Crossrail Bill

House of Commons

Session 2007 - 08
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Crossrail Bill

Crossrail Bill
Schedule 13 — Transfer schemes: tax provisions
Part 1 — Introduction
203

Schedule 13
Section 47

Transfer schemes: tax provisions
Part 1
Introduction
Meaning of “public body”
5
1
In this Schedule “public body” means a person which is a public body for the
purposes of section 66 of FA 2003 (SDLT: transfers involving public bodies).
Meaning of “taxable public body” and “exempt public body”
2     (1)
In this Schedule “taxable public body” means a public body which is within
the charge to corporation tax.
10
      (2)
In this Schedule “exempt public body” means a public body which is exempt
from corporation tax.
Interpretation: supplementary
3     (1)
In this Schedule—
“CAA 2001” means the Capital Allowances Act 2001 (c. 2);
15
“FA”, followed by a year, means the Finance Act of that year;
“ICTA” means the Income and Corporation Taxes Act 1988 (c. 1);
“ITA 2007” means the Income Tax Act 2007 (c. 3);
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act
2005 (c. 5);
20
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992 (c. 12);
“TMA 1970” means the Taxes Management Act 1970 (c. 9);
“transfer scheme” means a scheme made under Schedule 12 to this Act;
“transferee”, in relation to a transfer in accordance with a transfer
scheme, means the person to whom the transfer is made;
25
“transferor”, in relation to a transfer in accordance with a transfer
scheme, means the person from whom the transfer is made.
      (2)
So far as it relates to income tax this Schedule is to be construed as one with
the Income Tax Acts.
      (3)
So far as it relates to capital gains tax this Schedule is to be construed as one
30
with TCGA 1992.
      (4)
So far as it relates to corporation tax this Schedule is to be construed as one
with the Corporation Tax Acts.
      (5)
So far as it relates to capital allowances this Schedule is to be construed as
one with CAA 2001.
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Crossrail Bill
Schedule 13 — Transfer schemes: tax provisions
Part 2 — Transfers etc between taxable public bodies
204

Part 2
Transfers etc between taxable public bodies
Meaning of “relevant transfer” in Part 2 of Schedule
4
In this Part of this Schedule “relevant transfer” means a transfer, in
accordance with a transfer scheme, from a taxable public body to another
5
taxable public body.
Computation of profits and losses in respect of transfer of trade
5     (1)
This paragraph applies where a taxable public body (“the predecessor”) is
carrying on a trade or a part of a trade and, as a result of a transfer scheme—
(a)
the predecessor ceases to carry on that trade or that part of that trade,
10
and
(b)
another taxable public body (“the successor”) begins to carry on that
trade or that part of it.
      (2)
For the purpose of computing, in relation to the time when the scheme
comes into force and subsequent times, the relevant trading profits or losses
15
of the predecessor and the successor—
(a)
the trade or part is to be treated as having been a separate trade at the
time of its commencement and as having been carried on by the
successor at all times since its commencement as a separate trade,
and
20
(b)
the trade carried on by the successor after the time when the scheme
comes into force is to be treated as the same trade as that which it is
treated, by virtue of paragraph (a), as having carried on as a separate
trade before that time.
      (3)
Where a trade or a part of a trade falls to be treated under this paragraph as
25
a separate trade, such apportionments of receipts, expenses, assets and
liabilities shall be made for the purpose of computing relevant trading
profits or losses as may be just and reasonable.
      (4)
This paragraph is subject to the other provisions of this Part of this Schedule.
      (5)
In this paragraph “relevant trading profits or losses” means profits or losses
30
under Case I of Schedule D in respect of the trade or part of a trade in
question.
Transfers of trading stock
6     (1)
This paragraph applies if—
(a)
under a relevant transfer trading stock of the transferor is transferred
35
to the transferee, and
(b)
paragraph 5 does not apply in relation to that transfer.
      (2)
Sub-paragraphs (3) and (4) have effect in computing for any corporation tax
purpose both the profits of the trade in relation to which the stock is trading
stock immediately before the transfer takes effect (“the transferor’s trade”)
40
and—
(a)
if the stock falls immediately after the transfer takes effect to be
treated as trading stock of the transferee, the profits of the trade in

