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 17 — Group Real Estate Investment Trusts: modifications
354

26    (1)
If a UK resident company ceases to be a member of a group to which Part 4
applies section 131 shall apply to the company as if—
(a)
references to C (tax-exempt) were references to the company as a
member of G (property rental business),
(b)
references to C (post-cessation) were references to the company after
5
ceasing to be a member of the group, and
(c)
the reference to C (residual) were a reference to the company as a
member of G (residual).
      (2)
Where a percentage of the assets of the company is excluded from a financial
statement in accordance with paragraph 31(5), the excluded percentage shall
10
be disregarded in applying section 131 to the company.
Anti-avoidance
27
In section 132—
(a)
the reference in subsection (2) to disposal by the company shall be
treated as a reference to disposal by a member of the group, and
15
(b)
the reference in subsection (3)(a) to C (tax-exempt) shall be treated as
a reference to G (property rental business).
28    (1)
Section 132(2) and (3) shall apply where a UK resident company ceases to be
a member of a group to which Part 4 applies if—
(a)
Part 4 had applied to the group for a continuous period of less than
20
ten years, or
(b)
the company had been a member of the group for a continuous
period of less than ten years.
      (2)
In the application of section 132(2) and (3) by virtue of sub-paragraph (1)—
(a)
a reference to C (tax-exempt) shall be treated as a reference to the
25
company as a member of G (property rental business), and
(b)
a reference to the date of cessation shall be treated as a reference to
the date on which the company ceases to be a member of the group.
29    (1)
A direction under section 133(2)—
(a)
may relate to the group as a whole or to one or more members;
30
(b)
may, in particular, alter the effect of this Schedule.
      (2)
In the application of section 133(5), an appeal may be brought by the
principal company.
Manufactured dividends
30
Section 139 shall apply—
35
(a)
as if in subsection (1) the reference to a company to which Part 4
applies were a reference to the principal company of a group to
which that Part applies, and
(b)
as if, in the amendment effected by subsection (2), in sub-paragraph
(2E) the reference to “the company” were a reference to the principal
40
company of the group.

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications
355

Financial statements
31    (1)
This paragraph sets out the requirements referred to in paragraph 5(2) for
financial statements in respect of a group to which Part 4 applies in relation
to an accounting period of the principal company.
      (2)
The principal company shall prepare—
5
(a)
a financial statement for G (property rental business) for the
accounting period,
(b)
a financial statement for G (property rental business) in respect of its
UK business, and
(c)
a financial statement for G (residual) for the accounting period.
10
      (3)
A financial statement under sub-paragraph (2)(a) or (c) shall specify, in
relation to each member—
(a)
income (calculated in accordance with international accounting
standards),
(b)
expenses (calculated in accordance with international accounting
15
standards),
(c)
profits before tax excluding gains or losses on property (whether
realised or not) calculated in accordance with international
accounting standards, and
(d)
assets valued—
20
(i)
at the beginning of the accounting period,
(ii)
in accordance with international accounting standards,
(iii)
using fair value where there is a choice, and
(iv)
disregarding liabilities secured against or otherwise relating
to the assets.
25
      (4)
A financial statement under sub-paragraph (2)(b) shall specify, in relation to
each member, profits calculated in accordance with section 120.
      (5)
Where a non-member of the group holds a percentage of the beneficial
interest in a member (other than the principal company), the financial
statements for G (property rental business) and G (residual) shall exclude
30
that percentage of income, expenses, gains, losses, assets and liabilities of the
member.
      (6)
Percentages of beneficial interest for the purpose of sub-paragraph (5) shall
be determined by reference to beneficial entitlement to profits available for
distribution to equity holders.
35
      (7)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations—
(a)
make further provision relating to the content of a financial
statement (which may, in particular—
(i)
permit or require apportionment or otherwise prescribe or
40
refer to accounting practice,
(ii)
provide for the inclusion or exclusion of specified income,
expenses, gains, losses, assets and liabilities,
(iii)
make provision about the treatment of an interest in a
business held by a member),
45
(b)
prescribe the form of a financial statement, and

Finance (No.2) Bill
Schedule 17 — Group Real Estate Investment Trusts: modifications
356

