Finance (No.2) Bill

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Session 2005 - 06
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Finance (No.2) Bill

Finance (No.2) Bill
Part 9 — Miscellaneous provisions
144

175
Arrangements under section 174: information powers
(1)
Subsections (1) to (8) and (8C) to (9) of section 20 of TMA 1970 (powers to call
for information relevant to liability to income tax, corporation tax or capital
gains tax), and sections 20B, 20BB and 20D of that Act so far as relating to those
subsections, have effect as if—
5
(a)
the references in those provisions to tax liability included liability to
relevant foreign tax, and
(b)
the references to tax included relevant foreign tax,

(but subject to subsection (3)).
(2)
“Relevant foreign tax” means any tax or duty—
10
(a)
imposed under the law of a territory in relation to which arrangements
having effect by virtue of section 174 have been made, and
(b)
covered by the arrangements.
(3)
In their application by virtue of subsection (1) the provisions mentioned in that
subsection have effect as if—
15
(a)
the reference in section 20(7A) to any provision of the Taxes Acts were
to any provision of the law of the territory concerned,
(b)
the reference in subsection (2) of section 20B to an appeal were to an
appeal, review or similar proceedings under the law of that territory,
and
20
(c)
the reference in subsection (6) of that section to the Crown were to that
territory.
176
Arrangements under section 174: recovery of debts
(1)
The Treasury may by regulations make provision for the recovery in the
United Kingdom of debts relating to any relevant foreign tax pursuant to
25
arrangements having effect by virtue of section 174.
(2)
“Relevant foreign tax” means any tax or duty—
(a)
imposed under the law of a territory in relation to which such
arrangements have been made, and
(b)
covered by the arrangements.
30
(3)
Regulations under this section may make provision for the taking of action to
recover debts relating to any relevant foreign tax by way of legal proceedings,
distress, diligence or otherwise.
(4)
Such provision may in particular be made by applying, with any appropriate
modifications, any enactment or rule of law that applies in relation to the
35
recovery of any tax or duty imposed under the domestic law of the United
Kingdom (including any enactment relating to penalties or interest on unpaid
amounts).
(5)
The power to make regulations under this section is exercisable by statutory
instrument.
40
(6)
A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of the House of Commons.
177
Double taxation agreements: procedure
In section 788 of ICTA (relief by agreement with other territories), for

Finance (No.2) Bill
Part 9 — Miscellaneous provisions
145

subsection (10) substitute—
“(10)
An Order under this section is not to be submitted to Her Majesty in
Council unless a draft of the Order has been laid before and approved
by a resolution of the House of Commons.”
Disclosure of information
5
178
Disclosure of information
(1)
After section 352 of the Gambling Act 2005 (c. 19) (disclosure of information:
data protection) insert—
“352A
Wrongful disclosure
(1)
Where the Commissioners for Her Majesty’s Revenue and Customs
10
provide information to a person under this Act, section 19 of the
Commissioners for Revenue and Customs Act 2005 (c. 11) (wrongful
disclosure) shall apply to the disclosure of the information by the
person as it applies to the disclosure of information in contravention of
a provision of that Act.
15
(2)
But section 19 shall not apply to disclosure—
(a)
in accordance with this Act,
(b)
in accordance with another enactment, or
(c)
in circumstances specified in section 18(2)(c), (d), (e) or (h) of
that Act.
20
(3)
In subsection (1)—
(a)
information provided to a person shall be treated as being
provided both to him and to any person on whose behalf he acts
or by whom he is employed, and
(b)
the reference to disclosure by the person to whom information
25
was provided includes a reference to disclosure by any person
acting on behalf of, or employed by, the person to whom the
information was provided (or a person to whom it is treated as
being provided by virtue of paragraph (a)).
(4)
In the application of section 18(2)(c) and (d) of that Act by virtue of
30
subsection (2)(c) above a reference to functions of the Revenue and
Customs shall be taken as a reference to functions of the person making
the disclosure.
(5)
In the application of section 19 of that Act by virtue of subsection (1)
above “revenue and customs information” means information
35
provided by the Commissioners (but subject to the express exclusion in
section 19(2)).
(6)
Section 19 of that Act shall, in so far as it applies by virtue of this section,
be treated for the purposes of section 28 of this Act as an offence under
this Act.”
40
(2)
Section 352A of the Gambling Act 2005 as inserted by subsection (1) above shall
come into force on the passing of this Act.

