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Finance (No.2) Bill


Finance (No.2) Bill
Schedule 5 — Film tax relief: further provisions
Part 4 — Provisional entitlement to relief

177

 

Penalty

83X   (3)  

The company is liable to a penalty where it—

(a)   

fraudulently or negligently makes a claim for a film tax

credit that is incorrect, or

(b)   

discovers that a claim for a film tax credit made by it

5

(neither fraudulently nor negligently) is incorrect and does

not remedy the error without unreasonable delay.

      (4)  

The penalty is an amount not exceeding the excess film tax credit

claimed, that is, the difference between—

(a)   

the amount (if any) of the film tax credit to which the

10

company is entitled for the accounting period to which the

claim relates, and

(b)   

the amount of the film tax credit claimed by the company

for that period.”.

Part 4

15

Provisional entitlement to relief

Introduction

30    (1)  

In this Part of this Schedule—

“the company” means the film production company;

“the final accounting period” means the accounting period of the

20

company in which—

(a)   

the film is completed, or

(b)   

where the company does not complete the film, it abandons

film-making activities in relation to it;

“interim accounting period” means any earlier accounting period of the

25

company during which film-making activities are carried on in

relation to the film;

“interim certificate” and “final certificate” refer to certificates under

Schedule 1 to the Films Act 1985 (c. 21) (certification of films as

British films for purposes of film tax relief);

30

“relief” means—

(a)   

film tax relief, or

(b)   

relief under section 45 (transfer of terminal losses from one

qualifying film to another).

      (2)  

The company tax return of the company for the final accounting period must

35

state that the film has been completed or, as the case may be, that the

company has abandoned film-making activities in relation to it.

Certification as a British film

31    (1)  

The company is not entitled to relief for an interim accounting period unless

its company tax return for the period is accompanied by an interim

40

certificate.

      (2)  

If an interim certificate ceases to be in force (otherwise than on being

superseded by a final certificate) or is revoked, the company—

 

 

Finance (No.2) Bill
Schedule 5 — Film tax relief: further provisions
Part 4 — Provisional entitlement to relief

178

 

(a)   

is not entitled to relief for any period for which its entitlement

depended on the certificate, and

(b)   

must amend accordingly its company tax return for any such period.

      (3)  

If the film is completed by the company—

(a)   

its company tax return for the final accounting period must be

5

accompanied by a final certificate;

(b)   

if that requirement is met, the final certificate has effect for the final

accounting period and for any interim accounting period;

(c)   

if that requirement is not met, the company—

(i)   

is not entitled to relief for any period, and

10

(ii)   

must amend accordingly its company tax return for any

period for which relief was claimed.

      (4)  

If the company abandons film-making activities in relation to the film—

(a)   

its company tax return for the final accounting period may be

accompanied by an interim certificate; and

15

(b)   

the abandonment of film-making activities does not affect any

entitlement to relief in that or any previous accounting period.

      (5)  

If a final certificate is revoked, the company—

(a)   

is not entitled to relief for any period, and

(b)   

must amend accordingly its company tax return for any period for

20

which relief was claimed.

The UK expenditure condition

32    (1)  

The company is not entitled to relief for an interim accounting period

unless—

(a)   

its company tax return for the period states the amount of planned

25

core expenditure on the film that is UK expenditure, and

(b)   

that amount is such as to indicate that the condition in section 41 (the

UK expenditure condition) will be met on completion of the film.

           

If those requirements are met, the company is provisionally treated in

relation to that period as if that condition was met.

30

      (2)  

If such a statement is made but it subsequently appears that condition will

not be met on completion of the film, the company—

(a)   

is not entitled to relief for any period for which its entitlement

depended on such a statement, and

(b)   

must amend accordingly its company tax return for any such period.

35

      (3)  

When the film is completed or, as the case may be, the company abandons

film-making activities in relation to it—

(a)   

the company tax return for the final accounting period must—

(i)   

state that the film has been completed or, as the case may be,

the company has abandoned film-making activities in

40

relation to it, and

(ii)   

be accompanied by a final statement of the amount of core

expenditure on the film that is UK expenditure; and

(b)   

if the return shows that the condition in section 41 is not met, the

company—

45

(i)   

is not entitled to relief for any period, and

 

 

Finance (No.2) Bill
Schedule 5 — Film tax relief: further provisions
Part 4 — Provisional entitlement to relief

179

 

(ii)   

must amend accordingly its company tax return for any

period for which relief was claimed.

Whether film a limited-budget film

33    (1)  

The company is not entitled to film tax relief for an interim accounting

period on the basis that the film is a limited-budget film unless—

5

(a)   

its company tax return for the period states the amount of planned

core expenditure on the film, and

(b)   

that amount is such as to indicate that the condition in section 34(2)

(definition of “limited-budget film”) will be met on completion of the

film.

10

           

In that case, the film is provisionally treated in relation to that period as if

that condition was met.

      (2)  

If it subsequently appears that the condition will not be met on completion

of the film, the company—

(a)   

is not entitled to film tax relief for any period on the basis that the

15

film is a limited-budget film, and

(b)   

must amend accordingly its company tax return for any such period

for which relief has been claimed on that basis.

