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Finance (No.2) Bill


Finance (No.2) Bill
Schedule 16 — Excluded business and income
Part 2 — Classes of income or profit

347

 

Schedule 16

Section 104

 

Excluded business and income

Part 1

Classes of business

1     (1)  

Incidental letting of property (whether in the United Kingdom or outside)

5

which is held in connection with a property development trade.

      (2)  

In sub-paragraph (1) “property development” means the development of

land with the sole or main object of realising a gain from the disposal of an

interest in the land.

2          

Letting of property which is held for use for administrative purposes in

10

carrying on property rental business but is temporarily surplus to

requirements for those purposes, provided that—

(a)   

the space let is comparatively small compared to the space occupied

for administrative purposes, and

(b)   

the letting is for a term of not more than three years.

15

3          

The provision of services in connection with property outside the United

Kingdom where the services would not fall within Schedule A if provided

in connection with property in the United Kingdom.

4          

Entering into finance agreements to which sections 43A to 43G of ICTA

apply (rent factoring).

20

Part 2

Classes of income or profit

5          

All income in connection with the operation of a caravan site, if section 20(1)

of ITTOIA 2005 (caravan sites) would apply in respect of any receipts in

connection with the operation of the site.

25

6          

Rent in respect of an electric-line wayleave.

7          

Rent in respect of the siting of a pipeline for gas.

8          

Rent in respect of the siting of a pipeline for oil.

9          

Rent in respect of the siting of a mast or similar structure designed for use in

a mobile telephone network or other system of electronic communication.

30

10         

Rent in respect of the siting of a wind turbine.

11         

Dividends from shares in a company to which this Part of this Act applies.

12         

Income arising out of an interest in a limited liability partnership where

section 118ZA(4) of ICTA (winding-up) applies.

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

348

 

Part 3

Power to amend

13         

The Commissioners for Her Majesty’s Revenue and Customs may by

regulations—

(a)   

add a paragraph to Part 1 or 2 of this Schedule,

5

(b)   

amend a paragraph of Part 1 or 2 of this Schedule, or

(c)   

repeal a paragraph of Part 1 or 2 of this Schedule.

Schedule 17

Section 134

 

Group Real Estate Investment Trusts: modifications

Introduction

10

1          

This Schedule sets out the modifications of Part 4 in its application to groups.

2          

In this Schedule, in relation to a group—

(a)   

“G (pre-entry)” means the group before Part 4 begins to apply to it,

(b)   

“G (property rental business)” means the group in so far as it carries

on property rental business which satisfies Conditions 1 to 3 of

15

section 107 (as modified by paragraph 6 below) while Part 4 applies

to it,

(c)   

“G (residual)” means the group in so far as it carries on other

business while Part 4 applies to it, and

(d)   

“G (post-cessation)” means the group after Part 4 has ceased to apply

20

to it.

3     (1)  

A reference in this Schedule to a UK resident company is a reference to a

company which—

(a)   

is resident in the United Kingdom, and

(b)   

is not resident in another place in accordance with the law of that

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place relating to taxation.

      (2)  

A reference in this Schedule to UK profits of a group is a reference to—

(a)   

amounts shown in the financial statements of G (property rental

business) as profits of UK resident members of the group, and

(b)   

amounts shown in the financial statements of G (property rental

30

business) as profits of business in the United Kingdom of other

members.

      (3)  

A reference to UK business of a group is a reference to—

(a)   

the business of UK resident members of the group, and

(b)   

business in the United Kingdom of other members.

35

General modification

4          

Except where the context otherwise requires and subject to the provisions of

this Schedule, a reference to a company shall be treated as a reference to a

group.

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

349

 

Conditions

5     (1)  

In section 106 a reference to a company shall be treated as a reference to the

principal company.

      (2)  

The requirement in section 106(2) shall be treated as including a requirement

that the principal company prepare for the accounting period, and submit to

5

the Commissioners for Her Majesty’s Revenue and Customs, financial

statements in accordance with paragraph 31 (“the financial statements”).

