|
| |
|
section 18(3B) of ICTA) substitute— |
| |
“(2) | This section does not have effect in relation to a sale or transfer if the |
| |
proceeds of the sale or transfer are chargeable to tax.”. |
| |
(5) | Omit subsection (2A) (loan relationships). |
| |
(6) | For subsection (3) substitute— |
| 5 |
“(3) | The proceeds of any subsequent sale or other realisation of the right |
| |
to receive the distribution shall not, for any of the purposes of the Tax |
| |
Acts, be regarded as the income of the seller or the person on whose |
| |
behalf the right is otherwise realised.”. |
| |
(7) | In subsection (4), in the words following paragraph (b) after their |
| 10 |
substitution by paragraph 300(3)(b) of Schedule 1 to ITTOIA 2005, for |
| |
“interest” substitute “distribution”. |
| |
(8) | In subsection (4A), for “interest arising” substitute “distribution”. |
| |
(9) | In subsection (4B), for “interest” substitute “distribution”. |
| |
(10) | For subsection (7) (definitions) substitute— |
| 15 |
| |
“distribution”, in relation to shares in a company,— |
| |
(a) | has the same meaning as it has in the Corporation Tax |
| |
Acts (see section 209), but |
| |
(b) | also includes any amount that would be a distribution |
| 20 |
if the company paying it were resident in the United |
| |
| |
“shares” means shares in a company.”. |
| |
(11) | In subsection (8) (information powers) omit from “and for the purpose” to |
| |
the end of the subsection. |
| 25 |
(12) | The heading to the section becomes “Transfers of rights to receive |
| |
distributions in respect of shares”. |
| |
(13) | The amendments made by this paragraph have effect in relation to sales or |
| |
transfers on or after 2nd December 2004. |
| |
Change in ownership of company with investment business |
| 30 |
3 (1) | In section 768B(10) of ICTA (Part 4 of Schedule 28A to have effect for |
| |
restricting the debits to be brought into account in respect of loan |
| |
relationships) after “debits”, where first occurring, insert “and non-trading |
| |
| |
(2) | In section 768C(9) of ICTA (Part 4 of Schedule 28A to have effect for |
| 35 |
restricting the debits to be brought into account in respect of loan |
| |
relationships) after “debits”, where first occurring, insert “and non-trading |
| |
| |
(3) | Schedule 28A to ICTA (change in ownership of investment company: |
| |
deductions) is amended as follows. |
| 40 |
|
| |
|
| |
|
(4) | In paragraph 7(b) (apportionment of excess in paragraph 6(c), or of non- |
| |
trading deficit, to first part of accounting period) after “the whole amount of |
| |
the excess” insert “or, as the case may be, of the deficit”. |
| |
(5) | After paragraph 9 insert— |
| |
“9A (1) | This paragraph has effect in any case to which section 768B applies |
| 5 |
where the non-trading deficit mentioned in paragraph 6(dc) above |
| |
is apportioned by paragraph 7(b) above to the first part of the |
| |
accounting period being divided. |
| |
(2) | In any such case, none of that non-trading deficit shall be carried |
| |
| 10 |
(a) | the accounting period beginning immediately after the |
| |
change in the ownership of the company, or |
| |
(b) | any subsequent accounting period.”. |
| |
(6) | After paragraph 10 insert— |
| |
“10A (1) | This paragraph has effect in any case to which section 768C |
| 15 |
applies where the non-trading deficit mentioned in paragraph |
| |
13(1)(ec) below is apportioned by paragraph 16(1)(b) below to the |
| |
first part of the accounting period being divided. |
| |
(2) | In any such case, none of that non-trading deficit shall be carried |
| |
| 20 |
(a) | the accounting period beginning immediately after the |
| |
change in the ownership of the company, or |
| |
(b) | any subsequent accounting period.”. |
| |
(7) | In paragraph 16(1)(b) (apportionment of excess in paragraph 13(1)(ec), or of |
| |
non-trading deficit, to first part of accounting period) after “the whole |
| 25 |
amount of the excess” insert “or, as the case may be, of the deficit”. |
| |
(8) | The title of Part 4 of the Schedule becomes “Disallowed debits and non- |
| |
| |
(9) | The amendments made by this paragraph have effect in any case where the |
| |
change in ownership is on or after 10th February 2005. |
| 30 |
Transfers of rights to receive annual payments |
| |
4 (1) | After section 775 of ICTA (sale by individual of income derived from his |
| |
personal activities) insert— |
| |
