Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 6 — Companies carrying on business of leasing plant or machinery
114

Schedule 6
Section 30

Companies carrying on business of leasing plant or machinery
Company reconstructions without change of ownership
1     (1)
In section 343 of ICTA (company reconstructions without change of
ownership), in subsection (2) (continuity of treatment for capital
5
allowances), insert at the end “and are subject to section 343A (company
reconstructions involving business of leasing plant or machinery)”.
      (2)
After that section insert—
“343A
Company reconstructions involving business of leasing plant or
machinery
10
(1)
This section applies if the trade is or forms part of a business of
leasing plant or machinery which the predecessor or the successor
carries on on the day of cessation.
(2)
If, on the day of cessation, both the predecessor and the successor
carry on the trade otherwise than in partnership, section 343(2) does
15
not apply unless—
(a)
the principal company or companies of the predecessor
immediately before the cessation are the same as the
principal company or companies of the successor
immediately afterwards, and
20
(b)
if any such principal company is a consortium principal
company, the relevant fraction in relation to the predecessor
immediately before the cessation is the same as the relevant
fraction in relation to the successor immediately afterwards
(irrespective of whether the members of each consortium are
25
the same).
(3)
If, on the day of cessation, the predecessor or the successor carries on
the trade in partnership, section 343(2) does not apply unless—
(a)
the predecessor ceases to carry on the whole of its trade, and
(b)
that trade is a business of leasing plant or machinery which
30
the predecessor carries on in partnership on the day of
cessation.
(4)
In any case where section 343(2) does not apply as a result of this
section, the plant or machinery belonging to the trade shall be treated
for the purposes of the Corporation Tax Acts as sold by the
35
predecessor to the successor on the day of the cessation for an
amount equal to its market value as at that day.
(5)
In this section—
“business of leasing plant or machinery”—
(a)
has the same meaning as in Part 2 of Schedule 10 to
40
the Finance Act 2006 (sale etc of lessor companies etc)
(if the business is carried on otherwise than in
partnership), and
(b)
has the same meaning as in Part 3 of that Schedule (if
the business is carried on in partnership),
45

Finance Bill
Schedule 6 — Companies carrying on business of leasing plant or machinery
115

“consortium principal company” means a company which is a
principal company as a result of paragraph 12 of that
Schedule,
“market value”, in relation to plant or machinery, is to be
construed in accordance with paragraph 41(8) of that
5
Schedule,
“plant or machinery” has the same meaning as in Part 2 of the
Capital Allowances Act,
“principal company” is to be construed in accordance with
paragraph 11 or (as the case may be) 12 of Schedule 10 to the
10
Finance Act 2006, and
“relevant fraction” has the same meaning as in paragraph 12 of
that Schedule.”
      (3)
Subsection (2) of section 343A of ICTA (as inserted by sub-paragraph (2)
above) has effect in relation to cessations occurring on or after 22nd
15
November 2006.
      (4)
But, if the cessation occurs before 21st March 2007, that subsection has effect
as if for paragraphs (a) and (b) there were substituted “on that day each
company which is a principal company of the predecessor is also a principal
company of the successor”.
20
      (5)
Subsection (3) of section 343A of ICTA has effect in relation to cessations
occurring on or after that date.
Sale etc of lessor companies etc
2     (1)
Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as
follows.
25
      (2)
In paragraph 1(4) (contents of Schedule), for “an anti-avoidance provision”
substitute “anti-avoidance provisions”.
      (3)
In—
(a)
paragraph 7(3)(b) (provision for the purposes of condition A in
paragraph 6), and
30
(b)
paragraph 17(2)(b) (meaning of “PM” in paragraph 16),

for “it transfers” substitute “is transferred”.
      (4)
After paragraph 38 insert—
“38A  (1)
This paragraph applies if—
(a)
a question arises as to the application of this Schedule,
35
(b)
for the purpose of determining that question regard must
be had to amounts (if any) which fall (or would fall) to be
shown in any balance sheet of any company in respect of
plant or machinery,
(c)
there would (but for this paragraph) be a reduction or
40
increase in any such amount,
(d)
the reduction or increase arises directly or indirectly in
consequence of, or otherwise in connection with, any
arrangements, and

Finance Bill
Schedule 6 — Companies carrying on business of leasing plant or machinery
116

