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21 | Unit trusts: treatment of accumulation units |
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(1) | In Chapter III of Part III of TCGA 1992 (collective investment schemes, &c.) |
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after section 99A insert— |
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“99B | Calculation of the disposal cost of accumulation units |
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(1) | For the purposes of computing the gain accruing on a disposal by a unit |
| 5 |
holder of units in a unit trust scheme and for the purposes of all other |
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provisions of this Act, an amount shall be treated as expenditure falling |
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within section 38(1)(b) if— |
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(a) | it represents income from the investments subject to the unit |
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(b) | it has been reinvested in respect of the units on behalf of the unit |
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holder (without an issue of new units), and |
| |
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(i) | charged to income tax as income of the unit holder (or |
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would be charged to income tax as his income but for a |
| 15 |
relief which has effect in respect of it) for the purposes of |
| |
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(ii) | taken into account as a receipt in calculating profits, |
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gains or losses of the unit holder for the purposes of the |
| |
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(2) | Where an amount is treated as expenditure by virtue of subsection (1), |
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the expenditure shall be treated for the purposes of this Act as having |
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(a) | in relation to an authorised unit trust, on the distribution date |
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for the distribution period in respect of which the amount is |
| 25 |
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(b) | in relation to any other unit trust scheme, on the date on which |
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the amount is reinvested. |
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(3) | In subsection (2)(a) “distribution date” and “distribution period” shall |
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have the meaning given by section 468H of the Taxes Act.” |
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(2) | This section shall have effect in relation to a disposal of units on or after 16th |
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22 | Section 349B ICTA: exemption for distributions to PEP/ISA managers |
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(1) | Section 349B(4) of ICTA (requirement for individual to be entitled to income |
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tax exemption) shall be amended as follows. |
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(2) | In paragraph (a) after “of a plan” insert “of a kind to which regulations under |
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Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) |
| |
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(3) | Paragraph (b) shall cease to have effect. |
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(4) | This section shall have effect in relation to payments made on or after 6 April |
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| |
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(1) | In section 761 of ICTA (charge on offshore income gain)— |
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|
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|
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|
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(i) | for “sections 2(1) and 10” substitute “sections 2(1), 10 and 10B”, |
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(ii) | for “section 11(2)(b)” substitute “section 11(2A)(c)”, and |
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(i) | for “section 10” substitute “sections 10 and 10B”, |
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(ii) | for “subsection (1) of that section” substitute “subsection (1) of |
| |
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(iii) | for the words “and subsection (3) of that section (which makes |
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similar provision in relation to corporation tax) shall have effect |
| 10 |
with the omission of the words “situated in the United |
| |
Kingdom”” substitute “and paragraphs (a) and (b) of subsection |
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(1) of section 10B (which make similar provision in relation to |
| |
corporation tax) shall have effect with the omission of the words |
| |
“situated in the United Kingdom and””. |
| 15 |
(2) | For paragraph 1(1)(d) of Schedule 27 to ICTA (distributing funds) substitute— |
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“(d) | the form of the distribution is such that— |
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(i) | if any sum forming part of it were received in the |
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United Kingdom by an individual resident there and |
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did not form part of the profits of a trade, profession |
| 20 |
or vocation, that sum would fall to be chargeable to |
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tax under a provision specified in section 830(2) of |
| |
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(ii) | if any sum forming part of it were received in the |
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United Kingdom by a company resident there and |
| 25 |
did not form part of the profits of a trade, profession |
| |
or vocation, that sum would fall to be chargeable to |
| |
tax in accordance with section 18 of ICTA (Schedule |
| |
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(a) | under Case III of Schedule D in respect of |
| 30 |
income arising from securities out of the |
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United Kingdom or from possessions out of |
