|
| |
|
(b) | before the end of the relevant 6 year period, the transferee |
| |
company ceases to be a member of the relevant group. |
| |
(2) | In any such case, this Schedule shall have effect as if the transferee |
| |
| |
(a) | immediately before that cessation, assigned its rights and |
| 5 |
liabilities under the relevant derivative contract for a |
| |
consideration of an amount equal to their fair value at that |
| |
| |
(b) | immediately reacquired them for a consideration of the |
| |
| 10 |
| but only if Condition 1 or 2 is satisfied and sub-paragraph (5) does |
| |
| |
(3) | Condition 1 is that if sub-paragraph (2) has effect, a credit would |
| |
in consequence of paragraph (a) of that sub-paragraph fall to be |
| |
brought into account for the purposes of this Schedule by the |
| 15 |
| |
| |
(a) | Condition 1 is not satisfied, |
| |
(b) | the company has a hedging relationship between the |
| |
relevant derivative contract and a creditor relationship, |
| 20 |
| |
(c) | in consequence of paragraph 12A(2)(a) of Schedule 9 to the |
| |
Finance Act 1996, a credit falls to be brought into account |
| |
by the transferee company for the purposes of Chapter 2 of |
| |
Part 4 of the Finance Act 1996 in respect of the creditor |
| 25 |
| |
(5) | Where the transferee company ceases to be a member of the |
| |
relevant group by reason only of an exempt distribution (see |
| |
| |
(a) | sub-paragraph (2) does not have effect, but |
| 30 |
(b) | if there is chargeable payment within 5 years after the |
| |
making of the exempt distribution, sub-paragraph (6) |
| |
| |
(6) | Where this sub-paragraph applies, this Chapter shall have effect |
| |
| 35 |
(a) | the transferee company had, immediately before the |
| |
making of the chargeable payment, assigned its rights and |
| |
liabilities under the relevant derivative contract, |
| |
(b) | the assignment had been for a consideration of an amount |
| |
equal to the fair value of those rights and liabilities |
| 40 |
immediately before the transferee company ceased to be a |
| |
member of the relevant group, and |
| |
(c) | the transferee company had immediately reacquired those |
| |
rights and liabilities for a consideration of the same |
| |
| 45 |
| but only if Condition 1 or 2, as modified by sub-paragraph (7), is |
| |
| |
(7) | The modifications are that— |
| |
|
| |
|
| |
|
(a) | in Condition 1, the references to sub-paragraph (2), and |
| |
paragraph (a) of that sub-paragraph, are to be taken |
| |
respectively as references to sub-paragraph (6) and |
| |
paragraphs (a) and (b) of that sub-paragraph, and |
| |
(b) | in Condition 2, the reference to paragraph 12A(2)(a) of |
| 5 |
Schedule 9 to the Finance Act 1996 is to be taken as a |
| |
reference to paragraph 12A(6)(a) and (b) of that Schedule. |
| |
| |
“assignment”, in relation to Scotland, means an assignation; |
| |
“chargeable payment” has the meaning given by section |
| 10 |
214(2) of the Taxes Act 1988; |
| |
“exempt distribution” means a distribution which is exempt |
| |
by virtue of section 213(2) of the Taxes Act 1988; |
| |
“creditor relationship” has the same meaning as Chapter 2 of |
| |
Part 4 of the Finance Act 1996 (see section 103(1) of that |
| 15 |
| |
“the relevant 6 year period” means the period of 6 years |
| |
| |
(a) | in case A, the transaction mentioned in paragraph |
| |
| 20 |
(b) | in case B, the last of the series of transactions |
| |
mentioned in paragraph 28(2)(b); |
| |
“the relevant derivative contract” means the derivative |
| |
contract mentioned in paragraph 28(1); |
| |
“the relevant group” means— |
| 25 |
(a) | in case A, the group mentioned in paragraph 28(2)(a), |
| |
| |
(b) | in case B, the group mentioned in paragraph 28(2)(b); |
| |
“the transferee company” means the company referred to as |
| |
such in paragraph 28(1).”. |
| 30 |
(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. |
| |
Deeply discounted securities: corporate strips |
| |
25 (1) | Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted |
| |
securities) is amended as follows. |
| 35 |
