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Finance Bill
Schedule 8 — Financing of companies etc: transfer pricing and loan relationships

125

 

      (3)  

After that paragraph insert—

“Persons acting together in relation to financing arrangements

4A    (1)  

A person (“P”) shall be treated for the purposes of paragraph

1(1)(b)(i) above (but subject to sub-paragraph (7) below) as

indirectly participating in the management, control or capital of

5

another (“A”) at the time of the making or imposition of the actual

provision if—

(a)   

the actual provision relates, to any extent, to financing

arrangements for A;

(b)   

A is a body corporate or partnership;

10

(c)   

P and other persons acted together in relation to the

financing arrangements; and

(d)   

P would be taken to have control of A if, at any relevant

time, there were attributed to P the rights and powers of

each of the other persons mentioned in paragraph (c)

15

above.

      (2)  

A person (“Q”) shall be treated for the purposes of paragraph

1(1)(b)(ii) above (but subject to sub-paragraph (7) below) as

indirectly participating in the management, control or capital of

each of the affected persons at the time of the making or

20

imposition of the actual provision if—

(a)   

the actual provision relates, to any extent, to financing

arrangements for one of the affected persons (“B”);

(b)   

B is a body corporate or partnership;

(c)   

Q and other persons acted together in relation to the

25

financing arrangements; and

(d)   

Q would be taken to have control of both B and the other

affected person if, at any relevant time, there were

attributed to Q the rights and powers of each of the other

persons mentioned in paragraph (c) above.

30

      (3)  

It is immaterial for the purposes of sub-paragraph (1)(c) or (2)(c)

above whether P or Q and the other persons acting together in

relation to the financing arrangements did so at the time of the

making or imposition of the actual provision or at some earlier

time.

35

      (4)  

In sub-paragraph (1)(d) or (2)(d) “relevant time” means—

(a)   

a time when P or Q and the other persons were acting

together in relation to the financing arrangements; or

(b)   

a time in the period of six months beginning with the day

on which they ceased so to act.

40

      (5)  

In determining for the purposes of sub-paragraph (1)(d) or (2)(d)

whether P or Q would be taken to have control of another person,

the rights and powers of any person (and not just P or Q) shall be

taken to include those that would be attributed to that person in

determining under paragraph 4 above whether he is indirectly

45

participating in the management, control or capital of the other

person.

 

 

Finance Bill
Schedule 8 — Financing of companies etc: transfer pricing and loan relationships

126

 

      (6)  

In this paragraph “financing arrangements” means arrangements

made for providing or guaranteeing, or otherwise in connection

with, any debt, capital or other form of finance.

      (7)  

Where the condition in paragraph 1(1)(b) above would not be

satisfied but for this paragraph, paragraph 1(2) above applies only

5

to the extent that the actual provision relates to the financing

arrangements in question.”.

      (4)  

After the paragraph inserted by sub-paragraph (3) above insert—

“Financing arrangements: anticipatory provision

4B    (1)  

To the extent that it applies to provision relating to financing

10

arrangements, this Schedule has effect as if in paragraph 1(1)(b)

above the words “or within the period of six months beginning

with the day on which the actual provision was made or imposed”

were inserted immediately before sub-paragraph (i).

      (2)  

In this paragraph “financing arrangements” has the same meaning

15

as in paragraph 4A above.”.

      (5)  

In paragraph 6 (elimination of double counting), after sub-paragraph (4)

insert—

   “(4A)  

A claim by the disadvantaged person for the purposes of this

paragraph shall not be made where—

20

(a)   

the condition in paragraph 1(1)(b) above would not be

satisfied but for paragraph 4A above;

(b)   

the actual provision is provision in relation to a security

issued by one of the affected persons (“the issuer”);

(c)   

a guarantee is provided in relation to the security by a

25

person with whom the issuer has a participatory

relationship.

           

In this sub-paragraph “security” and “guarantee” have the same

meaning as in paragraph 1A above.

