|
| |
|
“money” includes money expressed in a currency other than |
| |
| |
“property” means property in any form, |
| |
“stock lending arrangement” and “securities” have the same |
| |
meanings as in section 263B of the 1992 Act, |
| 5 |
“transfer” means a transfer otherwise than by way of sale.”. |
| |
(4) | The amendments made by this paragraph have effect in relation to any |
| |
arrangement made on or after 22nd March 2006. |
| |
Loan relationships: mandatory convertibles |
| |
4 (1) | Section 81 of FA 1996 (meaning of “loan relationship” etc) is amended as |
| 10 |
| |
(2) | In subsection (2) (meaning of “money debt”)— |
| |
(a) | omit the “or” immediately before paragraph (b) (transfer of right to |
| |
settlement under a money debt), and |
| |
(b) | at the end of that paragraph insert “, or |
| 15 |
(c) | by the issue or transfer of any shares in any |
| |
| |
(3) | The amendments made by this paragraph have effect in relation to |
| |
relationships to which a company is a party on or after 22nd March 2006. |
| |
(4) | The following provisions of this paragraph apply for the purposes of TCGA |
| 20 |
| |
(a) | a company is a party to a relationship on 22nd March 2006, |
| |
(b) | the relationship becomes a loan relationship on that date for the |
| |
purposes of Chapter 2 of Part 4 of FA 1996 as a result of the |
| |
amendments made by this paragraph, |
| 25 |
(c) | the relationship is a creditor relationship of the company, and |
| |
(d) | immediately before that date the asset representing the relationship |
| |
was a chargeable asset in relation to the company. |
| |
(5) | The company is treated as if— |
| |
(a) | it had made a disposal of the asset representing the relationship |
| 30 |
immediately before 22nd March 2006, and |
| |
(b) | the disposal had been for a consideration equal to the fair value of the |
| |
asset at that time (within the meaning given by section 103(1) of FA |
| |
| |
(6) | Any chargeable gain or loss accruing to the company on the disposal is |
| 35 |
treated as accruing to the company when it ceases to be a party to the |
| |
| |
(7) | For the purposes of this paragraph an asset is a chargeable asset in relation |
| |
to the company at any time if any gain accruing to it on the disposal of the |
| |
asset at that time would be a chargeable gain for the purposes of TCGA 1992. |
| 40 |
Loan relationships: computation in accordance with generally accepted accounting practice |
| |
5 (1) | Section 85A of FA 1996 (computation in accordance with generally accepted |
| |
accounting practice) is amended as follows. |
| |
|
| |
|
| |
|
(2) | In subsection (1) (amounts to be brought into account are those recognised |
| |
in determining company’s profit or loss) after “Subject to the provisions of |
| |
this Chapter” insert “(including, in particular, section 84(1))”. |
| |
Loan relationships: amounts not fully recognised for accounting purposes |
| |
6 (1) | After section 85B of FA 1996 (amounts recognised in determining |
| 5 |
company’s profit or loss) insert— |
| |
“85C | Amounts not fully recognised for accounting purposes |
| |
(1) | This section applies if— |
| |
(a) | a company is, or is treated as being, a party to a loan |
| |
relationship in any period, and |
| 10 |
(b) | the credits and debits to be brought into account by the |
| |
company in respect of the relationship for the period for the |
| |
purposes of this Chapter are less than those that, on the |
| |
applicable assumptions, would be so brought into account. |
| |
| In determining whether the condition in paragraph (b) is met, the |
| 15 |
effect of this section is to be disregarded. |
| |
(2) | The credits and debits to be brought into account by the company in |
| |
respect of the relationship for the period for the purposes of this |
| |
Chapter are to be those that, on the applicable assumptions, would |
| |
be so brought into account. |
| 20 |
(3) | For the purposes of this section, if the relationship is a creditor |
| |
relationship of the company, the applicable assumptions are the |
| |
| |
(a) | the asset representing the relationship is the only asset of any |
| |
kind of the company for the period, and |
| 25 |
(b) | the company has no liabilities of any kind for the period. |
| |
(4) | For the purposes of this section, if the relationship is a debtor |
| |
relationship of the company, the applicable assumptions are the |
| |
| |
(a) | the liability representing the relationship is the only liability |
| 30 |
of any kind of the company for the period, and |
| |
(b) | the company has no assets of any kind for the period. |
| |
(5) | In determining under this section the amount of the credits and |
| |
debits to be brought into account by the company in respect of the |
| |
relationship for the period, the applicable assumptions are not to |
| 35 |
