Finance Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 4 — Chargeable gains: location of assets etc
Part 1 — Location of assets
74

      (8)
After that subsection insert—
“(2)
In subsection (1) above—
(a)
in paragraphs (d), (da) and (e), the references to shares or
debentures, in relation to a company that has no share
capital, include any interests in the company possessed by
5
members of the company, and
(b)
in paragraphs (d) and (e), the references to debentures, in
relation to a person other than a company, include securities.
(3)
In subsection (1) above, in each of paragraphs (h) and (j),
“corresponding rights” means any rights under the law of a country
10
or territory outside the United Kingdom that correspond or are
similar to those within that paragraph.
(4)
Subsection (1) above is subject to—
section 265(3) (securities issued by designated international
organisations to be taken to be situated outside UK),
15
section 266 (securities issued by Inter-American Development
Bank to be taken to be situated outside UK), and
section 275C (location of assets: interests of co-owners).”.
Location of certain intangible assets
5
After section 275 of TCGA 1992 insert—
20
“275A
  Location of certain intangible assets
(1)
This section applies for the purpose of determining whether the
situation of an intangible asset (“asset A”) is in the United Kingdom
if the situation of asset A is not otherwise determined (see section
275B(1)).
25
(2)
In this section “intangible asset” means—
(a)
intangible or incorporeal property and includes a thing in
action, or
(b)
anything that under the law of a country or territory outside
the United Kingdom corresponds or is similar to intangible
30
or incorporeal property or a thing in action.
(3)
If asset A is subject to UK law (see section 275B(2)) at the time it is
created, it shall be taken for the purposes of this Act to be situated in
the United Kingdom at all times.
(4)
Subsections (5) to (9) below have effect if asset A—
35
(a)
is a future or option (see section 275B(3)), and
(b)
is not subject to UK law at the time it is created.
(5)
If, as a result of the application of the rule in subsection (6) below in
relation to asset A or any other asset or assets, asset A falls to be
treated as being subject to UK law at the time it is created, it shall be
40
taken for the purposes of this Act to be situated in the United
Kingdom at all times.
(6)
That rule is that where, in the case of any intangible asset,—
(a)
the asset is a future or option,

Finance Bill
Schedule 4 — Chargeable gains: location of assets etc
Part 1 — Location of assets
75

(b)
the underlying subject matter (see section 275B(4)) of the
asset consists of or includes an asset which is an intangible
asset, and
(c)
either—
(i)
that intangible asset is subject to UK law at the time it
5
is created and, on the assumption that there were no
rights or interests in or over that asset, the situation of
that asset would not be otherwise determined, or
(ii)
that intangible asset is treated by this subsection as
being so subject at that time,
10

the intangible asset mentioned in paragraph (a) above is to be treated
for the purposes of subsection (5) above and this subsection as being
so subject at the time it is created.
(7)
If—
(a)
asset A is not taken to be situated in the United Kingdom by
15
virtue of subsection (5) above, and
(b)
as a result of the application of the rule in subsection (8)
below in relation to asset A or any other asset or assets,
asset A falls to be treated as being situated in the United
Kingdom at any time,
20

it shall be taken for the purposes of this Act to be situated in the
United Kingdom at that time.
(8)
That rule is that where, in the case of any intangible asset,—
(a)
the asset is a future or option, and
(b)
the underlying subject matter of the asset consists of or
25
includes an asset—
(i)
which is, by virtue of subsection (9) below or of any
provision of this Act apart from this section, situated
in the United Kingdom at any time, or
(ii)
which is treated by this subsection as being so
30
situated at any time,

the intangible asset mentioned in paragraph (a) above is to be treated
for the purposes of subsection (7) above and this subsection as being
so situated at that time.
(9)
Where—
35
(a)
the underlying subject matter of a future or option consists of
or includes shares or debentures issued by a company
incorporated in any part of the United Kingdom, but
(b)
at the time the future or option is created, those shares or
debentures have not been issued,
40

the underlying subject matter of the future or option, so far as
consisting of or including those shares or debentures, is to be taken,
for the purposes of subsection (8) above, to consist of or include an
asset which is situated in the United Kingdom at all times.
275B
Section 275A: supplementary provisions
45
(1)
For the purposes of section 275A, the situation of an asset is not
otherwise determined if, apart from that section, this Act does not
make any provision for determining—
(a)
the situation of the asset, or