6     (1)  

For the purposes of section 107(1) the property rental businesses of the

members of the group shall be treated as a single business.

      (2)  

For section 107(7)(a) substitute—

10

“(a)   

the members of the group shall be treated as a single

company, and

(b)   

if the shares of a member of the group are stapled to the

shares of another company, the stapled company and the

members of the group shall be treated as a single company,”.

15

      (3)  

For section 107(8) substitute—

“(8)   

Condition 4 is that at least 90% of the UK profits of the property

rental business arising in the accounting period are distributed—

(a)   

by the principal company,

(b)   

by way of dividend, and

20

(c)   

on or before the filing date for the principal company’s tax

return for the accounting period (see paragraph 14 of

Schedule 18 to FA 1998);

   

and for the purposes of this Condition “UK profits” means amounts

shown in the financial statements of G (property rental business) as

25

profits of UK resident members of the group.”

      (4)  

In the application of section 107(9) compliance with Condition 4 shall be

treated as unlawful in so far as—

(a)   

the Condition applies to the profits of the property rental business

attributable to a member, and

30

(b)   

compliance with the Condition by the member would (if the

Condition applied to it) be unlawful as described in section

107(9)(a)(i) or (ii).

7          

In the application of section 108

(a)   

the aggregate amount shown in the financial statement as profits of

35

members of G (property rental business), calculated in accordance

with international accounting standards, shall be treated as the

amount of the income accruing from tax-exempt business,

(b)   

the aggregate amount shown in the financial statements as the

amount of the profits of members of G (residual) shall be treated as

40

the amount of the income accruing from non-tax-exempt business,

(c)   

the amount shown in the financial statements as the amount of the

assets of G (property rental business) shall be treated as the amount

of the assets involved in tax-exempt business, and

(d)   

the amount shown in the financial statements as the amount of the

45

assets of G (residual) shall be treated as the amount of the assets

involved in non-tax-exempt business.

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

350

 

Entering Real Estate Investment Trust Regime

8     (1)  

A notice under section 109 must be given by the principal company.

      (2)  

For the purposes of the requirement under section 109(2)(c) a reference to the

company shall be treated as a reference to the principal company.

9     (1)  

In section 111(1) a reference to C (pre-entry) shall be treated as a reference to

5

a UK resident member of G (pre-entry).

      (2)  

Section 111(2) shall have effect in relation to each UK resident company

which is a member of the group; and for that purpose—

(a)   

a reference to C (pre-entry) (in subsection (2) or (4)) shall be treated

as a reference to the company as a member of G (pre-entry), and

10

(b)   

a reference to C (tax-exempt) (in subsection (2) or (4)) shall be treated

as a reference to the company as a member of G (property rental

business).

      (3)  

In section 111(5) the reference to the company shall be treated as a reference

to each UK resident member.

15

      (4)  

Where a percentage of the assets of a member of G (property rental business)

is excluded from a financial statement in accordance with paragraph 31(5),

the excluded percentage shall be disregarded for the purposes of section 111.

10    (1)  

If a UK resident company becomes a member of a group to which Part 4

applies, section 111 shall apply to the company as if—

20

(a)   

references to entry were references to becoming a member of the

group,

(b)   

references to C (pre-entry) were references to the company before

becoming a member of the group, and

(c)   

references to C (tax-exempt) were references to the company as a

25

member of G (property rental business).

      (2)  

Where a percentage of the assets of the company would be excluded from a

financial statement in accordance with paragraph 31(5), the percentage

which would be excluded shall be disregarded in applying section 111 to the

company.

