rs1970507.784-790

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Report Stage Proceedings: 5th July 2006
784

Finance (N–[ [], continued

774G
Sections 774A to 774D: minor definitions etc

(1)
For the purposes of sections 774A to 774D “arrangement” includes

any agreement or understanding (whether or not legally enforceable).

(2)
For the purposes of sections 774A to 774D “income deduction”

means—

(a)
a deduction in calculating any income for tax purposes, or

(b)
a deduction against total income or total profits.

(3)
For the purposes of sections 774A to 774D—

(a)
references to a person’s receiving any asset include the

person’s obtaining directly or indirectly the value of any asset

or otherwise deriving directly or indirectly any benefit from it,

(b)
references to a disposal of an asset include anything which

constitutes a disposal of the asset for the purposes of the 1992

Act,

(c)
references to payments in respect of any asset include

obtaining directly or indirectly the value of any asset or

otherwise deriving directly or indirectly any benefit from it.

(4)
For the purposes of sections 774A to 774D, section 839 (connected

persons) applies.

(5)
For the purposes of sections 774A to 774D references to the accounts

of any person who is a company include the consolidated group

accounts of a group of companies of which it is a member.

(6)
If any person does not draw up accounts in accordance with generally

accepted accounting practice, sections 774A to 774D apply as if the

accounts had been drawn up by the person in accordance with that

practice.

(7)
Sections 277 to 281 of ITTOIA 2005 and section 34 above (lease

premiums) are not to apply in relation to a premium paid in respect of

a grant of a lease where the grant constitutes a disposal of an asset for

the purposes of section 774A(2)(c) or 774C(2)(a).”.

      (2)
The amendment made by this paragraph has effect in relation to any

arrangements whenever made (but see sub-paragraphs (3) and (4)).

      (3)
In relation to arrangements made before 6th June 2006, amounts are, as a result

of the amendment made by this paragraph,—

(a)
to be charged to tax, or

(b)
to be brought into account in calculating any income for tax purposes

or deducted from any income for tax purposes,


only if the amounts arise on or after that date.

      (4)
The amendment made by this paragraph has no effect in relation to any

arrangement made before that date in so far as section 43B or 43D of ICTA

(rent factoring) applies to it.

      (5)
In any case where, in relation to arrangements made before that date, a person

is treated, as a result of the amendment made by this paragraph, as being a

party to any loan relationship—

(a)
a period of account is to be treated for the purposes of Chapter 2 of Part

4 of FA 1996 as beginning on that date, and

(b)
the loan relationship is to be treated for those purposes as being

entered into by the person for a consideration equal to the notional

carrying value of the liability representing the relationship.

Report Stage Proceedings: 5th July 2006
785

Finance (N–[ [], continued

      (6)
For this purpose, the notional carrying value is the amount that would have

been the carrying value of the liability in the accounts of the person if a period

of account had ended immediately before that date.

      (7)
“Carrying value” has the same meaning here as it has for the purposes of

paragraph 19A of Schedule 9 to FA 1996.

Rent factoring of leases of plant or machinery

3C  (1)
Section 785A of ICTA (rent factoring of leases of plant or machinery) is

amended as follows.

      (2)
After subsection (5) (provision about partnerships with legal personality)

insert—

“(5A)
This section does not apply in so far as section 774B or 774D

(structured finance arrangements) applies in relation to the

arrangements mentioned in paragraph (c) of subsection (1) above as a

result of the transfer mentioned in that paragraph.”.

Transactions associated with loans or credit

3D  (1)
Section 786 of ICTA (transactions associated with loans or credit) is amended

as follows.

      (2)
After subsection (5) (transaction under which a person assigns, surrenders etc

income arising from property) insert—

“(5ZA)
But subsection (5) above does not apply if the person mentioned in that

subsection is, as a result of section 774B or 774D (structured finance

arrangements), chargeable to tax on the amount of income assigned,

surrendered, waived or forgone.”.

Structured finance arrangements: chargeable gains treatment of acquisitions and

disposals

3E  (1)
After section 263D of TCGA 1992 (gains accruing to persons paying

manufactured dividends) insert—

“263E
  Structured finance arrangements

(1)
This section applies if—

(a)
section 774B of the Taxes Act (disregard of intended effects

of arrangement involving disposals of assets) applies in

relation to a structured finance arrangement,

(b)
the borrower or a person connected with the borrower makes

a disposal of any security at any time under the arrangement

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

the lender, and

(c)
condition A or B is met.