      (3)  

When the film is completed or, as the case may be, the company abandons

film-making activities in relation to it—

20

(a)   

its company tax return for the final accounting period must—

(i)   

state that the film has been completed or, as the case may be,

the company has abandoned film-making activities in

relation to it, and

(ii)   

be accompanied by a final statement of the core expenditure

25

on the film; and

(b)   

if the return shows that the film is not a limited-budget film, or (as

the case may be) that having regard to the proportion of work on the

film that was completed, it would not have been a limited-budget

film if it had been completed, the company—

30

(i)   

is not entitled to film tax relief for any period on the basis that

the film is a limited-budget film, and

(ii)   

must amend accordingly its company tax return for any

period for which such relief was claimed on that basis.

Time limit for amendments and assessments

35

34         

Any amendment or assessment necessary to give effect to the provisions of

this Part of this Schedule may be made notwithstanding any limitation on

the time within which an amendment or assessment may normally be made.

 

 

Finance (No.2) Bill
Schedule 6 — Avoidance involving financial arrangements

180

 

Schedule 6

Section 76

 

Avoidance involving financial arrangements

Dividend stripping: subsequent sales etc of rights to receive dividends etc

1     (1)  

Section 730 of ICTA (transfers of rights to receive distributions in respect of

shares) is amended as follows.

5

      (2)  

Omit subsection (3) (proceeds of subsequent sales etc of rights to receive

distributions not to be regarded as income of the seller etc).

      (3)  

The amendment made by this paragraph has effect in relation to sales or

other realisations on or after 20th January 2006.

Deemed interest: cash collateral under stock lending arrangements

10

2     (1)  

After section 736B of ICTA (deemed manufactured payments in the case of

stock lending arrangements) insert—

“736C   

  Deemed interest: cash collateral under stock lending arrangements

(1)   

This section applies where—

(a)   

the borrower under a stock lending arrangement is treated

15

under section 736B(2) as paying under that arrangement an

amount representative of interest on any securities (“the

relevant securities”),

(b)   

an amount of money (“cash collateral”) is payable to or for the

benefit of the lender for the purpose of securing the discharge

20

of the requirement to transfer the relevant securities back to

the lender,

(c)   

the stock lending arrangement is designed to produce a

return to the borrower which equates, in substance, to the

return on an investment of money at interest, and

25

(d)   

the main purpose, or one of the main purposes, of the stock

lending arrangement is the obtaining of a tax advantage.

(2)   

Where this section applies—

(a)   

the Tax Acts are to apply as if the borrower receives an

amount of interest payable in respect of the cash collateral,

30

and

(b)   

the amount of the interest is calculated in accordance with the

following provisions of this section (see, in particular,

subsections (3) to (7)).

(3)   

The interest is treated for the purposes of the Tax Acts as if it were

35

received on the date (“the return date”) on which the borrower

transfers the relevant securities back to the lender.

(4)   

The interest is treated for the purposes of the Tax Acts as if it were

payable in respect of the period (“the interest period”)—

(a)   

beginning with the date on which the lender transfers the

40

relevant securities to the borrower, and

(b)   

ending with the return date.

 

 

Finance (No.2) Bill
Schedule 6 — Avoidance involving financial arrangements

181

 

(5)   

The rate of interest payable in respect of the cash collateral is a rate

that is reasonably comparable to the rate that the borrower could

obtain by placing the cash collateral on deposit for the interest

period.

(6)   

For the purposes of this section, the amount of the cash collateral on

5

which the interest is payable is taken to be—

(a)   

in any case where the amount of the cash collateral varies at

any time on or before the return date, the highest amount of

the cash collateral at any time on or before the return date,

and

10

(b)   

in any other case, the amount of the cash collateral as at the

return date.

(7)   

The amount of the interest which the borrower is treated as receiving

in respect of the cash collateral for the interest period is reduced (but

not below nil) by any interest which the borrower actually receives

15

in respect of that collateral for that period.

(8)   

If the borrower is a person within the charge to income tax, the

interest which the borrower is treated as receiving is charged to

income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest).

(9)   

If the borrower is a company within the charge to corporation tax—

20

(a)   

the interest which the borrower is treated as receiving is

treated for the purposes of Chapter 2 of Part 4 of the Finance

Act 1996 (loan relationships) as payable to it on a money debt,

(b)   

that money debt is treated for those purposes as a

relationship to which section 100 of the Finance Act 1996

25

applies (money debts etc not arising from the lending of

money), and

(c)   

the credits to be brought into account for those purposes in

respect of the interest must be determined using an

amortised cost basis of accounting.

30

(10)   

The fact that the borrower is treated as receiving an amount of

interest is not to be taken as implying that the interest is payable by

the lender or any other person.

(11)   

For the purposes of this section—

“money” includes money expressed in a currency other than

35

sterling,

“stock lending arrangement” and “securities” have the same

meanings as in section 263B of the 1992 Act,

“tax advantage” has the meaning given by section 709(1).