(c)
specify a time before which a financial statement must be supplied to
the Commissioners.
Non-UK resident members
32    (1)
This paragraph applies to a non-UK resident company which is a member of
a group to which Part 4 applies if—
5
(a)
the company has property rental business in the United Kingdom
(“the UK property rental business”), and
(b)
the profits of that business would be chargeable to tax under Chapter
3 of Part 3 of ITTOIA 2005 or as profits of a Schedule A business.
      (2)
For the purposes of determining whether business carried on by a non-UK
10
resident company is property rental business section 104 shall apply as if
after subsection (1)(b) there were inserted— “, or
(c)
a UK property business (within the meaning of section 264 of
ITTOIA 2005)”.
      (3)
The property rental business of the company in the United Kingdom shall be
15
treated as if it were (subject to the application of this Part) chargeable to
corporation tax.
      (4)
Section 119(1) shall apply to the company as if the reference to the business
of C (tax-exempt) were a reference to the UK property rental business.
      (5)
Profits arising from the UK property rental business shall not be charged to
20
income tax.
      (6)
Sections 124 to 126 shall apply to the company as if—
(a)
a reference to C (tax-exempt) were a reference to the company in so
far as it carries on the UK property rental business,
(b)
a reference to tax-exempt business were a reference to the UK
25
property rental business, and
(c)
a reference to C (residual) were a reference to the company in so far
as it carries on other business in the United Kingdom.
      (7)
If a UK resident member of a group to which Part 4 applies receives a
dividend from the company, such proportion of the dividend as represents
30
profits of the UK property rental business shall be treated for the purposes
of the Corporation Tax Acts as a dividend from a UK resident company.
      (8)
Profits and gains of the UK property rental business shall be treated as
profits and gains of a UK resident member of the group for the purposes of—
(a)
section 107(8) (as modified by paragraph 6),
35
(b)
section 121 (as modified by paragraph 18),
(c)
section 122 (as modified by paragraph 19), and
(d)
a financial statement for G (property rental business) under
paragraph 31.

Finance (No.2) Bill
Schedule 18 — Oil taxation: market value of oil
Part 1 — Amendments of the Oil Taxation Act 1975
357

Schedule 18
Section 147

Oil taxation: market value of oil
Part 1
Amendments of the Oil Taxation Act 1975
1ntroductory
5
1
OTA 1975 is amended as follows.
Assessable profits and allowable losses
2     (1)
Section 2 is amended as follows.
      (2)
In subsection (4)(b) (one-half of the market value in the last calendar month
of the preceding period) for “in the last calendar month” substitute “on the
10
last business day”.
      (3)
In subsection (5)(d) (one-half of the market value in the last calendar month
of the period) for “in the last calendar month” substitute “on the last business
day”.
      (4)
In subsection (5A), in the opening words, after “or another country” insert
15
“, or from its place of extraction (where that is in the territorial sea of the
United Kingdom or a designated area),”.
      (5)
In subsection (9)(a)(i) (5% provisional allowance: deliveries)—
(a)
for “in the calendar month in which the delivery was made”
substitute “as determined in accordance with Schedule 3 to this Act
20
for each of the deliveries”;
(b)
for “ Schedule 3 to this Act” substitute “that Schedule”.
      (6)
In subsection (9)(a)(ii) (5% provisional allowance: relevant
appropriations)—
(a)
for “in the calendar month in which the appropriation was made”
25
substitute “as determined in accordance with Schedule 3 to this Act
for each of the appropriations”;
(b)
for “ Schedule 3 to this Act” substitute “that Schedule”.
Allowance of exploration and appraisal expenditure
3     (1)
Section 5A is amended as follows.
30
      (2)
In subsection (5B) (oil to be treated as disposed of at its market value in the
calendar month) for “in the calendar month in which it was disposed of or
appropriated as mentioned” substitute “determined in accordance with
Schedule 3 to this Act for the disposal or appropriation mentioned”.
      (3)
Amend subsection (5C) (application of Schedule 3 with modifications for
35
ascertaining market value for the purposes of subsection (5B)) as follows.
      (4)
Omit paragraph (a) (modification of paragraph 2(2)(f)).
      (5)
In paragraph (b) (omission of sub-paragraphs (3) and (4)) for “sub-
paragraphs (3) and (4)” substitute “sub-paragraph (4)”.

Finance (No.2) Bill
Schedule 18 — Oil taxation: market value of oil
Part 1 — Amendments of the Oil Taxation Act 1975
358

      (6)
At the end of paragraph (c) insert “; and
(d)
any reference in paragraph 2 to the notional delivery day for
the actual oil shall be construed as a reference to the day on
which the oil is disposed of or appropriated as mentioned in
subsection (5A)(a) above.”.
5
Interpretation
4     (1)
In section 12 (interpretation of Part 1 of the Act) subsection (1) (general
definitions) is amended as follows.
      (2)
Insert each of the following definitions at the appropriate place—
““business day” has the same meaning as in the Bills of
10
Exchange Act 1882;”;
“Category 1 oil” and “Category 2 oil” have the meaning given
by paragraph 2(1B) of Schedule 3 to this Act;”.
      (3)
For the definition of “calendar month” substitute—
“ “calendar month” (where those words are used) means a
15
month of the calendar year;”.
Date of delivery or appropriation for shipped oil not disposed of in sales at arm’s length
5     (1)
After section 12, insert—
“12A
Date of delivery or appropriation: shipped oil not sold at arm’s length
(1)
This section has effect for the purpose of determining the date on
20
which any oil to which it applies is to be regarded for the purposes
of this Part as delivered or relevantly appropriated.
(2)
This section applies to—
(a)
oil (not being light gases) won from a field and disposed of
crude by a participator otherwise than in sales at arm’s
25
length, and
(b)
oil (not being light gases) so won and relevantly appropriated
by a participator,

if the condition in subsection (3)(a) or (b) below is met.
(3)
The condition is that the oil is or has been, or is to be,—
30
(a)
transported by ship from the place of extraction to a place in
the United Kingdom or elsewhere, or
(b)
transported by pipeline to a place in the United Kingdom and
loaded on to a ship there.
(4)
The date on which the oil is to be taken to be delivered, or (as the case
35
may be) relevantly appropriated, by the participator is—
(a)
the date of completion of load, in a case where the condition
in subsection (3)(a) above is met,
(b)
the date of the bill of lading, in a case where the condition in
subsection (3)(b) above is met.”.
40
      (2)
The amendment made by this paragraph has effect in relation to oil which
would (apart from this paragraph) fall to be regarded for the purposes of
Part 1 of OTA 1975 as delivered or appropriated on a date after 30th June
2006.