(2)
Condition A is that the person making the disposal subsequently

acquires under the arrangement the asset disposed of by that disposal.

(3)
Condition B is that—

(a)
the asset disposed of by that disposal subsequently ceases to

exist at any time, and

(b)
that asset was held by the lender, or a person connected with

the lender, from the time of the disposal until that time.

Report Stage Proceedings: 5th July 2006
786

Finance (N–[ [], continued

(4)
The disposal of the security by the borrower or a person connected

with the borrower is to be disregarded for the purposes of this Act.

(5)
Any subsequent acquisition by the person making the disposal of the

asset disposed of by that disposal is to be disregarded for the purposes

of this Act.

(6)
In this section—

“the borrower”, in relation to a structured finance arrangement, means

the person who is the borrower under the arrangement for the purposes

of section 774A of the Taxes Act,

“the lender”, in relation to a structured finance arrangement, means the

person who is the lender under the arrangement for the purposes of that

section,

“security” means any such asset as is mentioned in subsection (2)(c) and

(d) of that section.

(7)
For the purposes of this section—

(a)
references to a person connected with the borrower do not

include the lender, and

(b)
references to a person connected with the lender do not

include the borrower.”.

      (2)
The amendment made by this paragraph has effect in relation to disposals

made on or after 6th June 2006.

      (3)
The amendment made by this paragraph also has effect in relation to any

disposal made by a person before that date if the person makes a claim to that

effect under this sub-paragraph.’.

Mr Chancellor of the Exchequer

Agreed to  17

Page  192,  line  19  [Schedule  6],  at end insert—

‘Loan relationships: repo and stock-lending arrangements

13A(1)
In Schedule 9 to FA 1996 (loan relationships: special computational

provisions), paragraph 15 (disposal or acquisition made in pursuance of repo

and stock-lending arrangements not to be related transaction) is amended as

follows.

      (2)
In sub-paragraph (2)(b) (transfer to original transferor (“A”) giving effect to

entitlement or requirement to rights on re-transfer etc.), after “to A” insert “by

B”.

      (3)
The amendment made by this paragraph has effect in relation to any transfer to

A (within the meaning of paragraph (a) of sub-paragraph (3) of paragraph 15)

under arrangements—

(a)
consisting in or involving an agreement made on or after 27th June

2006 for the transfer of rights by A to B (within the meaning of that

paragraph), or

Report Stage Proceedings: 5th July 2006
787

Finance (N–[ [], continued

(b)
involving an agreement made on or after that date providing for a

transfer giving effect to the entitlement or requirement described in

paragraph (b) of that sub-paragraph otherwise than by B.’.

Mr Chancellor of the Exchequer

Agreed to  21

Page  203,  line  30  [Schedule  8],  leave out from ‘the’ to ‘purpose’ in line 31 and

insert ‘main’.

Mr Chancellor of the Exchequer

Agreed to  24

Page  209,  line  7  [Schedule  8],  at end insert—

‘(6)
A plant or machinery lease is not a funding lease in the case of the lessor if—

(a)
before 1st April 2006, the plant or machinery had, for a period or periods

totalling at least 10 years, been the subject of one or more leases, and

(b)
the lessor under the plant or machinery lease was also lessor of the plant

or machinery on the last day before 1st April 2006 on which the plant or

machinery was the subject of a lease.’.

Mr Chancellor of the Exchequer

Agreed to  25

Page  212,  line  43  [Schedule  8],  at end insert ‘(but see also subsection (4A))’.

Mr Chancellor of the Exchequer

Agreed to  26

Page  213,  line  23  [Schedule  8],  at end insert—

‘(4A)
A lease is not excluded by virtue of subsection (2) if—

(a)
the inception of the lease is before 28th June 2006, and

(b)
by virtue only of section 70J(6), the lease is not a funding lease in the case

of the lessor.’.

Report Stage Proceedings: 5th July 2006
788

Finance (N–[ [], continued

Mr Chancellor of the Exchequer

Agreed to  22

Page  214,  line  32  [Schedule  8],  leave out from ‘is’ to ‘that’ in line 33.

Mr Chancellor of the Exchequer

Agreed to  23

Page  216,  line  26  [Schedule  8],  leave out from ‘if’ to third ‘the’ in line 27.