(2) | In section 430 (meaning of “deeply discounted security”) in subsection (6) |
| |
(subjections) omit “and” before the entry relating to section 443(1) and at the |
| |
end of that entry add “, and |
| |
section 452A(1) (corporate strips).”. |
| |
(3) | In section 437 (transactions which are disposals) after subsection (4) insert— |
| 40 |
“(5) | In the case of interest-bearing corporate securities, further provision |
| |
about occasions counting as disposals is made by section 452F(2)(a). |
| |
(6) | In the case of corporate strips, further provision about occasions |
| |
counting as disposals is made by section 452F(2)(a) and (3)(a).”. |
| |
(4) | In section 438 (timing of transfers and acquisitions) for subsection (4) |
| 45 |
|
| |
|
| |
|
| |
“(4) | This section is subject to— |
| |
section 445(7) (exchanges for and consolidations of strips); |
| |
section 452F(4) (conversion into and consolidations of corporate |
| |
| 5 |
(5) | In section 440 (market value disposals) for subsection (5) substitute— |
| |
“(5) | Subsection (4) is subject to— |
| |
section 445(8) (exchanges for and consolidations of strips); |
| |
section 452F(5) (conversion into and consolidations of corporate |
| |
| 10 |
(6) | In section 441 (market value acquisitions) for subsection (3) substitute— |
| |
“(3) | Subsection (2) is subject to— |
| |
section 445(8) (exchanges for and consolidations of strips); |
| |
section 452F(5) (conversion into and consolidations of corporate |
| |
| 15 |
(7) | Section 444 (meaning of “strip” in Chapter 8) after subsection (5) insert— |
| |
“(6) | Nothing in this section affects the meaning of the expression |
| |
“corporate strip” in this Chapter (see section 452E).”. |
| |
(8) | After section 452 insert— |
| |
“Special rules for corporate strips |
| 20 |
452A | Application of this Chapter to corporate strips |
| |
(1) | All corporate strips are treated as deeply discounted securities for |
| |
the purposes of this Chapter, whether or not they would otherwise |
| |
| |
(2) | This Chapter applies to corporate strips subject to the rules in— |
| 25 |
(a) | section 452F (corporate strips: acquisitions and disposals), |
| |
| |
(b) | section 452G (corporate strips: manipulation of acquisition, |
| |
transfer or redemption payments). |
| |
452B | Meaning of “interest-bearing corporate security” in Chapter 8 |
| 30 |
(1) | In this Chapter “interest-bearing corporate security” means any |
| |
interest-bearing security other than— |
| |
(a) | a security issued by the government of a territory, or |
| |
(b) | a share in a company. |
| |
(2) | In this section “interest-bearing security” includes any loan stock or |
| 35 |
| |
(3) | Section 452D(4)(a) gives an extended meaning to references to |
| |
converting an interest-bearing corporate security into corporate |
| |
strips (and related expressions). |
| |
|
| |
|
| |
|
452C | Conversion of interest-bearing corporate securities into corporate |
| |
| |
(1) | For the purposes of this Chapter a person converts an interest- |
| |
bearing corporate security into corporate strips of the security if he |
| |
has an interest-bearing corporate security (“the converted corporate |
| 5 |
| |
(a) | as a result of any scheme or arrangements, he acquires two or |
| |
more separate assets in place of the converted corporate |
| |
| |
(b) | each of those separate assets satisfies condition A, |
| 10 |
(c) | those separate assets, taken together, satisfy condition B, and |
| |
(d) | at least one of those separate assets is not prevented from |
| |
being a corporate strip by section 452E(2) or (3), |
| |
| and related expressions shall be construed accordingly. |
| |
(2) | Condition A is that the asset— |
| 15 |
(a) | represents the right to, or |
| |
| |
| one or more stripped payments. |
| |
(3) | For the purposes of this section, a “stripped payment” is— |
| |
| 20 |
(b) | a payment corresponding to, |
| |
| the whole or a part of one or more payments (whether of interest or |
| |
principal) remaining to be made under the converted corporate |
| |
| |
(4) | Condition B is that the assets, taken together,— |
| 25 |
(a) | represent the right to, or |