Finance (No.2) Bill
Schedule 18 — Oil taxation: market value of oil
Part 1 — Amendments of the Oil Taxation Act 1975
359

“The Board”
6     (1)
In section 21 (citation, interpretation and construction of the Act) subsection
(2) is amended as follows.
      (2)
In consequence of the Commissioners for Revenue and Customs Act 2005
(c. 11), for the definition of “the Board” substitute—
5
“ “the Board” means the Commissioners for Her Majesty’s
Revenue and Customs;”.
      (3)
The amendment made by this paragraph comes into force on the day on
which this Act is passed.
Returns by participators
10
7     (1)
In Schedule 2 (management and collection) paragraph 2 is amended as
follows.
      (2)
In sub-paragraph (2)(a)(iii) (market value of oil disposed of otherwise than
by sale at arm’s length) for “in the calendar month in which the delivery was
made” substitute “as determined in accordance with Schedule 3 to this Act
15
in the case of the delivery”.
      (3)
In sub-paragraph (2)(b)(ii) (market value of oil relevantly appropriated) for
“in the calendar month in which the delivery was made” substitute “as
determined in accordance with Schedule 3 to this Act in the case of the
appropriation”.
20
      (4)
In sub-paragraph (2)(d)(ii) (market value of oil not disposed of etc at end of
period) for “in the last calendar month” substitute “on the last business day”.
Gas fractionation
8     (1)
In Schedule 3 (petroleum revenue tax: miscellaneous provisions) paragraph
2A (market value of oil that consists of or includes gas) is amended as
25
follows.
      (2)
In sub-paragraph (1)—
(a)
for “(2D)” substitute “(2I)”;
(b)
omit “, or in accordance with those sub-paragraphs as modified by
sub-paragraph (3) of that paragraph,”.
30
      (3)
In sub-paragraph (2)—
(a)
for the words from the beginning to “paragraph 2 above” where first
occurring substitute “Sub-paragraph (2)(d) or (as the case may be)
(2AA)(d) of paragraph 2 above”;
(b)
after “in sub-paragraph (2)” insert “or (2AA)”.
35
      (4)
In sub-paragraph (3)—
(a)
after “in sub-paragraph (2)” insert “or (2AA)”,
(b)
for “(2D)” substitute “(2I)”;
(c)
omit “(with sub-paragraphs (2)(f) of paragraph 2 applying
accordingly)”.
40

Finance (No.2) Bill
Schedule 18 — Oil taxation: market value of oil
Part 2 — Amendments of other enactments
360

Aggregate market value of oil for purposes of section 2(5)
9
In Schedule 3, for paragraph 3 substitute—
“3    (1)
For the purposes of subsection (5) of section 2 of this Act, the
aggregate market value of any oil falling within paragraph (b) or
(c) of that subsection is arrived at as follows.
5
      (2)
In the case of oil falling within paragraph (b) of that subsection
and delivered as there mentioned in the chargeable period in
question—
(a)
for each delivery, find (in accordance with paragraph 2
above (read, where applicable, with paragraph 2A above))
10
the market value of the quantity of oil delivered, and
(b)
aggregate the market values so found.
      (3)
In the case of oil falling within paragraph (c) of that subsection and
appropriated as there mentioned in the chargeable period in
question—
15
(a)
for each appropriation, find (in accordance with paragraph
2 above (read, where applicable, with paragraph 2A
above)) the market value of the quantity of oil
appropriated, and
(b)
aggregate the market values so found.”.
20
Power to make regulations
10    (1)
At the end of Schedule 3 insert—
“Power to make regulations under this Schedule
12    (1)
Any power to make regulations under this Schedule is exercisable
by statutory instrument.
25
      (2)
A statutory instrument containing regulations under this
Schedule may not be made unless a draft of the instrument has
been laid before, and approved by a resolution of, the House of
Commons.
      (3)
Any power to make regulations under this Schedule includes
30
power—
(a)
to make different provision for different Categories or
kinds of oil or for different cases, or
(b)
to make incidental, consequential, supplemental, or
transitional provision or savings.”.
35
Part 2
Amendments of other enactments
Finance (No. 2) Act 1987
The designated fraction for the month
11    (1)
Schedule 8 to F(No.2)A 1987 (amendments of Schedule 10 to FA 1987) is
40
amended as follows.