|
| |
|
(2) | The amendment made by this paragraph has effect where a company ceases |
| |
to be a member of a group on or after 16th March 2005. |
| |
Avoidance involving repos or stock lending |
| |
19 (1) | In Schedule 9 to FA 1996 (loan relationships) paragraph 15 is amended as |
| |
| 5 |
(2) | At the end of sub-paragraph (2) (disposals and acquisitions to which the |
| |
paragraph applies) add “and as is, in the case of those arrangements, the |
| |
disposal or acquisition effected by— |
| |
(a) | the transfer by A to B mentioned in sub-paragraph (3)(a) |
| |
| 10 |
(b) | any transfer to A that gives effect to the entitlement or |
| |
requirement described in sub-paragraph (3)(b) below.”. |
| |
(3) | In sub-paragraph (3) (meaning of “repo or stock-lending arrangements”)— |
| |
(a) | in paragraph (a), after “one person” insert “(“A”)” and after |
| |
“another” insert “(“B”)”; |
| 15 |
(b) | in paragraph (b), for “the transferor” substitute “A”. |
| |
(4) | In sub-paragraph (4A) (which states certain consequences of sub-paragraph |
| |
(1) for each party), omit paragraph (b) (transferee not to be regarded as a |
| |
party to the loan relationship) and the word “and” before it, and for the |
| |
words following that paragraph substitute— |
| 20 |
| “but nothing in sub-paragraph (1) above prevents the person to |
| |
whom those rights are transferred from being regarded for the |
| |
purposes of this Chapter as being party to the loan relationship as a |
| |
result of the transfer.”. |
| |
(5) | The amendments made by this paragraph have effect in any case where the |
| 25 |
transfer mentioned in paragraph 15(3)(a) of Schedule 9 to FA 1996 is on or |
| |
after 2nd December 2004, whenever the repo or stock-lending arrangements |
| |
in question were entered into. |
| |
(6) | In any case involving an arrangement for the sale and repurchase of |
| |
securities where the arrangement— |
| 30 |
(a) | falls within section 737E(1)(b) of ICTA, and |
| |
(b) | involves securities (“substituted securities”) being substituted for |
| |
| |
| the substitution of any securities on or after 2nd December 2004 shall be |
| |
treated for the purposes of sub-paragraph (5) as if it were a transfer falling |
| 35 |
within paragraph 15(3)(a) of Schedule 9 to FA 1996. |
| |
Capital redemption policies: computations on the I minus E basis |
| |
20 (1) | In Schedule 11 to FA 1996 (loan relationships: special provision for insurers) |
| |
paragraph 1 (I minus E basis) is amended as follows. |
| |
(2) | After sub-paragraph (1B) insert— |
| 40 |
“(1C) | In applying the I minus E basis for any accounting period in |
| |
respect of any life assurance business carried on by an insurance |
| |
company, no credits or debits shall be brought into account in |
| |
respect of any debtor relationship that represents a capital |
| |
|
| |
|
| |
|
redemption policy, within the meaning of Chapter 2 of Part 13 of |
| |
| |
(3) | The amendment made by this paragraph has effect in relation to a debtor |
| |
relationship on and after 10th February 2005 (whenever the capital |
| |
redemption policy was effected). |
| 5 |
Relevant discounted securities: corporate strips |
| |
21 (1) | Schedule 13 to FA 1996 (discounted securities: income tax) is amended as |
| |
| |
(2) | In paragraph 3 (meaning of “relevant discounted security”) in sub- |
| |
paragraph (1), for “paragraph 14(1)” substitute “paragraphs 13B(1) and |
| 10 |
| |
(3) | In paragraph 4 (meaning of “transfer”)— |
| |
(a) | in sub-paragraph (1), after “Subject to sub-paragraph (2)” insert “and |
| |
| |
(b) | in sub-paragraph (5), after “without prejudice to paragraph” insert |
| 15 |
| |
(4) | In paragraph 5 (redemption to include conversion), in sub-paragraph (3), |
| |
after “This paragraph does not apply to” insert “— |
| |
(a) | the conversion of an interest-bearing corporate security |
| |
into corporate strips (see paragraph 13A(2) to (7) below), |
| 20 |
| |
| |
(5) | After paragraph 13 (excluded indexed securities) insert— |
| |
“Meaning of corporate strip and conversion into corporate strips |
| |
13A (1) | In this Schedule “corporate strip” means any asset— |
| 25 |
(a) | which is, or has at any time been, one of the separate assets |
| |
mentioned in sub-paragraph (2) below, and |
| |
(b) | which is not prevented from being a corporate strip by |
| |
| |
(2) | For the purposes of this Schedule a person converts an interest- |
| 30 |
bearing corporate security into corporate strips of the security if he |