Finance Bill
Schedule 4 — Chargeable gains: location of assets etc
Part 1 — Location of assets
76

(b)
whether the situation of the asset is in the United Kingdom.
(2)
For the purposes of section 275A, an intangible asset is subject to UK
law at a particular time if any right or interest which comprises or
forms part of the asset is, at that time,—
(a)
governed by, or otherwise subject to, or
5
(b)
enforceable under,

the law of any part of the United Kingdom.
(3)
Sub-paragraphs (6) to (10) of paragraph 12 of Schedule 26 to the
Finance Act 2002 (meaning of “future” and “option”) apply for the
purposes of section 275A as they apply for the purposes of Part 2 of
10
that Schedule.
(4)
For the purposes of section 275A—
(a)
the underlying subject matter of a future is the property
which, if the future were to run to delivery, would fall to be
delivered at the date and price agreed when the contract is
15
made, and
(b)
the underlying subject matter of an option is the property
which would fall to be delivered if the option were exercised.
(5)
Section 275A is subject to section 275C (location of assets: interests of
co-owners).
20
(6)
This section is to be construed as one with section 275A.”.
Location of assets: interests of co-owners
6
After section 275B of TCGA 1992 (as inserted by paragraph 5) insert—
“275C
  Location of assets: interests of co-owners
(1)
This section applies for determining for the purposes of this Act—
25
(a)
the situation of an interest (see subsection (4)) in an asset, or
(b)
whether the situation of an interest in an asset is in the United
Kingdom.
(2)
The situation of the interest in the asset shall be taken to be the same
as the situation of the asset, as determined in accordance with
30
subsection (3) below.
(3)
The situation of the asset for the purposes of subsection (2) above
shall be determined on the assumption that the asset is wholly-
owned by the person holding the interest in the asset.
(4)
In this section “interest”, in relation to an asset, means an interest as
35
a co-owner of the asset (whether the asset is owned jointly or in
common and whether or not the interests of the co-owners are
equal).”.

Finance Bill
Schedule 4 — Chargeable gains: location of assets etc
Part 3 — Commencement
77

Part 2
Minor amendments: non-resident company with UK permanent establishment
Computation of losses
7     (1)
Section 16 of TCGA 1992 is amended as follows.
      (2)
In subsection (3) (loss accruing to person in year of assessment during which
5
he is not resident or ordinarily resident in UK not to be allowable loss unless,
under section 10, he would be chargeable to tax in respect of chargeable gain
if the loss had been a gain) after “section 10” insert “or 10B”.
Reallocation within group of gain or loss accruing under section 179
8     (1)
Section 179A of TCGA 1992 is amended as follows.
10
      (2)
In subsection (12) (asset is “chargeable asset” if gain accruing to company on
disposal of asset would be chargeable gain and would by virtue of section
10(3) form part of company’s chargeable profits for corporation tax) for
“section 10(3)” substitute “section 10B”.
Exemptions for disposals by companies with substantial shareholding
15
9     (1)
Schedule 7AC to TCGA 1992 is amended as follows.
      (2)
In paragraph 3(2)(c)(ii) (one of conditions for exemption that chargeable
gain accruing to company on disposal would by virtue of section 10(3) form
part of company’s chargeable profits for corporation tax) for “section 10(3)”
substitute “section 10B”.
20
Part 3
Commencement
Commencement
10    (1)
The amendments made by Part 1 of this Schedule have effect for
determining for the purposes of TCGA 1992—
25
(a)
the situation of any asset, or
(b)
whether the situation of any asset is in the United Kingdom,

at any time on or after 16th March 2005 (irrespective of when the asset was
acquired by the person holding it).
      (2)
The amendment made by paragraph 7 has effect in relation to any loss
30
accruing to a company in an accounting period ending on or after 16th
March 2005.
      (3)
The amendment made by paragraph 8 has effect for determining for the
purposes of section 179A of TCGA 1992 whether an asset is a “chargeable
asset” in relation to a company at any time on or after 16th March 2005.
35
      (4)
The amendment made by paragraph 9 has effect in relation to disposals on
or after 16th March 2005.