Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance (No.2) Bill

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
158


and section 13 of the Capital Allowances Act (use for qualifying
activity of plant or machinery provided for other purposes) is to
apply accordingly.
      (3)
This paragraph is to be read as one with Part 2 of the Capital
Allowances Act.
5
Applicable UK tax rules
16    (1)
For the purposes of this Part of this Schedule references to
recalculating the EEA amount in accordance with the applicable
UK tax rules are to recalculating it in accordance with any
provision made by or under the Corporation Tax Acts—
10
(a)
which applies for the purpose of calculating for
corporation tax purposes the amount of the loss or other
amount to which the EEA amount corresponds, or
(b)
which otherwise affects in any way the amount of that loss
or other amount for which relief from corporation tax is
15
available.
      (2)
For the purposes of sub-paragraph (1), the Treasury may by
regulations provide for the modification of any provision made by
or under the Corporation Tax Acts—
(a)
which applies as mentioned in sub-paragraph (1)(a), or
20
(b)
which otherwise affects an amount as mentioned in sub-
paragraph (1)(b).
      (3)
Regulations under this paragraph may make provision in relation
to—
(a)
all classes of trade or business, or
25
(b)
any particular class or classes of trade or business.
      (4)
Regulations under this paragraph may make—
(a)
different provision for different cases or different
purposes, and
(b)
incidental, supplemental, consequential or transitional
30
provision and savings.
      (5)
Regulations under this paragraph may make provision having
effect before the date on which the regulations are made.
Part 3
Definitions for the purposes of this Schedule
35
Charge to tax under the law of any territory outside the United Kingdom
17    (1)
This paragraph applies for the purposes of this Schedule.
      (2)
Any reference to a tax under a territory outside the United
Kingdom is a reference to a tax chargeable under the law of that
territory which—
40
(a)
is charged on income and corresponds to United Kingdom
income tax, or

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 2 — Amendments of other enactments
159

(b)
is charged on income or chargeable gains or both and
corresponds to United Kingdom corporation tax.
      (3)
A tax chargeable under the law of a territory outside the United
Kingdom is not to be regarded as failing to correspond to income
or corporation tax just because—
5
(a)
it is chargeable under the law of a province, state or other
part of a country, or
(b)
it is levied by or on behalf of a municipality or other local
body.”.
Part 2
10
Amendments of other enactments
Claims for group relief
8
After paragraph 77 of Schedule 18 to FA 1998 (joint amended returns)
insert—
“Claims in respect of overseas losses of non-resident companies
15
77A   (1)
This paragraph applies if a claim for group relief is made in
respect of any loss or other amount as a result of the condition in
section 402(2A) of the Taxes Act 1988 being satisfied (relief in
respect of overseas losses of non-resident companies).
      (2)
In relation to the surrendering company, this Part of this Schedule
20
applies as if—
(a)
references to the relief being surrendered were to the EEA
amount and to the relief being claimed, and
(b)
references to its accounting period were to its deemed
accounting period under Part 2 of Schedule 18A to the
25
Taxes Act 1988.
      (3)
Notice of consent of the surrendering company—
(a)
is to be given to the officer of the Board under paragraph
70(3)(b) by the claimant company (and not by the
surrendering company), and
30
(b)
is to be given to the officer to whom the claimant company
makes its company tax returns.
      (4)
If the surrendering company is not within the charge to income or
corporation tax, the requirement under paragraph 71(1)(e) for
notice of consent by the surrendering company to contain details
35
of its tax district reference is not to apply.
      (5)
If notice of consent is withdrawn under paragraph 71, the notice of
the withdrawal is to be given to the officer of the Board by the
claimant company (and not by the surrendering company).
      (6)
If notice of consent is withdrawn under paragraph 75—
40
(a)
the notice of withdrawal, and any copy of any new notice
of consent, is to be sent to an officer of Revenue and
Customs by the claimant company (and not by the
surrendering company), and

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 3 — Commencement
160

(b)
any notice containing directions by an officer of Revenue
and Customs under sub-paragraph (4) of that paragraph is
to be given to the claimant company (and not to the
surrendering company).
      (7)
The remaining provisions of that paragraph, and the rest of this
5
Part of this Schedule, are, accordingly, to be read with the
appropriate modifications (so that, in particular, it is the claimant
company (and not the surrendering company) which can bring an
appeal under paragraph 75(7)).
      (8)
A notice under paragraph 27 (notice to produce documents etc for
10
purposes of an enquiry) given to the claimant company may
require the claimant company—
(a)
to explain why the EEA amount meets the conditions
mentioned in subsection (2)(a) to (d) of section 403F of the
Taxes Act 1988 and is not prevented from being
15
surrendered by section 403G of that Act, and
(b)
to provide details of the recalculation required under Part
2 of Schedule 18A to that Act in relation to the EEA
amount.
      (9)
Except where expressly indicated, requirements imposed under
20
this paragraph are in addition to those imposed apart from this
paragraph.
     (10)
In this paragraph “the EEA amount” has the same meaning as in
Part 2 of Schedule 18A to the Taxes Act 1988.”.
Part 3
25
Commencement
Commencement
9     (1)
The amendments made by this Schedule, other than those made by
paragraphs 4(2) and 5, have effect—
(a)
in relation to any accounting period of a claimant company
30
beginning on or after 1st April 2006, and
(b)
in relation to any period (“the loss period”) beginning on or after 1st
April 2006 in which any loss or other amount arises to a non-resident
company.
      (2)
If an accounting period (a “straddling period”) of a claimant company
35
begins before 1st April 2006 and ends on or after that date—
(a)
so much of the straddling period as falls before 1st April 2006, and
(b)
so much of the straddling period as falls on or after that date,