Rob Marris

Mr Ken Purchase

Withdrawn  1

Page  92,  line  2,  leave out Clause 99.

Rob Marris

Mr Ken Purchase

Not called  2

Page  93,  line  40,  leave out Clause 100.

Mr Chancellor of the Exchequer

Agreed to  28

Page  349,  line  5    [Schedule  16],  leave out paragraph 1 and insert—

‘1
Incidental letting of property (whether in the United Kingdom or outside)

which is held in connection with a trade in property.’.

Mr Chancellor of the Exchequer

Agreed to  29

Page  349,  line  15   [Schedule  16],  at end insert—

‘2A(1)
Letting of property if the following two conditions are satisfied.

      (2)
Condition 1 is that the property is let—

(a)
by one member of a group to another, or

(b)
by a member of a group to a company the shares in which are stapled

to the shares of a member of the group.

      (3)
Condition 2 is that the property would fall in accordance with generally

accepted accounting practice to be described as owner-occupied.

      (4)
For the purpose of sub-paragraph (2)(b), shares of one company are stapled to

shares of another if in consequence of the nature of the rights attaching to the

shares of the one company (including any terms or conditions attaching to the

right to transfer the shares) it is necessary or advantageous for a person who

has, disposes of or acquires shares of that company also to have, to dispose of

or to acquire a holding of shares of the other company.’.

Report Stage Proceedings: 5th July 2006
789

Finance (N–[ [], continued

Mr Chancellor of the Exchequer

Agreed to  101

Page  349,  line  19  [Schedule  16],  leave out from ‘into’ to end of line 20 and insert

‘structured finance arrangements to which section 774B or 774D of ICTA applies

(factoring of rent and other income receipts).’.

Mr Alex Salmond

Stewart Hosie

Angus Robertson

Pete Wishart

Mr Mike Weir

Mr Angus MacNeil

Not called  64

Page  97,  line  14  [Clause  106],  leave out ‘6’ and insert ‘5’.

Mr Alex Salmond

Stewart Hosie

Angus Robertson

Pete Wishart

Mr Mike Weir

Mr Angus MacNeil

Not called  65

Page  97,  line  23  [Clause  106],  leave out subsection (5).

Mrs Theresa Villiers

Mr Mark Francois

Mr Mark Hoban

Mr Paul Goodman

Andrew Selous

Negatived on division  130

Page  97,  line  24  [Clause  106],  at end insert ‘or on the Alternative Investment

Market of the London Stock Exchange or its equivalent European Union exchanges.’.

Mr Alex Salmond

Stewart Hosie

Angus Robertson

Pete Wishart

Mr Mike Weir

Mr Angus MacNeil

Not called  66

Page  97,  line  25  [Clause  106],  leave out ‘4’ and insert ‘3’.

Mr Alex Salmond

Stewart Hosie

Angus Robertson

Pete Wishart

Mr Mike Weir

Mr Angus MacNeil

Not called  67

Page  97,  line  34  [Clause  106],  leave out ‘5’ and insert ‘4’.

Report Stage Proceedings: 5th July 2006
790

Finance (N–[ [], continued

Mr Alex Salmond

Stewart Hosie

Angus Robertson

Pete Wishart

Mr Mike Weir

Mr Angus MacNeil

Not called  68

Page  97,  line  42  [Clause  106],  leave out ‘6’ and insert ‘5’.

Mr Chancellor of the Exchequer

Agreed to  27

Page  98,  line  43     [Clause  107],  at end insert—

‘(a)
no account shall be taken of the fact that a property may fall to be

described as owner-occupied by reason only of the provision by the

company of services to an occupant who is in exclusive occupation of the

property and is not connected with the company (within the meaning

given by section 839 of ICTA),’.

Sir George Young

Not called  60

Page  101,  line  5  [Clause  112],  at end insert ‘; but no charge shall arise under this

section in respect of a company whose predominant purpose is investment in residential

property.’.

Sir George Young

Not called  61

Page  101,  line  36  [Clause  112],  at end insert—

‘(8)
The Treasury may by regulations provide for the applilcation of this section to

companies whose predominant purpose is investment in residential property.’.

Mr Chancellor of the Exchequer

Agreed to  30

Page  351,  line  9     [Schedule  17],  at end insert—

  ‘(1A)
In section 107(7)(a) a reference to the company shall be treated as a reference

to a member of the group.’.