Finance (No.2) Bill
Part 10 — Supplementary provisions
146

Part 10
Supplementary provisions
179
Repeals
(1)
The enactments mentioned in Schedule 26 (which include provisions that are
spent or of no practical utility) are repealed to the extent specified.
5
(2)
The repeals specified in that Schedule have effect subject to the commencement
provisions and savings contained or referred to in the notes set out in that
Schedule.
180
Interpretation
In this Act—
10
“ALDA 1979” means the Alcoholic Liquor Duties Act 1979 (c. 4);
“CAA 2001” means the Capital Allowances Act 2001 (c. 2);
“FA”, followed by a year, means the Finance Act of that year;
“F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year;
“HODA 1979” means the Hydrocarbon Oil Duties Act 1979 (c. 5);
15
“ICTA” means the Income and Corporation Taxes Act 1988 (c. 1);
“IHTA 1984” means the Inheritance Tax Act 1984 (c. 51);
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003
(c. 1);
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act
20
2005 (c. 5);
“OTA 1975” means the Oil Taxation Act 1975 (c. 22);
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992 (c. 12);
“TMA 1970” means the Taxes Management Act 1970 (c. 9);
“VATA 1994” means the Value Added Tax Act 1994 (c. 23);
25
“VERA 1994” means the Vehicle Excise and Registration Act 1994 (c. 22).
181
Short title
This Act may be cited as the Finance Act 2006.

147
Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

Schedules
Schedule 1
Section 27

Group relief where surrendering company not resident in UK
Part 1
Amendments of Chapter 4 of Part 10 of ICTA
5
Availability of relief
1     (1)
Section 402 of ICTA (surrender of relief between members of groups and
consortia) is amended as follows.
      (2)
In subsection (1) (availability of relief) for the words from the beginning to
“set out” substitute—
10
“(1)
Subject to and in accordance with this Chapter and section 492(8)—
(a)
relief for trading losses and other amounts eligible for relief
from corporation tax, or
(b)
losses and other amounts not eligible for relief from
corporation tax,
15

may, in the cases set out”.
      (3)
For subsection (2) (group claims) substitute—
“(2)
In respect of amounts falling within subsection (1)(a) above, group
relief shall be available in a case where—
(a)
the surrendering company and the claimant company are
20
both members of the same group,
(b)
the surrendering company is resident in the United Kingdom
or is not so resident but carries on a trade there through a
permanent establishment, and
(c)
the claimant company is resident in the United Kingdom or
25
is not so resident but carries on a trade there through a
permanent establishment,

and, in respect of amounts falling within subsection (1)(b) above,
group relief shall be available in a case where the condition in
subsection (2A) below is satisfied.
30

A claim made by virtue of this subsection is referred to as a “group
claim”.
(2A)
The condition in this subsection is satisfied if the surrendering
company is within the charge to tax under the law of any EEA
territory and—
35

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA
148

(a)
the surrendering company is a 75 per cent. subsidiary of the
claimant company and the claimant company is resident in
the United Kingdom, or
(b)
both the surrendering company and the claimant company
are 75 per cent. subsidiaries of a third company that is
5
resident in the United Kingdom.
(2B)
For the purposes of subsection (2A) above, the surrendering
company is within the charge to tax under the law of any EEA
territory if—
(a)
it is a non-resident company which is resident in any EEA
10
territory, or
(b)
it is a non-resident company which is not resident in any EEA
territory but which carries on a trade in any EEA territory
through a permanent establishment.”.
      (4)
In subsection (3A) (group relief not available unless both companies satisfy
15
following condition) for “Group relief is not available” substitute “A
consortium claim shall not be made”.
Limits on group relief
2     (1)
Section 403A of ICTA (limits on group relief) is amended as follows.
      (2)
In subsection (10) (qualifying conditions for the purposes of subsection (9)),
20
for paragraph (a) (group claims) and the “and” at the end of that paragraph
substitute—
“(a)
if (or so far as) the claim is a group claim for the surrender of
any loss or other amount other than a qualifying overseas
loss, whenever the conditions in paragraphs (a) to (c) of
25
section 402(2) are satisfied;
(ab)
if (or so far as) the claim is a group claim for the surrender of
a qualifying overseas loss, whenever the condition specified
in section 402(2A) is satisfied; and”.
      (3)
After that subsection insert—
30
“(11)
For the purposes of subsection (10) above a “qualifying overseas
loss” means a loss or other amount that is available for surrender by
way of group relief in accordance with sections 403F and 403G and
Schedule 18A (relief in respect of overseas losses of non-resident
companies).”.
35
Relief for or in respect of non-resident companies within the charge to corporation tax
3     (1)
Section 403D of ICTA (relief for or in respect of non-resident companies) is
amended as follows.
      (2)
In subsection (1) (provision for determining amounts available for surrender
by a non-resident company), in the opening words,—
40
(a)
after “non-resident company” insert “carrying on a trade in the
United Kingdom through a permanent establishment”, and
(b)
after “as so available” insert “(but see also subsection (11) below)”.