“775A | Transfers of rights to receive annual payments |
| |
(1) | This section applies in any case where— |
| 35 |
(a) | a person sells or transfers the right to receive an annual |
| |
payment to which this section applies (see subsection (4)), |
| |
| |
(b) | the consideration (if any) for the sale or transfer would not, |
| |
apart from this section, be chargeable to tax. |
| 40 |
(2) | In any such case, tax is charged— |
| |
(a) | in the case of income tax, under this section; or |
| |
(b) | in the case of corporation tax, under Case III of Schedule D. |
| |
|
| |
|
| |
|
(3) | Where this section applies— |
| |
(a) | the tax is charged on an amount equal to the market value of |
| |
the right to receive the annual payment; |
| |
(b) | the tax is charged for the chargeable period in which the sale |
| |
| 5 |
(c) | the person liable for the tax is the person who sells or |
| |
transfers the right to the annual payment. |
| |
(4) | This section applies to any annual payment other than— |
| |
(a) | an annual payment under a life annuity; |
| |
(b) | an annual payment under a pension annuity; |
| 10 |
(c) | an annual payment to which section 347A applies (annual |
| |
payments that are not charges on income); |
| |
(d) | an annual payment in respect of which, by virtue of section |
| |
727 of ITTOIA 2005 (payments by individuals arising in UK), |
| |
no liability to income tax arises under Part 5 of that Act. |
| 15 |
(5) | This section applies in relation to part of an annual payment as it |
| |
applies in relation to the whole of an annual payment. |
| |
(6) | For the purposes of this section, a sale or transfer of all rights under |
| |
an agreement for annual payments, or under an annuity, is a sale or |
| |
transfer of the rights to each individual payment under the |
| 20 |
| |
| |
| |
(a) | a life annuity, as defined in section 657(1); or |
| |
(b) | a life annuity, as defined in section 473(2) of ITTOIA |
| 25 |
| |
“pension annuity” means an annuity which is pension income |
| |
within the meaning of Part 9 of ITEPA 2003 (see section 566(2) |
| |
| |
(2) | The amendment made by this paragraph has effect in relation to sales or |
| 30 |
transfers on or after 16th March 2005. |
| |
Disposals and acquisitions of company loan relationships with or without interest |
| |
5 (1) | Section 807A of ICTA is amended as follows. |
| |
(2) | After subsection (2A) (exclusion of certain tax) insert— |
| |
“(2B) | Where, in the case of any share, section 91A or 91B of the Finance Act |
| 35 |
1996 (shares treated as loan relationships) applies in relation to a |
| |
company for an accounting period, this section has effect— |
| |
(a) | in relation to a distribution in respect of the share as it has |
| |
effect in relation to interest under a loan relationship, and |
| |
(b) | in relation to a distribution accruing in respect of the share at |
| 40 |
a time when the company does not (within the meaning of |
| |
the section in question) hold the share as it applies in relation |
| |
to interest accruing under a loan relationship at a time when |
| |
the company is not a party to the loan relationship.”. |
| |
(3) | The amendment made by this paragraph has effect in relation to shares held |
| 45 |
by a company on or after 16th March 2005. |
| |
|
| |
|
| |
|
Manufactured interest and the accrued income scheme |
| |
6 (1) | In Schedule 23A to ICTA (manufactured dividends and interest) paragraph |
| |
3 (manufactured interest on UK securities) is amended as follows. |
| |
(2) | In sub-paragraph (2A) (restriction on relief under sub-paragraph (2)(c))— |
| |
(a) | in paragraph (a) (receipt of interest or payment representative of it) |
| 5 |
after “is chargeable to income tax” insert “(and see section 714(5) for |
| |
the amount so chargeable in a case where section 714(4) applies)”, |
| |
| |
(b) | for paragraph (b) (accrued income scheme) substitute— |
| |
“(b) | is, by virtue of section 714(2), chargeable to income |
| 10 |
tax on annual profits or gains in respect of transfers |
| |
of securities which are subject to the arrangement |
| |
giving rise to the payment of manufactured |
| |
| |
(3) | In sub-paragraph (2A), in the paragraph (b) so substituted, for “annual |
| 15 |
profits or gains” substitute “income”. |
| |
(4) | The amendment made by sub-paragraph (3) has effect in relation to |
| |
payments of manufactured interest made on or after 6th April 2005. |
| |