| |
has an interest-bearing corporate security (“the converted |
| |
corporate security”) but— |
| |
(a) | as a result of any scheme or arrangements, he comes to |
| |
have two or more separate assets in place of the converted |
| 35 |
| |
(b) | each of those separate assets satisfies condition A, |
| |
(c) | those separate assets, taken together, satisfy condition B, |
| |
| |
(d) | at least one of those separate assets is not prevented from |
| 40 |
being a corporate strip by sub-paragraph (9) below, |
| |
| and related expressions shall be construed accordingly. |
| |
(3) | Condition A is that the asset— |
| |
(a) | represents the right to, or |
| |
|
| |
|
| |
|
| |
| one or more stripped payments. |
| |
(4) | For the purposes of this paragraph, a “stripped payment” is— |
| |
| |
(b) | a payment corresponding to, |
| 5 |
| the whole or a part of one or more payments (whether of interest |
| |
or principal) remaining to be made under the converted corporate |
| |
| |
(5) | Condition B is that the assets, taken together,— |
| |
(a) | represent the right to, or |
| 10 |
| |
| every payment (whether of interest or principal) remaining to be |
| |
made under the converted corporate security (or payments |
| |
corresponding to every such payment). |
| |
| 15 |
(a) | has an interest-bearing corporate security, but |
| |
(b) | sells or transfers the right to one or more payments |
| |
remaining to be made under it (so that, as a result, there are |
| |
two or more separate assets which, taken together, satisfy |
| |
| 20 |
| this Schedule has effect as if, as a result of a scheme or |
| |
arrangements, the person had come to have the separate assets in |
| |
place of the security immediately before the sale or transfer. |
| |
(7) | For the purposes of this Schedule, sub-paragraphs (2) to (6) above |
| |
also have effect in relation to each of the separate assets mentioned |
| 25 |
in sub-paragraph (2) above as if it were itself an interest-bearing |
| |
corporate security (if that is not in fact the case). |
| |
(8) | Where sub-paragraphs (2) to (6) above have effect by virtue of sub- |
| |
| |
(a) | any reference in this Schedule to converting an interest- |
| 30 |
bearing corporate security into corporate strips of the |
| |
security shall be construed accordingly, and |
| |
(b) | sub-paragraph (1) above (meaning of “corporate strip”) |
| |
| |
(9) | An asset is not a corporate strip if it— |
| 35 |
(a) | represents the right to, or |
| |
| |
| payments of, or corresponding to, a part of every payment |
| |
remaining to be made under an interest-bearing corporate security |
| |
| 40 |
(10) | After a balance has been struck for a dividend on an interest- |
| |
bearing corporate security, any payment to be made in respect of |
| |
that dividend shall, at times falling after that balance has been |
| |
struck, be treated for the purposes of this paragraph as not being |
| |
a payment remaining to be made under the security. |
| 45 |
| References to payments the right to which a separate asset |
| |
represents or secures shall be construed accordingly. |
| |
|
| |
|
| |
|
Corporate strips deemed to be relevant discounted securities |
| |
13B (1) | Every corporate strip is a relevant discounted security. |
| |
(2) | Where a person converts an interest-bearing corporate security |
| |
into corporate strips of the security, he shall be deemed to have |
| |
paid, in respect of his acquisition of each corporate strip, an |
| 5 |
amount determined in accordance with sub-paragraph (3) below. |
| |
(3) | The amount is that which bears to the acquisition cost of the |
| |
converted corporate security the proportion that SMV bears to |
| |
| |
SMV is the market value of the corporate strip, and |
| 10 |
TMV is the total of the market values of all the separate assets |
| |
resulting from the conversion. |
| |
(4) | If the converted corporate security is a relevant discounted |
| |
| |
(a) | its conversion into corporate strips is deemed to be a |
| 15 |
transfer of the security, and |
| |
(b) | the amount payable on the transfer is deemed to be an |
| |
amount equal to the acquisition cost of the converted |
| |
| |
(5) | Where corporate strips are consolidated into a single security— |
| 20 |
(a) | by being exchanged by any person for that security, or |
| |
(b) | by being otherwise converted by any person into that |
| |
security under any arrangements, |
| |
| each of the corporate strips shall be deemed to have been |