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA
149

      (3)
At the end insert—
“(11)
Any loss or other amount that is available for surrender by way of
group relief in accordance with this section is in addition to any loss
or other amount that is so available in accordance with sections 403F
and 403G and Schedule 18A (relief in respect of overseas losses of
5
non-resident companies).”.
      (4)
In consequence of the amendments made by this paragraph, the title to the
section becomes “Relief for or in respect of UK losses of non-resident
companies”.
Relief in respect of overseas losses of non-resident companies
10
4     (1)
After section 403E of ICTA (relief for overseas losses of UK resident
companies) insert—
“403F
  Relief in respect of overseas losses of non-resident companies
(1)
This section has effect for determining for the purposes of this
Chapter the extent to which a loss or other amount is available for
15
surrender by way of group relief by a non-resident company—
(a)
which is resident in an EEA territory, or
(b)
which is not so resident but which carries on a trade in an
EEA territory through a permanent establishment,

in a case where a group claim may be made as a result of the
20
condition in section 402(2A) being satisfied.
(2)
A loss or other amount is not available for surrender by way of group
relief by the non-resident company except in so far as, in relation to
the EEA territory, the amount meets—
(a)
the equivalence condition,
25
(b)
the EEA tax loss condition,
(c)
the qualifying loss condition, and
(d)
the precedence condition.
(3)
Part 1 of Schedule 18A determines, in the case of any amount and any
EEA territory, the extent to which those conditions are met.
30
(4)
In so far as a loss or other amount meets those conditions, Part 2 of
Schedule 18A applies—
(a)
for calculating the amount of the loss or other amount (if any)
that is available for surrender by way of group relief, and
(b)
otherwise for making provision in relation to the application
35
of this Chapter to the non-resident company.
(5)
This section is subject to section 403G (unallowable overseas losses of
non-resident companies).”.
      (2)
After section 403F of ICTA (as inserted by sub-paragraph (1)) insert—
“403G
  Unallowable overseas losses of non-resident companies
40
(1)
This section applies in the case of a loss or other amount arising to a
non-resident company—
(a)
which is resident in any EEA territory, or

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA
150

(b)
which is not so resident but which carries on a trade in an
EEA territory through a permanent establishment,

where the amount is not attributable for corporation tax purposes to
any UK permanent establishment of the non-resident company.
(2)
The amount is not available for surrender by way of group relief by
5
the non-resident company in so far as conditions A and B are met.
(3)
Condition A is that—
(a)
the amount would not qualify for group relief but for any
relevant arrangements, or
(b)
the amount would not have arisen to the non-resident
10
company but for any relevant arrangements.
(4)
Condition B is that the main purpose, or one of the main purposes,
of the relevant arrangements was to secure that the amount would
qualify for group relief.
(5)
In this section references to relevant arrangements, in relation to any
15
amount, are to—
(a)
arrangements made on or after 20th February 2006, or
(b)
arrangements made before that date where the amount
would (but for this section) first qualify for group relief on or
after that date or (as the case may be) the amount arises on or
20
after that date.
(6)
In this section—
“arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable),
25
“UK permanent establishment”, in relation to the non-resident
company, means any permanent establishment through
which it carries on a trade in the United Kingdom.”.
Interpretation of Chapter 4 of Part 10 of ICTA
5     (1)
Section 413 of ICTA (interpretation) is amended as follows.
30
      (2)
In subsection (1) (general definitions), after the definition of “consortium
claim”, insert—
““EEA territory”, in relation to any time, means a territory
outside the United Kingdom which is within the European
Economic Area at that time;”.
35
Group relief: equity holders and profits or assets available for distribution
6     (1)
Schedule 18 to ICTA (group relief: equity holders and profits or assets
available for distribution) is amended as follows.
      (2)
In paragraph 5F (special rules in the case of non-resident companies), in sub-
paragraph (1)(b) (application of paragraph for relevant purposes) for “by the
40
consortium” substitute “by the consortium;

but this paragraph does not have effect in relation to any
determination in the case of amounts falling within section
402(1)(b).”.