(5) | The other amendments made by this paragraph have effect in relation to |
| |
payments of manufactured interest made on or after 16th March 2005. |
| 20 |
Consideration due after time of disposal: creditor relationships etc |
| |
7 (1) | Section 48 of TCGA 1992 (consideration due after time of disposal) is |
| |
| |
(2) | At the beginning insert “(1)”. |
| |
| 25 |
“(2) | Subsection (1) above does not apply in relation to so much of any |
| |
consideration as consists of rights under a creditor relationship to |
| |
which a company becomes a party as a result of the disposal. |
| |
(3) | In the computation of the gain in a case where subsection (2) above |
| |
has effect in relation to any consideration, the amount to be brought |
| 30 |
into account in respect of that consideration is the fair value of the |
| |
| |
| |
(a) | “creditor relationship”, and |
| |
(b) | “fair value”, in relation to a creditor relationship, |
| 35 |
| each have the same meaning as in Chapter 2 of Part 4 of the Finance |
| |
Act 1996 (see section 103(1) of that Act).”. |
| |
Corporate strips: manipulation of price: associated payment giving rise to loss |
| |
8 | In TCGA 1992, after section 151C (strips: manipulation of price: associated |
| |
|
| |
|
| |
|
payment giving rise to loss) insert— |
| |
“151D | Corporate strips: manipulation of price: associated payment giving |
| |
| |
(1) | This section applies if— |
| |
(a) | as a result of any scheme or arrangement which has an |
| 5 |
unallowable purpose, the circumstances are, or might have |
| |
been, as mentioned in paragraph (a), (b) or (c) of section |
| |
| |
(b) | under the scheme or arrangement, a payment falls to be made |
| |
otherwise than in respect of the acquisition or disposal of a |
| 10 |
| |
(c) | as a result of that payment or the circumstances in which it is |
| |
made, a loss accrues to any person. |
| |
(2) | The loss shall not be an allowable loss. |
| |
(3) | For the purposes of this section a scheme or arrangement has an |
| 15 |
unallowable purpose if the main benefit, or one of the main benefits, |
| |
that might have been expected to result from, or from any provision |
| |
of, the scheme or arrangement (apart from section 452G of ITTOIA |
| |
2005 and this section) is— |
| |
(a) | the obtaining of a tax advantage by any person, or |
| 20 |
(b) | the accrual to any person of an allowable loss. |
| |
(4) | The reference in subsection (1)(b) above to the acquisition or disposal |
| |
of a corporate strip shall be construed as if it were in Chapter 8 of Part |
| |
4 of ITTOIA 2005 (profits from deeply discounted securities) (see, in |
| |
particular, sections 437 and 452F of that Act for the meaning of |
| 25 |
“disposal” and section 452E of that Act for the meaning of “corporate |
| |
| |
(5) | In subsection (3)(a) above “tax advantage” has the meaning given by |
| |
section 709(1) of the Taxes Act. |
| |
(6) | This section applies to losses accruing on or after 6th April 2005.”. |
| 30 |
Transactions within a group: shares subject to third party obligations |
| |
9 (1) | Section 171 of TCGA 1992 (transfers within a group: general provisions) is |
| |
| |
(2) | After subsection (3) insert— |
| |
“(3A) | Subsection (1) above does not apply— |
| 35 |
(a) | if section 91A of the Finance Act 1996 (shares subject to third |
| |
| |
(i) | does not apply in the case of the asset in relation to |
| |
company A immediately before the disposal, but |
| |
(ii) | does apply in the case of the asset in relation to |
| 40 |
company B immediately after its acquisition, or |
| |
| |
(i) | applies in the case of the asset in relation to company |
| |
A immediately before the disposal, but |
| |
|
| |
|
| |
|
(ii) | does not apply in the case of the asset in relation to |
| |
company B immediately after its acquisition.”. |
| |
(3) | The amendment made by this paragraph has effect in any case where the |
| |
disposal is on or after 16th March 2005. |
| |
Shares treated as loan relationships |
| 5 |
10 (1) | After section 91 of FA 1996 insert the following heading— |
| |
“Shares treated as loan relationships” |
| |
(2) | After that heading insert the following section— |
| |
“91A | Shares subject to outstanding third party obligations |
| |
(1) | This section applies for the purposes of corporation tax in relation to |
| 10 |
a company if at any time in an accounting period— |
| |
(a) | that company (“the investing company”) holds a share in |