     (4B)  

For the purposes of sub-paragraph (4A) above, the cases where

30

one person has a “participatory relationship” with another are

those where—

(a)   

one of them is directly or indirectly participating in the

management, control or capital of the other; or

(b)   

the same person or persons is or are directly or indirectly

35

participating in the management, control or capital of each

of them.

     (4C)  

Paragraph 4A above applies for the purposes of sub-paragraph

(4B) above as it applies for the purposes of paragraph 1(1)(b)

above.”.

40

Amendments of Schedule 9 to FA 1996

2     (1)  

In Schedule 9 to FA 1996 (loan relationships: computational provisions),

paragraph 2 (late interest) is amended as follows.

      (2)  

In sub-paragraph (1B)—

 

 

Finance Bill
Schedule 8 — Financing of companies etc: transfer pricing and loan relationships

127

 

(a)   

omit “, but not a CIS-based close company,” and the words after

paragraph (c);

(b)   

in paragraph (a), at the end insert “or a person who controls a

company which is such a participator”;

(c)   

in paragraph (b), after “who is” insert “, or who controls a company

5

which is,”;

(d)   

for paragraph (c) substitute—

“(c)   

a company controlled by such a participator or by

a person who controls a company which is such a

participator, or

10

(d)   

a company in which such a participator has a major

interest.”;

(e)   

at the end insert—

   

“This is subject to sub-paragraph (1E).”.

      (3)  

After sub-paragraph (1D) insert—

15

   “(1E)  

A case does not fall within sub-paragraph (1B) above if either of

the following exceptions applies.

     (1F)  

The first exception applies where—

(a)   

the debtor company is a CIS-based close company at all

such times as are mentioned in sub-paragraph (1B) above;

20

(b)   

the person standing in the position of a creditor as respects

the loan relationship is not resident in a non-qualifying

territory at any such time; and

(c)   

the debtor company is a small or medium-sized enterprise

for the relevant accounting period.

25

     (1G)  

The second exception applies where—

(a)   

the debt is one that is owed to, or to persons acting for, a

CIS limited partnership;

(b)   

no member of that partnership is resident in a non-

qualifying territory at any time in the relevant accounting

30

period;

(c)   

the debtor company has received written notice from the

partnership containing information from which it appears

that the condition in paragraph (b) above is satisfied; and

(d)   

the debtor company is a small or medium-sized enterprise

35

for the relevant accounting period.”.

      (4)  

In sub-paragraph (6), at the appropriate places insert—

““non-qualifying territory” has the meaning given by

paragraph 5E of Schedule 28AA to the Taxes Act 1988;”;

““resident” has the meaning given by paragraph 5B(6) of

40

Schedule 28AA to the Taxes Act 1988;”;

““small or medium-sized enterprise” has the meaning given by

paragraph 5D of that Schedule.”.

3     (1)  

Paragraph 18 of that Schedule (discounted securities of close companies) is

amended as follows.

45

      (2)  

In sub-paragraph (1), omit paragraphs (aa) and (c).

      (3)  

In sub-paragraph (1)(b)—

 

 

Finance Bill
Schedule 8 — Financing of companies etc: transfer pricing and loan relationships

128

 

(a)   

in sub-paragraph (i), at the end insert “or a person who controls a

company which is such a participator”;

(b)   

in sub-paragraph (ii), after “an associate of” insert “a person who is,

or who controls a company which is,”;

(c)   

for sub-paragraph (iii) substitute—

5

“(iii)   

a company controlled by such a

participator or by a person who controls a

company which is such a participator.”.

      (4)  

After sub-paragraph (1) insert—

  “(1ZA)  

But for any such accounting period this paragraph shall not apply

10

in relation to that debtor relationship if any of the following

exceptions applies.”.

      (5)  

In sub-paragraph (1A), for the words before paragraph (a) substitute “The

first exception applies where—”.

      (6)  

After that sub-paragraph insert—

15

   “(1B)  

The second exception applies where—

(a)   

the issuing company is a CIS-based close company;

(b)   

at all times in the period when there is such a person as is

described in sub-paragraph (1)(b) above, that person is not

resident in a non-qualifying territory; and

20

(c)   

the issuing company is a small or medium-sized enterprise

for the period.