(e)
the main purpose, or one of the main purposes, of the
arrangements is to secure that there is a relevant tax
advantage.
      (2)
There is a relevant tax advantage if (but for this paragraph)—
(a)
any company would not be regarded for the purposes of
5
any provision of this Schedule as carrying on a business of
leasing plant or machinery (whether alone or in
partnership),
(b)
the amount of any income which any company is treated
as receiving under any provision of this Schedule would
10
be reduced, or
(c)
the amount of any expense which any company is treated
as incurring under any provision of this Schedule would
be increased.
      (3)
For the purpose of determining any question which arises as to the
15
application of this Schedule, the reduction or increase in the
amount which falls (or would fall) to be shown in the balance sheet
in respect of plant or machinery is to be ignored.
      (4)
For the purposes of this paragraph and paragraph 38B a question
arises as to the application of this Schedule if a question arises—
20
(a)
as to whether any company carries on a business of leasing
plant or machinery (whether alone or in partnership) for
the purposes of any provision of this Schedule, or
(b)
as to the amount (if any) of any income or expense which
any company is treated as receiving or incurring under any
25
provision of this Schedule.
      (5)
In this paragraph—
“arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions—
(a)
whether or not legally enforceable, and
30
(b)
whether or not the company for which the relevant
tax advantage is intended to be secured is a party to
the arrangements,
“increase” includes an increase from nil, and
“reduction” includes a reduction to nil.
35
38B   (1)
This paragraph applies if—
(a)
a company owns any plant or machinery at any time on
any day (“the relevant day”),
(b)
a question arises as to the application of this Schedule,
(c)
for the purpose of determining that question regard must
40
be had to the amount (if any) which falls (or would fall) to
be shown in any balance sheet of the company in respect of
the plant or machinery, and
(d)
condition A or B is met.
      (2)
Condition A is met if there would (but for this paragraph) be no
45
amount which would fall to be shown in the balance sheet of the
company in respect of the plant or machinery.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
117

      (3)
Condition B is met if the amount which (but for this paragraph)
would fall to be shown in the balance sheet of the company in
respect of the plant or machinery is less than the amount which, on
the relevant assumption, would fall to be so shown.
      (4)
For the purpose of determining any question which arises as to the
5
application of this Schedule, the amount which falls (or would fall)
to be shown in any balance sheet of the company in respect of the
plant or machinery is to be determined on the relevant assumption
(as well as on the other assumptions applicable under other
provisions of this Schedule).
10
      (5)
The relevant assumption is that the company has no liabilities of
any kind at any time on that day.
      (6)
For this purpose “liabilities” includes any share capital issued by
the company which falls to be treated for accounting purposes as
a liability.”
15
      (5)
For the purposes of Schedule 10 to FA 2006 the amendments made by sub-
paragraphs (3) and (4) have effect in relation to—
(a)
any qualifying change of ownership in relation to a company which
occurs on or after 22nd November 2006, and
(b)
any qualifying change in a company’s interest in a business which
20
occurs on or after that date.
      (6)
For all other purposes those amendments have effect for the purpose of
determining whether a company carries on a business of leasing plant or
machinery (whether alone or in partnership) on or after that date.
Schedule 7
25
Section 37

Insurance business: gross roll-up business etc
Part 1
Amendments
Taxes Management Act 1970 (c. 9)
1
In section 98 of TMA 1970 (special returns etc), in the Table, omit the entries
30
relating to section 333B of ICTA.
Income and Corporation Taxes Act 1988 (c. 1)
2
ICTA is amended as follows.
3     (1)
Section 76 (expenses of insurance companies) is amended as follows.
      (2)
In subsection (1), omit the second sentence.
35
      (3)
In subsection (7), in Step 5—
(a)
for “sum (“amount S”) of the amounts” substitute “amount (“amount
S”)”, and
(b)
for “436 or 439B” substitute “436A”.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
118

      (4)
Omit subsection (14).
      (5)
In subsection (15), omit the definition of “capital redemption business”.
4
Omit section 333B (involvement of insurance companies with plans and
accounts).
5
In section 403E (relief for overseas losses of UK resident companies), omit
5
subsection (3).
6     (1)
Section 431 (interpretative provisions relating to insurance companies) is
amended as follows.
      (2)
In subsection (2), insert at the appropriate places—
““child trust fund business” has the meaning given by section
10
431BA;”,
““foreign currency assets”, in relation to an insurance company
and any time during a period of account, means assets, other
than assets linked to gross roll-up business, which—
(a)
are at that time managed under the control of a
15
person whose normal place of work is at a permanent
establishment outside the United Kingdom at or
through which the company carries on gross roll-up
business; or
(b)
are denominated in a foreign currency and specified
20
in a certificate given by a director of the company no
later than three months after the end of the period of
account as being held at that time during the period
of account to enable the company to meet liabilities of
its gross roll-up business which are denominated in
25
that currency;”,
““gross roll-up business” has the meaning given by section
431EA;”,
““immediate needs annuities business” means business which
consists of the effecting or carrying out of immediate needs
30
annuities (within the meaning of section 725 of ITTOIA
2005);”,
““individual savings account business” has the meaning given
by section 431BB;”, and
““PHI business” means long-term business other than life
35
assurance business (including the reinsurance of such long-
term business);”.
      (3)
In subsection (2), omit the definitions of—
(a)
“annuity business”, and
(b)
“overseas life assurance fund”.
40
      (4)
In subsection (2), for the definition of “life assurance business” substitute—
““life assurance business” means business which—
(a)
consists of the effecting or carrying out of contracts of
insurance which fall within paragraph I, II, III or
VII(b) of Schedule 1 to the Financial Services and
45
Markets Act 2000 (Regulated Activities) Order 2001,
or
(b)
is capital redemption business,