| |
another company (“the issuing company”), |
| |
(b) | the share is subject to outstanding third party obligations (see |
| |
| 15 |
(c) | the share is an interest-like investment (see subsections (7) |
| |
| |
(2) | This Chapter shall have effect for the accounting period of the |
| |
investing company in accordance with subsection (3) below as if— |
| |
(a) | the share were rights under a creditor relationship of that |
| 20 |
| |
(b) | any distribution in respect of the share were not a |
| |
distribution falling within section 209(2)(a) or (b) of the Taxes |
| |
| |
(3) | The debits and credits to be brought into account by the investing |
| 25 |
company for the purposes of this Chapter as respects the share must |
| |
be determined on the basis of fair value accounting. |
| |
(4) | No debits are to be brought into account in respect of any transaction |
| |
(or series of transactions) which (apart from the assumption in |
| |
subsection (8)(b) below) would have the effect of causing the |
| 30 |
condition in paragraph (a) or (b) of subsection (7) below not to be |
| |
| |
(5) | For the purposes of this section, the cases where a share is subject to |
| |
outstanding third party obligations are those cases where— |
| |
(a) | the share is subject to obligations of any description in |
| 35 |
| |
(b) | the obligations are obligations of a person other than the |
| |
| |
(c) | the obligations are yet to be discharged, |
| |
| and where a share is subject to any such obligations, they are for the |
| 40 |
purposes of this section the “third party obligations” in the case of |
| |
| |
(6) | The descriptions of obligation are— |
| |
(a) | an obligation to meet unpaid calls on the share; |
| |
|
| |
|
| |
|
(b) | an obligation (not falling within paragraph (a) above) to |
| |
make a contribution to the capital of the issuing company |
| |
that could affect the value of the share. |
| |
(7) | In this section “interest-like investment” means a share whose nature |
| |
is such that the fair value of the share— |
| 5 |
(a) | is likely to increase at a rate which represents a return on an |
| |
investment of money at a commercial rate of interest (see |
| |
| |
(b) | is unlikely to deviate to a substantial extent from that rate of |
| |
| 10 |
| Fluctuations in value resulting from changes in exchange rates are to |
| |
be left out of account for the purposes of paragraph (b) above. |
| |
(8) | For the purposes of subsection (7) above, it shall be assumed — |
| |
(a) | that any third party obligations will be met in the amounts, |
| |
and at the time, at which they are due, and |
| 15 |
(b) | that no transaction (or series of transactions) intended to |
| |
cause the condition in paragraph (a) or (b) of that subsection |
| |
not to be satisfied will be entered into. |
| |
(9) | For the purposes of this section, the fair value of a share that is |
| |
subject to outstanding third party obligations must include the fair |
| 20 |
value of the obligations. |
| |
(10) | For the purposes of this section a company shall be treated as |
| |
continuing to hold a share notwithstanding that the share has been |
| |
transferred to another person— |
| |
(a) | under a repo or stock lending arrangement, or |
| 25 |
(b) | under a transaction which is treated by section 26 of the |
| |
Taxation of Chargeable Gains Act 1992 as not involving any |
| |
| |
(3) | After section 91A insert— |
| |
“91B | Non-qualifying shares |
| 30 |
(1) | This section applies for the purposes of corporation tax in relation to |
| |
a company if at any time in an accounting period— |
| |
(a) | the company (“the investing company”) holds a share in |
| |
another company (“the issuing company”), |
| |
(b) | the share is not one which, by virtue of paragraph 4 of |
| 35 |
Schedule 10 to this Act (holdings in unit trusts and offshore |
| |
funds), falls to be treated for that accounting period as if it |
| |
were rights under a creditor relationship of the investing |
| |
| |
(c) | the share is a non-qualifying share (see subsection (6) below), |
| 40 |
| and at no time in the accounting period does section 91A above |
| |
apply in relation to the investing company in the case of that share. |
| |
(2) | This Chapter shall have effect for that accounting period in |
| |
accordance with subsection (3) below as if— |
| |
(a) | the share were rights under a creditor relationship of the |
| 45 |
| |
|
| |
|