30

11    (1)  

In the application of section 112

(a)   

a reference to a company to which Part 4 applies shall be treated as a

reference to each member of a group to which Part 4 applies,

(b)   

a reference to C (residual) shall be treated as a reference to the

company as a member of G (residual),

35

(c)   

in subsection (3) the reference to assets treated as sold and re-

acquired under section 111(2) shall be construed in accordance with

paragraph 9(4) or 10(2), and

(d)   

the section shall apply to non-UK resident members—

(i)   

as if a reference to a charge to corporation tax were a

40

reference to charge to income tax under Chapter 9 of Part 6 of

ITTOIA (other income), and

(ii)   

as if a reference to the rate at which the company pays tax on

income were, where relevant, a reference to the rate at which

the company would pay tax on the notional income if it were

45

the highest part of the company’s income.

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

351

 

      (2)  

Where a company joins a group to which Part 4 applies, section 112 shall

apply to the company as if joining the group amounted to becoming a

company to which Part 4 applies (but with a reference to C (residual) being

treated as a reference to the company as a member of G (residual)).

12    (1)  

Section 113(1) to (4) shall apply in relation to G (property rental business), G

5

(pre-entry), G (residual) and G (post-cessation) as they apply in relation to C

(tax-exempt), C (pre-entry), C (residual) and C (post-cessation).

      (2)  

Section 113(1) to (6) shall also apply in relation to each UK resident company

which is a member of the group; for which purpose—

(a)   

a reference to C (tax-exempt) is a reference to the company if or in so

10

far as it is a member of G (property rental business),

(b)   

a reference to C (pre-entry) is a reference to the company as a

member of G (pre-entry) (or, in the case of a company which joins a

group to which Part 4 applies, a reference to the company before

joining),

15

(c)   

a reference to C (residual) is a reference to the company if or in so far

as it is a member of G (residual), and

(d)   

a reference to C (post-cessation) is a reference to the company as a

member of G (post-cessation) (or, in the case of a company which

leaves a group to which Part 4 applies, a reference to the company

20

after leaving).

      (3)  

Where a percentage of the profits of a member of G (property rental

business) is excluded from a financial statement in accordance with

paragraph 31(5), the excluded percentage shall be treated for the purposes

of section 113 as profits of G (residual).

25

13         

Regulations under section 114 may make provision in relation to a group to

which Part 4 applies as if references to the company were references to the

principal company.

14         

Section 115 shall apply as if for subsection (2) there were substituted—

“(2)   

That sum is—equation: over[plus[(*n*)times[char[P],char[r],char[o],char[f],char[i],char[t],char[s]],times[

char[F],char[i],char[n],char[a],char[n],char[c],char[i],char[n],char[g],char[C],

char[o],char[s],char[t],char[s],id[times[char[a],char[l],char[l]]]]],times[char[

F],char[i],char[n],char[a],char[n],char[c],char[i],char[n],char[g],char[C],char[

o],char[s],char[t],char[s],id[times[char[e],char[x],char[t],char[e],char[r],char[

n],char[a],char[l]]]]]

30

   

where—

(a)   

Profits means the aggregate of the UK profits of G (property

rental business) arising in the accounting period as set out in

the financial statement under paragraph 31(2)(b) (before the

offset of capital allowances),

35

(b)   

Financing Costs (all) means the amount of the financing costs

incurred in respect of the UK property business of G

(property rental business) as set out in the financial statement

under paragraph 31(2)(b), and

(c)   

Financing Costs (external) means the amount of the financing

40

costs incurred in respect of the UK property business of G

(property rental business), excluding financing costs owed by

one member of G (property rental business) to another.”

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

352

 

Assets, etc

15    (1)  

In section 117(1) the reference to the company shall be treated as a reference

to a member of the group.

      (2)  

An appeal under section 117(6) may be made by the member of the group on

which the assessment is made.

5

16         

Section 118 shall apply as if—

(a)   

a reference to C (residual) were a reference to G (residual), and

(b)   

a reference to C (tax-exempt) were a reference to G (property rental

business).