    (1C)  

The third exception applies where—

(a)   

the debt is one that is owed to, or to persons acting for, a

CIS limited partnership;

25

(b)   

no member of that partnership is resident in a non-

qualifying territory at any time in the period when there is

such a person as is described in sub-paragraph (1)(b)

above;

(c)   

the debtor company has received written notice from the

30

partnership containing information from which it appears

that the condition in paragraph (b) above is satisfied; and

(d)   

the issuing company is a small or medium-sized enterprise

for the period.”.

      (7)  

In sub-paragraph (4), at the appropriate places insert—

35

““CIS-based close company” and “CIS limited partnership”

have the meaning given by paragraph 2(6) above;”;

““non-qualifying territory” has the meaning given by

paragraph 5E of Schedule 28AA to the Taxes Act 1988;”;

““resident” has the meaning given by paragraph 5B(6) of

40

Schedule 28AA to that Act;”;

““small or medium-sized enterprise” has the meaning given by

paragraph 5D of that Schedule.”.

 

 

Finance Bill
Schedule 8 — Financing of companies etc: transfer pricing and loan relationships

129

 

Commencement and transitional provisions

4     (1)  

Except where sub-paragraph (2) or (3) applies, the amendments made by

this Schedule have effect in relation to accounting periods beginning on or

after 4th March 2005.

      (2)  

As regards any actual provision that constitutes, or gives rise to, a debtor

5

relationship entered into in pursuance of a contract—

(a)   

made before 4th March 2005, and

(b)   

not varied after that date, or not varied until after that date,

           

the amendments made by paragraph 1(2), (3) and (5) apply only in relation

to accounting periods beginning on or after 1st April 2007 or, in a case where

10

the contract is varied before 1st April 2007, in relation to accounting periods

beginning on or after the date of the variation.

      (3)  

As regards a debtor relationship entered into in pursuance of a contract—

(a)   

made before 4th March 2005, and

(b)   

not varied after that date, or not varied until after that date,

15

           

the amendments made by paragraph 2(2)(a) and (e), (3) and (4) and

paragraph 3(2) and (4) to (7) apply only in relation to accounting periods

beginning on or after 1st April 2007 or, in a case where the contract is varied

before 1st April 2007, in relation to accounting periods beginning on or after

the date of the variation.

20

      (4)  

In the case of a company’s accounting period (“the straddling period”) that

begins before and ends on or after a relevant date, for the purposes of sub-

paragraph (1) or (where it applies) sub-paragraph (2) or (3) the amendments

made by this Schedule have effect as if the straddling period consisted of—

(a)   

one accounting period beginning with the straddling period and

25

ending with the day before the relevant date, and

(b)   

a second accounting period beginning with the relevant date and

ending with the straddling period,

           

and the company’s profits and losses are to be computed accordingly for tax

purposes.

30

      (5)  

A reference in sub-paragraph (2) or (3) to a variation of a contract does not

include a reference to a variation that does not affect the terms of the debtor

relationship in question.

      (6)  

Sub-paragraph (3) is not to be read as allowing or requiring a debit to be

brought into account under Chapter 2 of Part 4 of FA 1996 for an accounting

35

period beginning on or after 1st April 2007, or the date of the variation, in

respect of any amount of interest or discount in respect of which a debit is so

brought into account for any earlier accounting period.

      (7)  

In the application of this paragraph to a person within the charge to income

tax—

40

(a)   

a reference to an accounting period is to be read as a reference to a

period of account;

(b)   

a reference in sub-paragraph (4) to a company is to be read as a

reference to such a person.