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
119

other than immediate needs annuities business;”.
      (5)
In subsection (2), for the definition of “reinsurance business” substitute—
““reinsurance” includes retrocession;”.
      (6)
After subsection (2ZE) insert—
“(2ZF)
In this Chapter “capital redemption business” means any business of
5
a company carrying on insurance business in so far as it consists of
the effecting on the basis of actuarial calculations, and the carrying
out, of contracts under which, in return for one or more fixed
payments, a sum or series of sums of a specified amount become
payable at a future time or over a period.”
10
7
In section 431A(3)(a) (power to amend), omit “and Schedule 19AA”.
8
After section 431B insert—
“431BA
  Meaning of “child trust fund business”
(1)
In this Chapter “child trust fund business” means so much of a
company’s life assurance business as is referable to child trust fund
15
policies (but not including the reinsurance of such business).
(2)
In this section “child trust fund policy” means a policy of life
insurance which is an investment under a child trust fund (within
the meaning of the Child Trust Funds Act 2004).
431BB
  Meaning of “individual savings account business”
20
(1)
In this Chapter “individual savings account business” means so
much of a company’s life assurance business as is referable to
individual savings account policies (but not including the
reinsurance of such business).
(2)
In this section “individual savings account policy” means a policy of
25
life insurance which is an investment of a kind specified in
regulations made by virtue of section 695(1) of ITTOIA 2005.”
9     (1)
Section 431D (meaning of “overseas life assurance business”) is amended as
follows.
      (2)
For subsection (1) substitute—
30
“(1)
In this Chapter “overseas life assurance business” means so much of
a company’s relevant life assurance business as is with a policy
holder or annuitant not residing in the United Kingdom (but not
including the reinsurance of such business).
(1A)
In subsection (1) above “relevant life assurance business” means life
35
assurance business other than—
(a)
pension business
(b)
individual savings account business,
(c)
child trust fund business, and
(d)
business of any description prescribed by regulations made
40
by the Commissioners for Her Majesty’s Revenue and
Customs.”
      (3)
In subsections (2) and (4), for “(1)” substitute “(1A)”.

Finance Bill
Schedule 7 — Insurance business: gross roll-up business etc
Part 1 — Amendments
120

      (4)
In subsection (4), insert at the end “(including provision amending any
enactment or any instrument made under an enactment)”.
10
After section 431E insert—
“431EA
  Meaning of “gross roll-up business”
In this Chapter “gross roll-up business” means business of any of the
5
following kinds—
(a)
pension business;
(b)
child trust fund business;
(c)
individual savings account business;
(d)
life reinsurance business; and
10
(e)
overseas life assurance business.”
11
In section 431F (meaning of “basic life assurance and general annuity
business”), for the words from “(including” to the end substitute “other than
gross roll-up business”.
12
In section 432ZA(7) (linked assets), for “long-term business other than life
15
assurance” (in both places) substitute “PHI”.
13    (1)
Section 432A (apportionment of income and gains) is amended as follows.
      (2)
In subsection (1A), for “shall be” substitute “is”.
      (3)
In subsection (2), for paragraphs (a) to (f) substitute—
“(a)
basic life assurance and general annuity business,
20
(b)
gross roll-up business, and
(c)
PHI business.”
      (4)
In subsection (3), for “(apart from overseas life assurance business) shall be”
substitute “is”.
      (5)
Omit subsection (4).
25
      (6)
Before subsection (5) insert—
“(4A)
Income arising from, and gains or losses accruing on the disposal of,
foreign currency assets is referable to gross roll-up business.”
      (7)
In subsection (5)—
(a)
for “shall be” substitute “is”, and
30
(b)
omit “(apart from overseas life assurance business)”.
      (8)
For subsections (6) to (6AA) substitute—
“(6)
For the purposes of subsection (5) above “the relevant fraction”, in
relation to basic life assurance and general annuity business, is—

where—
35
A is the aggregate of—
(a)
the mean of the opening and closing liabilities of the
basic life assurance and general annuity business (but
taking that mean to be nil if it would otherwise be
below nil), reduced (but not below nil) by the mean of
40