affect the operation of any other provision of this Chapter. |
| |
(6) | This section does not apply to an amount of credits or debits for any |
| |
period in so far as it is not brought into account by the company for |
| |
the period for the purposes of this Chapter as a result of regulations |
| |
| 40 |
(a) | section 84A(3A) (exchange gains and losses), or |
| |
(b) | section 85B(3) (amounts recognised in determining |
| |
company’s profit or loss). |
| |
(7) | This section does not apply if the company has any qualifying rights |
| |
under any repo or stock lending arrangements in relation to the |
| 45 |
| |
|
| |
|
| |
|
(8) | For this purpose a company has qualifying rights under any repo or |
| |
stock lending arrangements if— |
| |
(a) | the arrangements are an agreement falling within subsection |
| |
(1)(a) of section 730A of the Taxes Act 1988 (sale and |
| |
repurchase of securities) which are not excluded by |
| 5 |
subsection (8) of that section and the company is the interim |
| |
holder under the agreement, or |
| |
(b) | the arrangements are a stock lending arrangement (within |
| |
the meaning of section 263B of the Taxation of Chargeable |
| |
Gains Act 1992) and the company is the borrower under the |
| 10 |
stock lending arrangement. |
| |
(9) | For the purposes of this section a company is to be treated as |
| |
continuing to be a party to a loan relationship notwithstanding that |
| |
the rights under the relationship have been transferred to another |
| |
| 15 |
(a) | under a repo or stock lending arrangement, or |
| |
(b) | under a transaction which is treated by section 26 of the |
| |
Taxation of Chargeable Gains Act 1992 as not involving any |
| |
| |
(10) | In this section “liabilities” includes any share capital issued by the |
| 20 |
company which falls to be treated for accounting purposes as a |
| |
| |
(2) | The amendment made by this paragraph has effect in relation to periods of |
| |
account ending on or after 22nd March 2006. |
| |
(3) | But, in relation to a period of account beginning before 22nd March 2006, |
| 25 |
amounts are to be brought into account for the purposes of Chapter 2 of Part |
| |
4 of FA 1996 as a result of that amendment only if the amounts relate to any |
| |
time on or after that date. |
| |
Shares treated as loan relationships: shares subject to outstanding third party obligations |
| |
7 (1) | Section 91A of FA 1996 (shares subject to outstanding third party |
| 30 |
obligations) is amended as follows. |
| |
(2) | In subsection (1) (conditions for section to apply), in the opening words, for |
| |
“a company if at any time in an accounting period” substitute “the times in |
| |
a company’s accounting period during which”. |
| |
(3) | In subsection (2) (how Chapter has effect for the accounting period) after “as |
| 35 |
if” insert “during those times”. |
| |
(4) | In subsection (5) (cases where a share is subject to outstanding third party |
| |
| |
(a) | in paragraph (a) (share is subject to obligations of description in |
| |
subsection (6)) after “the share is subject to” insert “, or will or might |
| 40 |
under any relevant arrangements be subject to,”, and |
| |
(b) | in paragraph (b) (obligations of a person other than the investing |
| |
company) after “the investing company” insert “or are obligations of |
| |
the investing company which, under any relevant arrangements, |
| |
will or might be discharged directly or indirectly by any other |
| 45 |
| |
|
| |
|
| |
|
(5) | After that subsection insert— |
| |
“(5A) | For the purposes of subsection (5) above— |
| |
(a) | “arrangements” includes any agreement or understanding |
| |
(whether or not legally enforceable), |
| |
(b) | arrangements are “relevant” if they were entered into at any |
| 5 |
time on or before the share was issued.”. |
| |
(6) | The amendments made by sub-paragraphs (2) and (3) have effect in relation |
| |
to accounting periods ending on or after 22nd March 2006. |
| |
(7) | The other amendments made by this paragraph have effect in relation to |
| |
shares held by a company on or after 22nd March 2006. |
| 10 |
(8) | But, in relation to an accounting period beginning before 22nd March 2006, |
| |
amounts are to be brought into account for the purposes of Chapter 2 of Part |
| |
4 of FA 1996 as a result of those other amendments only if the amounts relate |
| |
to any time on or after that date. |
| |
Shares treated as loan relationships: application of rules to non-qualifying shares |
| 15 |
8 (1) | Section 91B of FA 1996 (non-qualifying shares) is amended as follows. |
| |
(2) | In subsection (1) (conditions for section to apply)— |
| |
(a) | in the opening words, for “a company if at any time in an accounting |
| |
period” substitute “the times in a company’s accounting period |
| |
| 20 |