| |
redeemed, at the time of the exchange or other conversion, by the |
| 25 |
payment to that person of an amount equal to its market value. |
| |
(6) | Sub-paragraphs (2) to (5) above have effect for the purposes of this |
| |
| |
(7) | For the purposes of this paragraph, the acquisition cost of the |
| |
converted corporate security is the amount paid in respect of his |
| 30 |
acquisition of the security by the person who has it immediately |
| |
before the conversion (no account being taken of any costs |
| |
incurred in connection with that acquisition). |
| |
(8) | References in this paragraph to the market value of a security |
| |
given or received in exchange for, or otherwise converted into, |
| 35 |
another are references to its market value at the time of the |
| |
| |
Corporate strips: manipulation of acquisition, sale or redemption price |
| |
13C (1) | This paragraph applies in any case where, as a result of any |
| |
| 40 |
(a) | the amount paid by a person in respect of his acquisition of |
| |
a corporate strip is or was more than the market value of |
| |
the corporate strip at the time of that acquisition, |
| |
(b) | the amount payable to a person on a transfer of a corporate |
| |
strip by him is less than the market value of the corporate |
| 45 |
strip at the time of the transfer, or |
| |
|
| |
|
| |
|
(c) | on redemption of a corporate strip, the amount payable to |
| |
a person, as the person holding the corporate strip, is less |
| |
than the market value of the corporate strip on the day |
| |
| |
| and the obtaining of a tax advantage by any person is the main |
| 5 |
benefit, or one of the main benefits, that might have been expected |
| |
to accrue from, or from any provision of, the scheme or |
| |
| |
(2) | In a case falling within sub-paragraph (1)(a) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above on a |
| 10 |
transfer of the corporate strip by him as if he had paid in respect |
| |
of his acquisition of the corporate strip an amount equal to the |
| |
market value of the corporate strip at the time of that acquisition. |
| |
(3) | In a case falling within sub-paragraph (1)(b) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above as if |
| 15 |
the amount payable to him on the transfer were an amount equal |
| |
to the market value of the corporate strip at the time of the |
| |
| |
(4) | In a case falling within sub-paragraph (1)(c) above, the person |
| |
shall be treated for the purposes of paragraph 1(2)(b) above as if |
| 20 |
the amount payable to him on redemption were an amount equal |
| |
to the market value of the corporate strip on the day before |
| |
| |
(5) | The market value of a corporate strip at any time shall be |
| |
determined for the purposes of this paragraph without regard to |
| 25 |
any increase or diminution in the value of the corporate strip as a |
| |
result of the scheme or arrangement mentioned in sub-paragraph |
| |
| |
(6) | For the purposes of this paragraph, no account shall be taken of |
| |
any costs incurred in connection with any transfer or redemption |
| 30 |
of a corporate strip or its acquisition. |
| |
(7) | In this paragraph “tax advantage” has the meaning given by |
| |
section 709(1) of the Taxes Act 1988. |
| |
Corporate strips: manipulation of price: associated payment giving rise to CGT loss |
| |
| 35 |
(a) | as a result of any scheme or arrangement which has an |
| |
unallowable purpose, the circumstances are, or might have |
| |
been, as mentioned in paragraph (a), (b) or (c) of paragraph |
| |
| |
(b) | under the scheme or arrangement, a payment falls to be |
| 40 |
made otherwise than in respect of the acquisition or |
| |
disposal of a corporate strip, and |
| |
(c) | as a result of that payment or the circumstances in which it |
| |
is made, a loss accrues to any person for the purposes of |
| |
| 45 |
| the loss shall not be an allowable loss for the purposes of capital |
| |
| |
|
| |
|
| |
|
(2) | For the purposes of this paragraph, a scheme or arrangement has |
| |
an 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 paragraph |
| |
13C above and this paragraph) is— |
| 5 |
(a) | the obtaining of a tax advantage by any person, or |
| |
(b) | the accrual to any person of an allowable loss for the |
| |
purposes of capital gains tax. |
| |
(3) | In this paragraph “tax advantage” has the meaning given by |
| |
section 709(1) of the Taxes Act 1988.”. |
| 10 |