| |
| |
| every payment (whether of interest or principal) remaining to be |
| |
made under the converted corporate security (or payments |
| |
corresponding to every such payment). |
| 30 |
| |
(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 condition B), |
| 35 |
| this Chapter has effect as if, as a result of a scheme or arrangements, |
| |
the person had acquired the separate assets in place of the security |
| |
immediately before the sale or transfer. |
| |
(6) | After a balance has been struck for a dividend on an interest-bearing |
| |
corporate security, any payment to be made in respect of that |
| 40 |
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. |
| |
452D | Conversion into corporate strips: lower level conversions |
| |
(1) | For the purposes of this Chapter, section 452C also has effect in |
| 45 |
relation to each of the separate assets mentioned in subsection (1) of |
| |
|
| |
|
| |
|
that section as if that separate asset were itself an interest-bearing |
| |
corporate security (if that is not in fact the case). |
| |
(2) | In subsection (1), the reference to section 452C includes a reference to |
| |
that section as it has effect by virtue of this section. |
| |
(3) | In the application of section 452C by virtue of this section, references |
| 5 |
to payments the right to which a separate asset represents or secures |
| |
shall be construed in accordance with subsection (6) of that section. |
| |
(4) | Where section 452C has effect by virtue of subsection (1)— |
| |
(a) | any reference in this Chapter to converting an interest- |
| |
bearing corporate security into corporate strips of the |
| 10 |
security shall be construed accordingly, and |
| |
(b) | section 452E (meaning of “corporate strip”) has effect |
| |
| |
452E | Meaning of “corporate strip” in Chapter 8 |
| |
(1) | In this Chapter “corporate strip” means any asset— |
| 15 |
(a) | which is, or has at any time been, one of the separate assets |
| |
mentioned in section 452C(1), and |
| |
(b) | which is not prevented from being a corporate strip by |
| |
| |
(2) | An asset is not a corporate strip if it— |
| 20 |
(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 or a |
| |
| 25 |
(3) | An asset is a corporate strip in the case of any person only if he |
| |
| |
(a) | on or after 2nd December 2004, and |
| |
(b) | otherwise than in pursuance of an agreement entered into |
| |
| 30 |
452F | Corporate strips: acquisitions and disposals |
| |
(1) | A person who converts an interest-bearing corporate security into |
| |
corporate strips of the security is treated as having acquired each |
| |
corporate strip by the payment of an amount equal to—![equation: cross[char[A],over[char[B],char[C]]]](missing.gif) |
| |
| 35 |
A is acquisition cost of the converted corporate security; |
| |
B is the market value of the corporate strip; |
| |
C is the total of the market values of all the separate assets |
| |
resulting from the conversion. |
| |
(2) | If the converted corporate security is a deeply discounted security— |
| 40 |
(a) | its conversion into corporate strips is to be treated for the |
| |
purposes of this Chapter as a transfer of the security, but |
| |
|
| |
|
| |
|
(b) | the amount payable on the transfer is taken to be an amount |
| |
equal to the acquisition cost of the converted corporate |
| |
| |
(3) | For the purposes of this Chapter— |
| |
(a) | the consolidation of a corporate strip with other corporate |
| 5 |
strips into a single security is a disposal of the corporate strip |
| |
by the person consolidating it (whether or not it would be |
| |
apart from this subsection), and |
| |
(b) | an amount equal to the market value of the corporate strip at |
| |
the consolidation is treated as payable on the disposal. |
| 10 |
(4) | Section 438 (timing of transfers and acquisitions) does not apply to a |
| |
conversion within subsection (1) or a consolidation within |
| |
| |
(5) | Subsections (1) to (3) apply instead of sections 440(4) (market value |
| |
on general conversions of deeply discounted securities) and 441 |
| 15 |
(market value acquisitions). |