(b) | in the words after paragraph (c), for “at no time in the accounting |
| |
period does section 91A above apply” substitute “, during those |
| |
times, section 91A above does not apply”. |
| |
(3) | In subsection (2) (how Chapter has effect for the accounting period) after “as |
| |
if” insert “during those times”. |
| 25 |
(4) | The amendments made by this paragraph have effect in relation to |
| |
accounting periods ending on or after 22nd March 2006. |
| |
(5) | But, in relation to an accounting period beginning before 22nd March 2006, |
| |
amounts are to be brought into account for the purposes of Chapter 2 of Part |
| |
4 of FA 1996 as a result of those amendments only if the amounts relate to |
| 30 |
any time on or after that date. |
| |
Shares treated as loan relationships: redeemable shares |
| |
9 (1) | Section 91D of FA 1996 (condition 2 for section 91B(6)(b)) is amended as |
| |
| |
(2) | For subsection (2) (cases in which share regarded as redeemable) |
| 35 |
| |
“(2) | For the purposes of this section, a share is to be regarded as |
| |
redeemable if (and only if)— |
| |
(a) | it is redeemable as a result of its terms of issue (or any |
| |
collateral arrangements) requiring redemption, entitling the |
| 40 |
holder to require redemption or entitling the issuer to |
| |
| |
|
| |
|
| |
|
(b) | there are relevant arrangements which will or might entitle |
| |
the investing company to qualifying redemption amounts.”. |
| |
(3) | After that subsection insert— |
| |
“(2A) | For the purposes of subsection (2) above— |
| |
(a) | “arrangements” includes any agreement or understanding |
| 5 |
(whether or not legally enforceable and whether or not |
| |
forming part of the terms of issue of the share), |
| |
(b) | arrangements are “relevant” if they were entered into at any |
| |
time on or before the investing company acquired the share, |
| |
| 10 |
(c) | “qualifying redemption amounts” means amounts which, |
| |
when taken together, are the same, or are substantially the |
| |
same, as an amount that might be payable on the redemption |
| |
| |
(4) | In subsection (7) (shares mirroring a public issue: Case 1), in paragraph (b) |
| 15 |
(associated companies issuing mirroring shares to company within 24 hours |
| |
of its issuing shares), for “24 hours” substitute “7 days”. |
| |
(5) | In subsection (8) (shares mirroring a public issue: Case 2), in paragraph (a) |
| |
(second-level mirroring shares issued within 24 hours of the public issue), |
| |
for “24 hours” substitute “7 days”. |
| 20 |
(6) | The amendments made by sub-paragraphs (2) and (3) have effect in relation |
| |
to shares held by a company on or after 22nd March 2006. |
| |
(7) | But, in relation to an accounting period beginning before 22nd March 2006, |
| |
amounts are to be brought into account for the purposes of Chapter 2 of Part |
| |
4 of FA 1996 as a result of those amendments only if the amounts relate to |
| 25 |
any time on or after that date. |
| |
(8) | The amendments made by sub-paragraphs (4) and (5) have effect in relation |
| |
to any case where the public issue (within the meaning of section 91D(7) and |
| |
(8) of FA 1996) is on or after 22nd March 2006. |
| |
Creditor relationships and benefit derived by connected persons |
| 30 |
10 (1) | After section 93B of FA 1996 (despite its repeal) insert— |
| |
“93C | Creditor relationships and benefit derived by connected persons |
| |
(1) | This section applies in the case of any loan relationship which is a |
| |
creditor relationship of a company (“company C”) if— |
| |
(a) | the return to company C from the relationship is less than a |
| 35 |
return (a “commercial return”) on an investment of money at |
| |
a commercial rate of interest, |
| |
(b) | another company (“company P”) that is connected with |
| |
company C directly or indirectly derives any benefit as a |
| |
result of any arrangements made in consequence of, or |
| 40 |
otherwise in connection with, the relationship, and |
| |
(c) | that benefit is designed to represent some or all of the amount |
| |
by which the return to company C from the relationship is |
| |
less than a commercial return. |
| |
|
| |
|
| |
|
(2) | The credits to be brought into account by company C in respect of the |
| |
relationship for the purposes of this Chapter must be determined on |
| |
the basis of fair value accounting. |
| |
(3) | The fair value of company C’s rights under the relationship must |
| |
include the fair value of the benefit which is derived by company P |
| 5 |
as a result of the arrangements. |
| |
(4) | Section 839 of the Taxes Act 1988 (connected persons) applies for the |
| |
purposes of this section. |
| |
| |
“arrangements” includes any agreement or understanding |
| 10 |
(whether or not legally enforceable); |
| |
“benefit” includes value in any form. |
| |