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Schedule 13 — Transfer schemes: tax provisions
Part 2 — Transfers etc between taxable public bodies
205

relation to which it falls to be treated as trading stock (“the
transferee’s trade”);
(b)
otherwise, the consideration given by the transferee, or the
expenditure incurred by the transferee, for the acquisition of the
stock.
5
      (3)
The stock must be taken to have been—
(a)
disposed of by the transferor in the course of the transferor’s trade,
(b)
if sub-paragraph (2)(a) applies, acquired by the transferee in the
course of the transferee’s trade, and
(c)
subject to that, disposed of and acquired when the transfer takes
10
effect.
      (4)
The stock must be valued as if the disposal and acquisition had been for a
consideration which in relation to the transferor would have resulted in
neither a profit nor a loss being brought into account in respect of the
disposal in the accounting period of the transferor which ends with, or is
15
current at, the time when the transfer takes effect.
      (5)
In this paragraph “trading stock” has the same meaning as in section 100 of
ICTA.
Capital allowances: transfer of whole trade
7     (1)
This paragraph applies where a taxable public body (“the predecessor”) is
20
carrying on a trade and, as a result of a transfer scheme—
(a)
the predecessor ceases to carry on that trade, and
(b)
another taxable public body (“the successor”) begins to carry on that
trade.
      (2)
For the purposes of the allowances and charges provided for by CAA 2001,
25
the trade is not to be treated as permanently discontinued, nor a new trade
as set up; but sub-paragraphs (3) and (4) are to apply.
      (3)
There are to be made to or on the successor, in accordance with CAA 2001,
all such allowances and charges as would, if the predecessor had continued
to carry on the trade, have fallen to be made to or on the predecessor.
30
      (4)
The amounts of those allowances and charges are to be computed as if—
(a)
the successor had been carrying on the trade since the predecessor
began to do so, and
(b)
everything done to or by the predecessor had been done to or by the
successor,
35

but so that transfers in accordance with the scheme, so far as they relate to
assets in use for the purposes of the trade, shall not be treated as giving rise
to an allowance or charge.
Capital allowances: transfer of part of a trade
8     (1)
Where a taxable public body (“the predecessor”) is carrying on a trade and,
40
as a result of a transfer scheme—
(a)
the predecessor ceases to carry on a trade, and
(b)
another taxable public body (“the successor”) begins to carry on
activities of that trade as part of a trade carried on by the successor,

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Schedule 13 — Transfer schemes: tax provisions
Part 2 — Transfers etc between taxable public bodies
206


then that part of the trade carried on by the successor shall be treated for the
purposes of paragraph 7 as a separate trade.
      (2)
Where a taxable public body (“the predecessor”) is carrying on a trade and,
as a result of a transfer scheme—
(a)
the predecessor ceases to carry on a part of a trade, and
5
(b)
another taxable public body begins to carry on activities of that part
of that trade,