(12)   

For the purposes of this section—

40

(a)   

any reference to the transfer of securities back has the same

meaning as in section 263B of the 1992 Act (see, in particular,

sections 263B(5) and 263C(1) of that Act), but

(b)   

if it becomes apparent that the borrower will not comply with

the requirement to transfer any securities back, the borrower

45

is treated as if he transfers them back on the date on which it

becomes so apparent.

(13)   

For the purposes of this section it does not matter—

 

 

Finance (No.2) Bill
Schedule 6 — Avoidance involving financial arrangements

182

 

(a)   

whether the cash collateral is payable by the borrower or by

any other person,

(b)   

whether the cash collateral is payable under the stock lending

arrangement or under any other arrangement,

(c)   

whether collateral in another form is also provided in

5

connection with the stock lending arrangement.”.

      (2)  

Section 736C of ICTA has effect in relation to any stock lending arrangement

made on or after 5th December 2005.

      (3)  

In relation to any stock lending arrangement made on or after that date but

before 22nd March 2006, that section has effect as if subsection (6) were

10

omitted.

      (4)  

If—

(a)   

a stock lending arrangement was made before 5th December 2005 in

respect of any securities (“the original securities”), and

(b)   

on or after that date the lender under the stock lending arrangement

15

transfers securities (“the substituted securities”) in substitution for

some or all of the original securities,

           

section 736C of ICTA has effect as if that arrangement were made on the date

of the substitution (and the substituted securities were the relevant

securities).

20

Quasi-stock lending arrangements and quasi-cash collateral

3     (1)  

In section 736B of ICTA (deemed manufactured payments in the case of

stock lending arrangements) at the end insert—

“(4)   

See section 736D for provision treating certain arrangements as stock

lending arrangements for the purposes of this section.”.

25

      (2)  

In section 736C of ICTA (deemed interest: cash collateral under stock

lending arrangements), as inserted by paragraph 2 above, at the end insert—

“(14)   

See section 736D—

(a)   

for provision treating certain arrangements as stock lending

arrangements for the purposes of this section, and

30

(b)   

for provision treating certain amounts as cash collateral for

those purposes.”.

      (3)  

After that section insert—

“736D   

  Quasi-stock lending arrangements and quasi-cash collateral

(1)   

In this section “quasi-stock lending arrangement” means so much of

35

any arrangements between two or more persons as are not stock

lending arrangements, but are arrangements under which—

(a)   

a person (“the lender”) transfers securities to another person

(“the borrower”), and

(b)   

a requirement is imposed on a person to transfer any or all of

40

the securities, or any other property, back to the lender or any

other person,

   

and it does not matter whether the person on whom that

requirement is imposed is the borrower or any other person.

 

 

Finance (No.2) Bill
Schedule 6 — Avoidance involving financial arrangements

183

 

(2)   

In this section “quasi-cash collateral”, in relation to any stock lending

arrangement or quasi-stock lending arrangement, means—

(a)   

any money which is payable for a relevant purpose, plus

(b)   

any other property which is transferable for a relevant

purpose.

5

(3)   

Money or other property is payable or transferable for a relevant

purpose if it is payable or transferable to or for the benefit of—

(a)   

the lender under the stock lending arrangement or quasi-

stock lending arrangement, or

(b)   

a person connected with that lender,

10

   

for the purpose of securing the discharge of the requirement to

transfer any or all of the securities, or any other property, back to that

lender or any other person.

(4)   

For the purposes of sections 736B and 736C, a quasi-stock lending

arrangement is treated as if it were a stock lending arrangement.

15

(5)   

For the purposes of section 736C, in relation to any stock lending

arrangement or quasi-stock lending arrangement,—

(a)   

quasi-cash collateral is treated as if it were cash collateral, and

(b)   

the amount of the quasi-cash collateral in relation to the stock

lending arrangement or quasi-stock lending arrangement is

20

taken to be the amount of the cash collateral.

(6)   

If any property other than money is transferable for a relevant

purpose, the amount of the quasi-cash collateral so far as relating to

that property is determined by reference to its market value.

(7)   

In any case where—

25

(a)   

section 736C applies in relation to a quasi-stock lending

arrangement, and

(b)   

the person for whom the tax advantage was designed to be

obtained is a person (“the other person”) other than the

borrower under that arrangement,

30

   

that section has effect as if the other person were the person who

receives the amount of interest mentioned in that section.

(8)   

In any case where section 736C applies in relation to a quasi-stock

lending arrangement—

(a)   

any reference in that section to cash collateral being payable

35

to or for the benefit of the lender includes its being payable to

or for the benefit of a person connected with the lender,

(b)   

the reference in subsection (1)(c) of that section to a return to

the borrower includes a return to any other person, and

(c)   

any reference in that section to the transfer back of the

40

relevant securities by the borrower to the lender includes the

transfer back of any or all of the securities, or any other

property, by any person to the lender or any other person.

(9)   

Section 839 (connected persons) applies for the purposes of this

section.

45

(10)   

In this section—

 

 

 
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