| |
(6) | For the purposes of this section, the acquisition cost of the converted |
| |
corporate security is the amount paid in respect of his acquisition of |
| |
the security by the person who has it immediately before the |
| |
conversion (no account being taken of any costs incurred in |
| 20 |
connection with that acquisition). |
| |
(7) | References in this section to the market value of a security given or |
| |
received in exchange for, or otherwise converted into, another are |
| |
references to its market value at the time of the exchange or |
| |
| 25 |
452G | Corporate strips: manipulation of acquisition, transfer or redemption |
| |
| |
(1) | This section applies if— |
| |
(a) | as a result of any scheme or arrangement, an amount referred |
| |
to in subsection (2)(a), (b) or (c) differs from the market value |
| 30 |
of the corporate strip in a way specified in that subsection, |
| |
| |
(b) | the obtaining of a tax advantage by any person is the main |
| |
benefit, or one of the main benefits, that might have been |
| |
expected to accrue from, or from any provision of, the scheme |
| 35 |
| |
| |
(a) | the amount paid by a person in respect of the acquisition of |
| |
the corporate strip is or was more than the market value of |
| |
the corporate strip at the time of that acquisition, |
| 40 |
(b) | the amount payable to a person on transferring the corporate |
| |
strip is less than the market value at the time of the transfer, |
| |
| |
(c) | on redemption of the corporate strip the amount payable to a |
| |
person, as the person holding the corporate strip, is less than |
| 45 |
the market value on the day before redemption. |
| |
(3) | In a case within subsection (2)(a), for the purposes of section 439(1) |
| |
on transferring the corporate strip the person is treated as if the |
| |
|
| |
|
| |
|
person had paid to acquire the corporate strip an amount equal to the |
| |
market value of the corporate strip at the time of the acquisition. |
| |
(4) | In a case falling within subsection (2)(b), for those purposes the |
| |
person is treated as if the amount payable to the person on the |
| |
transfer were an amount equal to the market value of the corporate |
| 5 |
strip at the time of the transfer. |
| |
(5) | In a case falling within subsection (2)(c), for those purposes the |
| |
person is treated as if the amount payable to the person on |
| |
redemption were an amount equal to the market value of the |
| |
corporate strip on the day before redemption. |
| 10 |
(6) | The market value of a corporate strip at any time is to be determined |
| |
for the purposes of this section without regard to any increase or |
| |
diminution in the value of the corporate strip as a result of the |
| |
scheme or arrangement mentioned in subsection (1). |
| |
(7) | For the purposes of this section, no account is to be taken of any |
| 15 |
incidental expenses incurred in connection with any disposal or |
| |
acquisition of a corporate strip.”. |
| |
(9) | In Schedule 4 (abbreviations and defined expressions) in Part 2 (expressions |
| |
defined in the Act or in ICTA) insert each of the following entries at the |
| |
| 20 |
| “conversion of an interest-bearing |
| | | | | corporate security into corporate |
| | | | | strips of the security (for the purposes |
| | | | | | | | | | “corporate strip (for the purposes of |
| | | 25 | | | | | | | “interest-bearing corporate security (for |
| | | | | the purposes of Chapter 8 of Part 4) |
| | | |
|
(10) | ITTOIA 2005 shall have effect as if it had been originally enacted with the |
| |
amendments made by this paragraph. |
| 30 |
| |
| |
Financing of companies etc: transfer pricing and loan relationships |
| |
Amendments of Schedule 28AA to ICTA |
| |
1 (1) | Schedule 28AA to ICTA (provision not at arm’s length) is amended as |
| |
| 35 |
(2) | In paragraph 4 (participation in the management, control or capital of a |
| |
person), in sub-paragraph (2) (meaning of indirect participation) for “and |
| |
only if” substitute “and (subject to paragraphs 4A and 6(4C) below) only if”. |
| |
|
| |
|