Profits

10

17    (1)  

Section 119 shall apply only in relation to each UK resident company which

is a member of the group; for which purpose—

(a)   

a reference to C (tax-exempt) is a reference to the company if or in so

far as it is a member of G (property rental business), and

(b)   

a reference to C (residual) is a reference to the company if or in so far

15

as it is a member of G (residual).

      (2)  

Where a percentage of the profits of a member of G (property rental

business) is excluded from a financial statement in accordance with

paragraph 31(5), the excluded percentage shall be treated for the purposes

of corporation tax as profits of the member in so far as it is a member of G

20

(residual).

18    (1)  

In the application of section 121(1)—

(a)   

the reference to a company to which Part 4 applies shall be treated as

a reference to the principal company of a group to which Part 4

applies, and

25

(b)   

the reference to the profits of C (tax-exempt) shall be treated as a

reference to amounts shown in the financial statements of G

(property rental business) as—

(i)   

the profits of the UK resident members of the group, and

(ii)   

gains accruing to UK resident members of the group.

30

      (2)  

In section 121(5) the reference to a company to which Part 4 applies shall be

treated as a reference to the principal company of a group to which Part 4

applies.

      (3)  

In the application of section 121(8)—

(a)   

for paragraph (a) substitute—

35

“(a)   

the reference to the principal company of a group to

which this Part applies includes a reference to the

principal company of G (post-cessation),” and

(b)   

disregard paragraph (b).

19    (1)  

In the application of section 122(1)(a)—

40

(a)   

the reference to a company to which Part 4 applies shall be treated as

a reference to the principal company of a group to which Part 4

applies, and

 

 

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications

353

 

(b)   

the reference to profits of a company’s tax-exempt business shall be

treated as a reference to amounts shown in the financial statements

of G (property rental business) as—

(i)   

the profits of the UK resident members of the group, and

(ii)   

gains accruing to UK resident members of the group.

5

      (2)  

In the application of section 122(2)(n), (o) and (p) a reference to a company

shall be treated as a reference to the principal company.

      (3)  

In the application of section 122 disregard subsection (5).

20         

In the application of section 123

(a)   

the reference to a company to which Part 4 applies shall be treated as

10

a reference to the principal company of a group to which Part 4

applies, and

(b)   

the reference to C (tax-exempt) shall be treated as a reference to a

member of G (property rental business).

Capital gains

15

21    (1)  

Sections 124 to 126 shall apply only in relation to each UK resident company

which is a member of the group; for which purpose—

(a)   

a reference to C (tax-exempt) is a reference to the company if or in so

far as it is a member of G (property rental business), and

(b)   

a reference to C (residual) is a reference to the company if or in so far

20

as it is a member of G (residual).

      (2)  

Where a percentage of the gains of a member of G (property rental business)

is excluded from a financial statement in accordance with paragraph 31(5),

the excluded percentage shall be treated for the purposes of corporation tax

as gains of the member in so far as it is a member of G (residual).

25

22         

In the application of section 125(7) a reference to the company shall be

treated as a reference to a member of the group.

Leaving Real Estate Investment Trust Regime

23         

In sections 128 to 130 a reference to the giving of a notice by or to a company

shall be treated as a reference to the giving of a notice by or to the principal

30

company.

24         

An appeal under section 129(6) may be made by the principal company.

25    (1)  

Section 131 shall apply in relation to each UK resident company which is a

member of the group; for which purpose—

(a)   

a reference to C (tax-exempt) is a reference to the company if or in so

35

far as it is a member of G (property rental business),

(b)   

a reference to C (residual) is a reference to the company if or in so far

as it is a member of G (residual), and

(c)   

a reference to C (post-cessation) is a reference to the company as a

member of G (post-cessation).

40

      (2)  

Where a percentage of the assets of a member of G (property rental business)

is excluded from a financial statement in accordance with paragraph 31(5),

the excluded percentage shall be disregarded for the purposes of section 131.

 

 

 
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