i)
that are chargeable intangible assets in relation to the
30
transferor immediately before the transfer, and
(ii)
in the case of one or more of which the proceeds of
realisation exceed the cost recognised for tax
purposes, and
(g)
no claim is made under paragraph 86 above in relation to
35
those assets.
      (2)
Where tax would, but for the Mergers Directive, have been
chargeable in the member State in which the permanent
establishment is located, Part 18 of the Taxes Act 1988 (double
taxation relief), including any arrangements having effect by virtue
40
of section 788 (double taxation agreements), shall have effect as if the
amount of tax that would, but for the Mergers Directive, have been
charged in respect of the transfer of the chargeable intangible assets,
had actually been charged.
      (3)
In this paragraph “the Mergers Directive” has the same meaning as
45
in paragraph 87.

Finance Bill
Part 4 — European company statute
46

      (4)
For the purposes of this paragraph a company is resident in a
member State if—
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded, for the purposes of any double taxation
5
relief arrangements to which the State is a party, as resident
in a territory not within a member State.
      (5)
This paragraph does not apply to the formation of an SE by merger
if—
(a)
it is not effected for bona fide commercial reasons, or
10
(b)
it forms part of a scheme or arrangements of which the main
purpose, or one of the main purposes, is avoiding liability to
corporation tax, capital gains tax or income tax.
      (6)
Sub-paragraph (5) shall not affect the operation of this paragraph in
any case where, before the transfer, Her Majesty’s Revenue and
15
Customs have, on the application of the transferor, notified the
transferor that they are satisfied that the merger will be effected for
bona fide commercial reasons and will not form part of any such
scheme or arrangements as are mentioned in sub-paragraph (5)(b).
      (7)
An application under sub-paragraph (6) must be made in accordance
20
with paragraph 88.”
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
54
Loan relationships
(1)
After paragraph 12A of Schedule 9 to FA 1996 (loan relationships: gains and
25
losses: continuity of treatment for groups) insert—
“Formation of SE by merger
12B   (1)
This paragraph applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
30
Regulation (EC) 2157/2001 on the Statute for a European
Company (Societas Europaea),
(b)
each merging company is resident in a member State,
(c)
the merging companies are not all resident in the same State,
and
35
(d)
either—
(i)
immediately after formation the SE is resident in the
United Kingdom and within the charge to
corporation tax in accordance with section 6 of the
Taxes Act, or
40
(ii)
immediately after formation the SE is not resident in
the United Kingdom but is within the charge to
corporation tax in accordance with section 11 of the
Taxes Act 1988.

Finance Bill
Part 4 — European company statute
47

      (2)
Where this paragraph applies, the transfer in the course of the
merger of an asset or liability which represents a loan relationship
shall be disregarded except—
(a)
for the purpose of determining the debits or credits to be
brought into account in respect of exchange gains or losses
5
and identifying the company which is to bring them into
account, and
(b)
for the purpose of identifying the company in whose case a
debit or credit which does not relate to the transfer is to be
brought into account.
10
      (3)
Where this paragraph applies, the transferor and the transferee
companies of an asset or liability which represents a loan
relationship shall be deemed, except for the purposes specified in
sub-paragraph (2)(a) and (b), to be the same company.
      (4)
Paragraph 12(2A) shall have effect (with any necessary
15
modifications) in relation to this paragraph as in relation to
paragraph 12.
      (5)
Sub-paragraphs (2) and (3) shall apply in relation to the formation of
an SE by merger only if—
(a)
it is effected for bona fide commercial reasons, and
20
(b)
it does not form part of a scheme or arrangements of which
the main purpose, or one of the main purposes, is avoiding
liability to corporation tax, capital gains tax or income tax.
      (6)
But sub-paragraph (5) shall not have the effect of preventing sub-
paragraphs (2) and (3) from applying if before the merger Her
25
Majesty’s Revenue and Customs have on the application of the
merging companies notified them that Her Majesty’s Revenue and
Customs are satisfied that sub-paragraph (5) will not have that effect.
      (7)
For the purposes of this paragraph a company is resident in a
member State if—
30
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded for the purposes of any double taxation
relief arrangements to which the State is a party, as resident
in a territory not within a member State.”
35
(2)
Subsection (1) shall have effect in relation to the formation of an SE which
occurs on or after 1st April 2005.
55
Derivative contracts
(1)
After paragraph 30A of Schedule 26 to FA 2002 (derivative contracts: profits:
groups) insert—
40
“Formation of SE by merger
30B   (1)
This paragraph applies where—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
Regulation (EC) 2157/2001 on the Statute for a European
45
Company (Societas Europaea),