| |
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(b) | under Case V of Schedule D;”. |
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(3) | For paragraph 3(1)(a) of that Schedule (distributing funds) substitute— |
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“(a) | the holders of interests in the fund who are individuals |
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domiciled and resident in the United Kingdom— |
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(i) | are chargeable to tax under a provision specified in |
| |
section 830(2) of ITTOIA 2005 in respect of such of those |
| |
sums as are referable to their interests; or |
| 40 |
(ii) | if any of that income is derived from assets within the |
| |
United Kingdom, would be so chargeable had the assets |
| |
been outside the United Kingdom; |
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(aa) | the holders of interests in the fund which are companies |
| |
resident in the United Kingdom— |
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(i) | are chargeable to tax under Case III of Schedule D in |
| |
respect of income arising from securities out of the |
| |
United Kingdom or from possessions out of the United |
| |
| |
(ii) | are chargeable to tax under Case V of Schedule D; or |
| 50 |
|
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|
| |
|
(iii) | if any of that income is derived from assets within the |
| |
United Kingdom, would have been chargeable under |
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sub-paragraph (i) or (ii) had the assets been outside the |
| |
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(4) | In paragraph 3(1)(b) of that Schedule (distributing funds) for “sub-paragraph |
| 5 |
(i) or (ii)” substitute “paragraph (a) or (aa)”. |
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Avoidance involving tax arbitrage |
| |
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(1) | If the Commissioners for Her Majesty’s Revenue and Customs consider, on |
| 10 |
reasonable grounds, that conditions A to D are or may be satisfied in relation |
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to a transaction to which a company falling within subsection (2) is party, they |
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may give the company a notice under this section. |
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(2) | A company falls within this subsection if— |
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(a) | it is resident in the United Kingdom, or |
| 15 |
(b) | it is resident outside the United Kingdom but is within the charge to |
| |
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(3) | Condition A is that the transaction to which the company is party forms part |
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of a scheme that is a qualifying scheme. |
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(4) | Condition B is that the scheme is such that for the purposes of corporation tax |
| 20 |
the company is in a position to claim or has claimed an amount by way of |
| |
deduction in respect of the transaction or is in a position to set off or has set off |
| |
against profits in an accounting period an amount relating to the transaction. |
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(5) | Condition C is that the main purpose, or one of the main purposes, of the |
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scheme is to achieve a UK tax advantage for the company. |
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(6) | Condition D is that the amount of the UK tax advantage in question is more |
| |
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(7) | A notice under this section is a notice— |
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(a) | specifying the transaction in relation to which the Commissioners |
| |
consider that conditions A to D are or may be satisfied, |
| 30 |
(b) | specifying the accounting period in relation to which the |
| |
Commissioners consider that condition B is or may be satisfied as |
| |
regards the transaction, and |
| |
(c) | informing the company that as a consequence section 25 (rules relating |
| |
to deductions) has effect in relation to the transaction. |
| 35 |
(8) | Nothing in this section prevents the Commissioners from giving a company |
| |
falling within subsection (2) a notice under this section as regards two or more |
| |
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(9) | Schedule 3 makes provision about what constitutes a qualifying scheme. |
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25 | Rules relating to deductions |
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(1) | The following provisions of this section apply in relation to a transaction if— |
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|
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|
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|
(a) | a notice specifying the transaction is given to a company under section |
| |
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(b) | when the notice is given, conditions A to D of section 24 are satisfied in |
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relation to the transaction. |
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(2) | The company must compute (or recompute) for the purposes of corporation |
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tax its income or chargeable gains, or its liability to corporation tax— |
| |
(a) | for the accounting period specified in the notice under section 24, and |
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(b) | for any subsequent accounting period, |
| |
| in accordance with rules A and B. |
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(3) | Rule A is that, in respect of the specified transaction, no amount is allowable as |
| 10 |
a deduction for the purposes of the Corporation Tax Acts to the extent that, in |
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relation to the expense in question, an amount may be otherwise deducted or |
| |
allowed in computing the income, profits or losses of any person for the |
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purposes of any tax (including any foreign tax) other than— |
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(a) | petroleum revenue tax, or |
| 15 |
(b) | the tax chargeable under section 501A(1) of ICTA (supplementary |