(6) | In paragraph 15(1) (general interpretation) insert each of the following |
| |
definitions at the appropriate place— |
| |
“ “corporate strip” has the meaning given by paragraph 13A |
| |
| |
“ “interest-bearing corporate security” means any interest- |
| 15 |
bearing security other than— |
| |
(a) | a security issued by the government of a territory; |
| |
(b) | a share in a company;”; |
| |
“ “interest-bearing security” includes any loan stock or similar |
| |
| 20 |
| |
(a) | in the definition of “relevant discounted security”, after “paragraphs |
| |
| |
(b) | in the definition of “strip”, after ““strip”” insert “, except in the |
| |
expression “corporate strip”,”. |
| 25 |
(8) | The amendments made by this paragraph have effect in any case where a |
| |
person acquires a corporate strip on or after 2nd December 2004 otherwise |
| |
than in pursuance of an agreement entered into before that date. |
| |
Transactions within groups: treatment of transferee company |
| |
22 (1) | In Schedule 26 to FA 2002 (derivative contracts) paragraph 28 (transactions |
| 30 |
within groups) is amended as follows. |
| |
(2) | For sub-paragraph (3) (the credits and debits to be brought into account) |
| |
| |
“(3) | For the purpose of determining the credits and debits to be |
| |
brought into account for the purposes of this Schedule in respect |
| 35 |
of the derivative contract— |
| |
(a) | for the accounting period in which the transaction or, as |
| |
the case may be, the first of the series of transactions takes |
| |
place, the transferor company shall be treated as having |
| |
entered into that transaction for a consideration equal to |
| 40 |
the notional carrying value of the contract; and |
| |
(b) | for any accounting period in which it is a party to the |
| |
contract, the transferee company shall be treated as if it |
| |
had acquired the contract for a consideration equal to its |
| |
| 45 |
| For the purposes of this sub-paragraph the notional carrying value |
| |
is the amount that would have been the carrying value of the |
| |
|
| |
|
| |
|
derivative contract in the accounts of the transferor company if a |
| |
period of account had ended immediately before the date when |
| |
the company ceased to be party to the contract.”. |
| |
(3) | In sub-paragraph (5), after “In this paragraph” insert the following |
| |
| 5 |
““carrying value” has the same meaning as it has for the |
| |
purposes of paragraph 50A;”. |
| |
(4) | Where the period of account mentioned in the second sentence of the sub- |
| |
paragraph (3) substituted by sub-paragraph (2) begins before 1st January |
| |
2005, “carrying value” shall be construed as if the period had begun on or |
| 10 |
| |
(5) | The amendments made by this paragraph have effect in any case where the |
| |
relevant transaction is on or after 16th March 2005. |
| |
(6) | In this paragraph “the relevant transaction” means— |
| |
(a) | the related transaction mentioned in sub-paragraph (2)(a) of |
| 15 |
paragraph 28 of Schedule 26 to FA 2002, |
| |
(b) | the first of the series of transactions mentioned in sub-paragraph |
| |
(2)(b) of that paragraph, or |
| |
(c) | the transfer mentioned in sub-paragraph (2)(c) or (2)(d) of that |
| |
| 20 |
| by virtue of which that paragraph applies or would apply apart from |
| |
paragraph 30 of that Schedule. |
| |
Transactions within groups: fair value accounting |
| |
23 (1) | In Schedule 26 to FA 2002 (derivative contracts) paragraph 30 (transactions |
| |
within groups: fair value accounting) is amended as follows. |
| 25 |
(2) | In sub-paragraph (1), for paragraph (b) (treatment of transferee in respect of |
| |
the transaction) substitute— |
| |
“(b) | paragraph 28(3)(b) shall have effect in relation to the |
| |
| |
(3) | The amendment made by this paragraph has effect in any case where the |
| 30 |
relevant transaction is on or after 16th March 2005. |
| |
(4) | In this paragraph “the relevant transaction” has the same meaning as in |
| |
| |
Transferee leaving group after replacing transferor as party to derivative contract |
| |
24 (1) | In Schedule 26 to FA 2002 (derivative contracts) after paragraph 30 insert— |
| 35 |
“Transferee leaving group after replacing transferor as party to derivative contract |
| |
30A (1) | This paragraph applies in any case where— |
| |
(a) | paragraph 28 applies— |
| |
(i) | by virtue of sub-paragraph (2)(a) of that paragraph |
| |
| 40 |
(ii) | by virtue of sub-paragraph (2)(b) of that paragraph |
| |
| |
|
| |
|