      (8)  

In this paragraph—

45

“actual provision” has the same meaning as in Schedule 28AA to ICTA;

“debtor relationship”—

 

 

Finance Bill
Schedule 9 — Insurance companies etc

130

 

(a)   

in relation to a company, has the meaning given by section

103(1) of FA 1996;

(b)   

in relation to a person other than a company, has a

corresponding meaning;

“relevant date” means—

5

(a)   

4th March 2005 for the purposes of sub-paragraph (1);

(b)   

1st April 2007, or (as the case may be) the date of the variation,

for the purposes of sub-paragraph (2) or (3).

Schedule 9

Section 42

 

Insurance companies etc

10

Expenses of insurance companies

1     (1)  

Section 76 of ICTA is amended as follows.

      (2)  

In subsection (8) (expenses attributable to basic life assurance and general

annuity business for the purposes of Step 1 are to be those so attributable

under proper internal accounting practice) in the second sentence (meaning

15

of “proper internal accounting practice”) at the end of paragraph (b) insert

“, or

(c)   

the Integrated Prudential Sourcebook.”.

      (3)  

The amendment made by this paragraph has effect in relation to periods of

account ending on or after 31st December 2004.

20

Interpretative provisions relating to insurance companies

2     (1)  

Section 431(2) of ICTA is amended as follows.

      (2)  

Insert the following definition at the appropriate place—

““the Integrated Prudential Sourcebook” means the Integrated

Prudential Sourcebook made by the Financial Services

25

Authority under the Financial Services and Markets Act

2000;”.

      (3)  

For the definition of “liabilities” substitute—

““liabilities”, in relation to an insurance company, means—

(a)   

the mathematical reserves of the company as

30

determined in accordance with chapter 7.3 of the

Integrated Prudential Sourcebook, and

(b)   

liabilities of the company (whose value falls to be

determined in accordance with chapter 1.3 of that

Sourcebook) which arise from deposit back

35

arrangements;

and for this purpose “deposit back arrangements” has the

same meaning as in that Sourcebook;”.

      (4)  

Omit the definition of “long-term liabilities”.

 

 

Finance Bill
Schedule 9 — Insurance companies etc

131

 

      (5)  

For the definition of “value” substitute—

““value”, in relation to an asset of an insurance company, means

the value of the asset as determined in accordance with

chapter 1.3, as read with chapter 3.2, of the Integrated

Prudential Sourcebook;”.

5

      (6)  

The amendments made by this paragraph have effect in relation to periods

of account ending on or after 31st December 2004.

Amendment of Chapter 1 of Part 12 of ICTA etc

3          

For section 431A of ICTA substitute—

“431A   

  Amendment of Chapter etc

10

(1)   

The Treasury may by order amend any insurance company taxation

provision where it is expedient to do so in consequence of the

exercise of any power under the Financial Services and Markets Act

2000, in so far as that Act relates to insurance companies.

(2)   

Where any exercise of a power under that Act has effect for a period

15

ending on or before, or beginning before and ending after, the day on

which an order containing an amendment in consequence of that

exercise is made under subsection (1) above, the power conferred by

that subsection includes power to provide for the amendment to

have effect in relation to that period.

20

(3)   

The Treasury may by order amend any of the following provisions—

(a)   

sections 432ZA, 432A, 432B to 432G and 755A and Schedule

19AA;

(b)   

sections 83A, 85, 88 and 89 of the Finance Act 1989;

(c)   

section 210A of the Taxation of Chargeable Gains Act 1992.

25

(4)   

An order under subsection (3) above may only be made so as to have

effect in relation to periods of account—

(a)   

beginning on or after 1st January 2005, and

(b)   

ending before 1st October 2006.

(5)   

The Treasury may by order amend subsection (4)(b) above by

30

substituting for “1st October 2006” a date no later than 1st October

2007.

(6)   

Any power conferred by this section to make an order includes

power to make—

(a)   

different provision for different cases or different purposes,

35

and

(b)   

incidental, supplemental, consequential or transitional

provision and savings.

(7)   

In this section “insurance company taxation provision” means any of

the following—

40

(a)   

a provision of this Chapter;

(b)   

any other provision of the Tax Acts so far as relating to

insurance companies.”.

 

 

 
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