are to be treated as separate accounting periods for the purposes of the
amendments made by this Schedule other than those made by paragraphs
40
4(2) and 5.
      (3)
The amount of the claimant company’s profits for the straddling period is to
be attributed, on an apportionment in accordance with this paragraph, to
those separate accounting periods.

Finance (No.2) Bill
Schedule 2 — Relief for research and development: subjects of clinical trials
161

      (4)
If the loss period of the non-resident company begins before 1st April 2006
and ends on or after that date—
(a)
so much of the loss period as falls before 1st April 2006, and
(b)
so much of the loss period as falls on or after that date,

are to be treated as separate periods for the purposes of the amendments
5
made by this Schedule other than those made by paragraphs 4(2) and 5.
      (5)
The amount of the loss or other amount of the non-resident company for the
loss period is to be attributed, on an apportionment in accordance with this
paragraph, to those separate periods.
      (6)
Any apportionment under this paragraph is to be made on a just and
10
reasonable basis.
Schedule 2
Section 28

Relief for research and development: subjects of clinical trials
Amendments to Schedule 20 to FA 2000
1     (1)
Schedule 20 to FA 2000 (tax relief for expenditure on research and
15
development by small or medium-sized enterprises) is amended as follows.
      (2)
In paragraph 3 (qualifying R&D expenditure), in sub-paragraph (4), after
paragraph (b) insert—
“(ba)
is incurred on relevant payments to the subjects of a
clinical trial (see paragraph 6A),”.
20
      (3)
After paragraph 6 (expenditure on software or consumable items), insert—
“Relevant payments to subjects of clinical trials
6A    (1)
For the purposes of this Schedule “relevant payment”, in relation
to a subject of a clinical trial, means a payment made to him for
participating in the trial.
25
      (2)
For the purposes of this Schedule “clinical trial” means an
investigation in human subjects undertaken in connection with
the development of a health care treatment or procedure.”
      (4)
In paragraph 10 (treatment of expenditure where company and sub-
contractor are connected persons), in sub-paragraph (2)(a)(iii), for “or on
30
software or consumable items” substitute “, on software or consumable
items or on relevant payments to the subjects of a clinical trial”.
Amendments to Schedule 12 to FA 2002
2     (1)
Schedule 12 to FA 2002 (tax relief for expenditure on research and
development: large companies etc) is amended as follows.
35
      (2)
In paragraph 4 (qualifying expenditure on direct research and
development), in sub-paragraph (3)—
(a)
omit the word “or” at the end of paragraph (b);

Finance (No.2) Bill
Schedule 2 — Relief for research and development: subjects of clinical trials
162

(b)
after that paragraph insert—
“(ba)
is incurred on relevant payments to the subjects of
a clinical trial, or”.
      (3)
In paragraph 9 (expenditure on research and development directly
undertaken by the SME), in sub-paragraph (2)—
5
(a)
omit the word “or” at the end of paragraph (b);
(b)
after that paragraph insert—
“(ba)
is incurred on relevant payments to the subjects of
a clinical trial, or”.
      (4)
In paragraph 17 (which applies certain definitions from Schedule 20 to FA
10
2000)—
(a)
in the heading, after ““software or consumable items”” insert “,
“relevant payments to the subjects of a clinical trial””;
(b)
omit the word “and” at the end of paragraph (c);
(c)
after that paragraph insert—
15
“(ca)
paragraph 6A (relevant payments to subjects of
clinical trials); and”.
Amendments to Schedule 13 to FA 2002
3     (1)
Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc) is
amended as follows.
20
      (2)
In paragraph 3 (qualifying expenditure on direct research and
development), in sub-paragraph (5)—
(a)
omit the word “or” at the end of paragraph (b);
(b)
after that paragraph insert—
“(ba)
is incurred on relevant payments to the subjects of
25
a clinical trial, or”.
      (3)
In paragraph 5 (which applies certain definitions from Schedule 20 to FA
2000)—
(a)
in the heading, after ““software or consumable items”,” insert
““relevant payments to the subjects of a clinical trial”,”;
30
(b)
in sub-paragraph (3), after paragraph (c) insert—
“(ca)
paragraph 6A (relevant payments to subjects of
clinical trials);”.
      (4)
In paragraph 9 (relevant expenditure of the sub-contractor), in sub-
paragraph (3)—
35
(a)
omit the word “or” at the end of paragraph (b);
(b)
after that paragraph insert—
“(ba)
is incurred on relevant payments to the subjects of
a clinical trial, or”.