(6) | In determining for the purposes of subsection (1)(a) the return to |
| |
company C from the relationship, any benefit which company C |
| |
derives directly or indirectly from the benefit derived by company P |
| 15 |
as mentioned in subsection (1)(b) is to be disregarded.”. |
| |
(2) | The amendment made by this paragraph has effect in relation to loan |
| |
relationships to which a company is a party on or after 22nd March 2006. |
| |
(3) | But amounts are to be brought into account for the purposes of Chapter 2 of |
| |
Part 4 of FA 1996 as a result of that amendment only if the amounts relate to |
| 20 |
any time on or after that date. |
| |
Loan relationships: money debts etc not arising from the lending of money |
| |
11 (1) | Section 100 of FA 1996 (money debts etc not arising from the lending of |
| |
money) is amended as follows. |
| |
(2) | In subsection (1A) (conditions mentioned in subsection (1)(c)(iv)) for |
| 25 |
paragraph (e) (property not an asset representing a loan relationship or |
| |
derivative contract) substitute— |
| |
“(e) | if the money debt is some or all of the consideration payable |
| |
for a disposal of property, the property in question is not an |
| |
asset representing a loan relationship or a derivative contract |
| 30 |
the disposal of which is a relevant disposal.”. |
| |
(3) | After that subsection insert— |
| |
“(1B) | For the purposes of subsection (1A)(e) above “relevant disposal” |
| |
| |
(a) | a disposal to which paragraph 12 of Schedule 9 applies or |
| 35 |
would apply but for sub-paragraph (2A) of that paragraph, |
| |
(b) | a disposal to which paragraph 28 of Schedule 26 to the |
| |
Finance Act 2002 applies or would apply but for paragraph |
| |
| |
(c) | a disposal not falling within paragraph (a) or (b) above as |
| 40 |
respects which the whole of the consideration is brought into |
| |
account for the purposes of this Chapter or Schedule 26 to the |
| |
| |
(4) | The amendments made by this paragraph have effect in relation to disposals |
| |
made on or after 22nd March 2006. |
| 45 |
|
| |
|
| |
|
Loan relationships: meaning of “fair value” in Chapter 2 of Part 4 of FA 1996 |
| |
12 (1) | Section 103 of FA 1996 (interpretation of Chapter 2 of Part 4 of FA 1996) is |
| |
| |
(2) | In subsection (1), in the definition of “fair value”, in paragraphs (a) and (b), |
| |
omit “in respect of amounts which at that time are not yet due and payable”. |
| 5 |
(3) | The amendment made by this paragraph has effect in relation to periods of |
| |
account ending on or after 22nd March 2006. |
| |
(4) | But, in relation to a period of account beginning before 22nd March 2006, the |
| |
amendment made by this paragraph has effect only in relation to— |
| |
(a) | disposals or acquisitions (in whole or in part) of rights or liabilities |
| 10 |
under a loan relationship, or |
| |
(b) | anything treated for the purposes of Chapter 2 of Part 4 of FA 1996 |
| |
as such a disposal or acquisition, |
| |
| which were made (or treated as made) on or after that date. |
| |
Loan relationships: continuity of treatment of groups etc |
| 15 |
13 (1) | In Schedule 9 to FA 1996 (loan relationships: special computational |
| |
provisions) paragraph 12 (continuity of treatment: groups etc) is amended as |
| |
| |
(2) | In sub-paragraph (2A) (paragraph 12 not to apply where transferor uses fair |
| |
| 20 |
(a) | in the opening words, for “uses” substitute “is regarded for the |
| |
purposes of this sub-paragraph as using”, and |
| |
(b) | for paragraph (aa) (treatment of transferee in respect of the |
| |
| |
“(aa) | for any accounting period in which it is a party to |
| 25 |
the relationship, the transferee company shall be |
| |
treated for the purpose of determining the credits |
| |
and debits to be brought into account for the |
| |
purposes of this Chapter in respect of the |
| |
relationship as if it had acquired the asset or |
| 30 |
liability representing the relationship for a |
| |
consideration equal to the amount mentioned in |
| |
paragraph (a) above (but on the assumption that |
| |
sub-paragraph (2C)(b) below is omitted).”. |
| |
(3) | After that sub-paragraph insert— |
| 35 |
“(2B) | The transferor company shall be regarded for the purposes of sub- |
| |
paragraph (2A) above as using fair value accounting as respects |
| |
the loan relationship only if— |
| |
(a) | it uses fair value accounting as respects the relationship |
| |
and the debits and credits to be brought into account for |
| 40 |
the purposes of this Chapter as respects the relationship |
| |
are also determined on that basis, or |
| |
(b) | it does not use fair value accounting as respects the |
| |
relationship but the debits and credits to be brought into |
| |
account for the purposes of this Chapter as respects the |
| 45 |
relationship are determined on that basis.”. |
| |
|
| |
|