| |
charge in respect of ring fence trades). |
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(4) | The reference in subsection (3) to an amount otherwise deducted or allowed in |
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computing the income, profits or losses of any person for the purposes there |
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mentioned includes a reference to an amount that would be so deducted or |
| 20 |
allowed but for any rule that has the same effect as rule A. |
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(5) | For the purposes of subsection (4) “rule” means— |
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(a) | a provision of the Tax Acts, or |
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(b) | a rule having effect under the tax law of any territory outside the |
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(a) | a transaction, or a series of transactions, forming part of the scheme by |
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reference to which conditions A to D are satisfied makes or imposes |
| |
provision as a result of which one person (“the payer”) makes a |
| |
payment and another person (“the payee”) receives, or becomes |
| 30 |
entitled to receive, a payment or payments, |
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(b) | in respect of the payment by the payer, an amount may be deducted or |
| |
otherwise allowed to the payer, or to another person who is party to, or |
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concerned in, the scheme, in computing any profits or losses for tax |
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(c) | in respect of the payment or payments that the payee receives or is |
| |
entitled to receive as a result of the transaction or series of transactions, |
| |
or part of such payment or payments, the payee is not liable to tax or, if |
| |
liable, his liability to tax is reduced as a result of provision made or |
| |
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(7) | Without prejudice to the generality of subsection (6)(c), the payee’s liability to |
| |
tax in respect of the payment or payments that he receives or is entitled to |
| |
receive as a result of the transaction or series of transactions shall be treated for |
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the purposes of subsection (6)(c) as reduced as a result of provision made or |
| |
imposed by the scheme if— |
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(a) | an amount arising from the transaction or series of transactions |
| |
forming part of the scheme, or from another transaction or series of |
| |
transactions forming part of the scheme, falls to be deducted or |
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otherwise allowed to the payee in computing for tax purposes any |
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|
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|
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|
profits or losses arising from the payment or payments or the |
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entitlement to receive the payment or payments, or |
| |
(b) | an amount of relief arising from the transaction or series of transactions |
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forming part of the scheme, or from another transaction or series of |
| |
transactions forming part of the scheme, may be deducted from the |
| 5 |
amount of income or gains arising from the payment or payments or |
| |
the entitlement to receive the payment or payments. |
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(8) | The requirement in subsection (6)(c) is not satisfied if the payee is not liable to |
| |
tax because he is not liable to tax on any income or gains received by him or for |
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his benefit under the tax law of any territory. |
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(9) | The requirement in subsection (6)(c) is not satisfied if, or to the extent that, the |
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payee is not subject to tax because his liability to tax is subject to an exemption |
| |
falling within subsection (10). |
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(10) | An exemption falls within this subsection if— |
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(a) | it exempts a person from being liable to tax in respect of income or |
| 15 |
gains, without providing for that income or those gains to be treated as |
| |
the income or gains of one or more other persons, and |
| |
(b) | it is conferred by a provision contained in or having the force of an Act |
| |
or by a provision of the tax law of any territory outside the United |
| |
| 20 |
(11) | Rule B is that the aggregate of the amounts allowable as a deduction for the |
| |
purposes of the Corporation Tax Acts in computing any profits to the company |
| |
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(a) | the specified transaction, and |
| |
(b) | any other transaction that forms part of the scheme and to which the |
| 25 |
| |
| is to be reduced in accordance with subsections (12) and (13). |
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(12) | If, in respect of the payment or payments that the payee receives or is entitled |
| |
to receive, the payee is not liable to tax for the purposes of the requirement in |
| |
subsection (6)(c), the aggregate is to be reduced to nil. |
| 30 |
(13) | If, in respect of the payment or payments, the payee is liable to tax as regards |
| |
part or his liability to tax is reduced as described in subsection (6)(c), the |
| |
aggregate is to be reduced to such proportion of the aggregate as is equal to the |
| |
proportion of the payment or payments on which the payee is liable to tax; and |
| |
for this purpose the amount by which the payee’s liability is reduced is to be |
| 35 |
treated as an amount on which the payee is not liable to tax. |
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(14) | The company may choose to incorporate in its company tax return for the |
| |
specified accounting period such relevant adjustments as are necessary for |
| |
counteracting those effects of the scheme that are referable to the purpose |
| |
referred to in condition C. |
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(15) | If, as a consequence of incorporating relevant adjustments in that company tax |
| |
return, the company counteracts those effects of the scheme that are referable |
| |
to the purpose referred to in condition C, the company is to be treated, so far |
| |
as regards the scheme, as having complied with subsection (2). |
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(16) | The following are relevant adjustments— |
| 45 |
(a) | treating all or part of a deduction allowable for corporation tax |
| |
purposes as not being allowable; |
| |
|
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|
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|
(b) | treating all or part of an amount that for corporation tax purposes may |
| |
be set off against profits in an accounting period as not falling to be set |
| |
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(17) | In this section, references to tax purposes include a reference to the purposes |
| |
of any foreign tax; and foreign tax has the meaning given by section 403D of |
| 5 |
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(18) | In this section, “company tax return” means the return required to be delivered |
| |
pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with |
| |
paragraph 4 of that Schedule. |
| |
| 10 |
(1) | If the Commissioners for Her Majesty’s Revenue and Customs consider, on |
| |
reasonable grounds, that conditions A to E are or may be satisfied in relation |
| |
to a company resident in the United Kingdom, they may give the company a |
| |
notice under this section. |
| |
(2) | Condition A is that a scheme makes or imposes provision (“the actual |
| 15 |
provision”) as between the company and another person (“the paying party”) |
| |
by means of a transaction or series of transactions. |
| |
(3) | Condition B is that the actual provision includes the making by the paying |
| |
party, by means of a transaction or series of transactions, of a payment that is |
| |
a qualifying payment in relation to the company. |
| 20 |
(4) | Condition C is that, as regards the qualifying payment made by the paying |
| |
party, there is an amount that— |
| |
(a) | is available as a deduction for the purposes of the Tax Acts, or |
| |
(b) | may be deducted or otherwise allowed in respect of the payment under |
| |
the tax law of any territory outside the United Kingdom, |
| 25 |
| and does not fall to be disregarded as described in subsection (5). |
| |
(5) | An amount is to be disregarded if or to the extent that it is, for tax purposes, set |
| |
against any income arising to the paying party from the transaction or |
| |
transactions forming part of the scheme. |
| |
(6) | Condition C is not to be treated as satisfied if— |
| 30 |
(a) | the paying party is a dealer, |
| |
(b) | in the ordinary course of his business, he incurs losses in respect of the |
| |
transaction or transactions forming part of the scheme to which he is |
| |
| |
(c) | the amount by reference to which condition C would, but for this |
| 35 |
subsection, be satisfied is an amount in respect of those losses. |
| |
(7) | In subsection (6), “dealer” means a person who is a dealer in relation to a |
| |
distribution within the meaning of section 95(2) of ICTA or who would, if he |
| |
were resident in the United Kingdom, be such a dealer. |
| |
(8) | Condition D is that at least part of the qualifying payment is not an amount to |
| 40 |
which subsection (9) or (10) applies. |
| |
(9) | This subsection applies to an amount that is, for the purposes of the |
| |
| |
(a) | income or gains arising to the company in the accounting period in |
| |
which the qualifying payment was made in relation to the company, or |
| 45 |
|
| |
|
| |
|
(b) | income arising to any other company resident in the United Kingdom |
| |
in a corresponding accounting period. |
| |
(10) | This subsection applies to an amount that is taken into account in determining |
| |
the debits and credits to be brought into account by a company for the |
| |
purposes of Chapter 2 of Part 4 of FA 1996 as respects a share in another |
| 5 |
company by virtue of section 91A or 91B of FA 1996 (shares treated as loan |
| |
| |
(11) | Condition E is that the company and the paying party expected on entering |
| |
into the scheme that a benefit would arise as a result of condition D being |
| |
satisfied (whether by reference to all or part of the qualifying payment). |
| 10 |
(12) | A notice under this section is a notice— |
| |
(a) | informing the company of the Commissioners’ view under subsection |
| |
| |
(b) | specifying the qualifying payment by reference to which the |
| |
Commissioners consider conditions B to E are or may be satisfied, |
| 15 |
(c) | specifying the accounting period of the company in which the payment |
| |
| |
(d) | informing the company that as a consequence section 27 has effect in |
| |
| |
(13) | For the purposes of this section a payment is a qualifying payment in relation |
| 20 |
to a company if it constitutes a contribution to the capital of the company. |
| |
(14) | For the purposes of this section the accounting period of a company (“company |
| |
A”) corresponds to the accounting period of another company (“company B”) |
| |
if at least one day of company A’s accounting period falls within company B’s |
| |
| 25 |
27 | Rule as to qualifying payment |
| |
(1) | The following provisions of this section apply in relation to a payment that is |
| |
a qualifying payment in relation to a company if— |
| |
(a) | a notice specifying that payment is given to the company under section |
| |
| 30 |
(b) | when the notice is given, conditions A to E of section 26 are satisfied in |
| |
| |
(2) | The company must compute (or recompute) for the purposes of corporation |
| |
tax for the accounting period specified in the notice its income or chargeable |
| |
gains, or its liability to corporation tax, as if the relevant part of the qualifying |
| 35 |
payment were an amount of income chargeable under Case VI of Schedule D |
| |
arising to the company in that period. |
| |
(3) | The relevant part of the qualifying payment is the part by reference to which |
| |
conditions C and D are satisfied; and, where conditions C and D are satisfied |
| |
in relation to the whole of the qualifying payment, the relevant part is the |
| 40 |
whole of the qualifying payment. |
| |
(4) | In this section “qualifying payment” has the same meaning as in section 26. |
| |
|
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