then the predecessor shall be treated for the purposes of paragraph 7 and
sub-paragraph (1) as having carried on that part of its trade as a separate
trade.
10
      (3)
Where activities fall to be treated for the purposes of this paragraph as a
separate trade, such apportionments of receipts, expenses, assets and
liabilities shall be made for the purposes of CAA 2001 as may be just and
reasonable.
Capital allowances: transfer of plant or machinery
15
9     (1)
This paragraph applies where—
(a)
there is a relevant transfer of plant or machinery,
(b)
paragraph 7 does not apply in relation to that transfer,
(c)
the plant or machinery would be treated for the purposes of CAA
2001 as disposed of by the transferor to the transferee on the transfer
20
taking effect, and
(d)
the transfer scheme in accordance with which the transfer is made
contains provision for the disposal value of the plant or machinery to
be treated for the purposes of that Act as an amount specified in or
determined in accordance with the scheme.
25
      (2)
For the purposes of CAA 2001—
(a)
the provision mentioned in sub-paragraph (1)(d) is to have effect for
determining an amount as the disposal value of the plant or
machinery or the price at which a fixture is to be treated as sold,
(b)
the transferee is to be treated as having incurred capital expenditure
30
of that amount on the provision of the plant or machinery for the
purposes for which it is used by the transferee on and after the taking
effect of the transfer,
(c)
the property is to be treated as belonging to the transferee as a result
of the transferee having incurred that expenditure, and
35
(d)
in the case of a fixture, the expenditure which falls to be treated as
incurred by the transferee is to be treated for the purposes of sections
181(1) and 182(1) of that Act as being incurred by the giving of a
consideration consisting in a capital sum of that amount.
      (3)
The provision mentioned in sub-paragraph (1)(d) for the determination of
40
an amount may include provision for a determination—
(a)
to be made by the Secretary of State in a manner described in the
scheme,
(b)
to be made by reference to factors so described or to the opinion of a
person so described, and
45
(c)
to be capable of being modified (on one or more occasions) in a
manner and in circumstances so described.

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Schedule 13 — Transfer schemes: tax provisions
Part 2 — Transfers etc between taxable public bodies
207

      (4)
The consent of the Treasury is required for the making or modification of a
determination under the provision mentioned in sub-paragraph (1)(d).
      (5)
The consent of the transferee is required for the modification of a
determination under the provision mentioned in sub-paragraph (1)(d).
      (6)
As to the making of a determination or a modification of a determination
5
under the provision mentioned in sub-paragraph (1)(d), see further
paragraph 43.
      (7)
Expressions used in this paragraph and in Part 2 of CAA 2001 have the same
meanings in this paragraph as in that Part.
Capital allowances: transfers not to be sales
10
10    (1)
This paragraph applies for the purposes of Part 3 of CAA 2001, and the other
provisions of that Act which are relevant to that Part, to a relevant transfer
of the relevant interest in an industrial building or structure.
      (2)
Neither section 559 nor section 573 of that Act is to have effect in relation to
that transfer.
15
Chargeable gains: assets to be treated as disposed of without a gain or a loss
11    (1)
For the purposes of TCGA 1992 a disposal—
(a)
constituted by a relevant transfer, or
(b)
to which sub-paragraph (2) applies,

is to be taken (in relation to the person to whom the disposal is made as well
20
as the person making the disposal) to be for a consideration such that no gain
or loss accrues to the person making the disposal.
      (2)
This sub-paragraph applies to a disposal if—
(a)
it is made in accordance with provision contained in a transfer
scheme by virtue of paragraph 5 or 11 of Schedule 12 to this Act,
25
(b)
the person making the disposal and the person to whom the disposal
is made are taxable public bodies, and
(c)
each of those persons is either the transferor or a transferee under the
scheme.
      (3)
Sub-paragraph (1) is subject to paragraph 12.
30
Chargeable gains: roll-over relief
12    (1)
This paragraph applies if—
(a)
but for section 154 of TCGA 1992 (depreciating assets) a held-over
gain would have been carried forward to a depreciating asset, and
(b)
the asset is the subject of a relevant transfer.
35
      (2)
Section 154 is to have effect as if the gain had accrued to, and the claim for it
to be held over had been made by, the transferee and as if the transferor’s
acquisition of the depreciating asset had been the transferee’s acquisition of
it.
      (3)
Expressions used in this paragraph and in section 154 have the same
40
meanings in this paragraph as in that section.

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Schedule 13 — Transfer schemes: tax provisions
Part 2 — Transfers etc between taxable public bodies
208

Continuity in relation to transfer of intangible assets
13    (1)
For the purposes of Schedule 29 to FA 2002—
(a)
a relevant transfer of a chargeable intangible asset of the transferor is
to be treated as a tax-neutral transfer, and
(b)
an intangible fixed asset which is an existing asset of the transferor at
5
the time of a relevant transfer is to be treated, on and after the
transfer, as an existing asset in the hands of the transferee.
      (2)
Expressions used in this paragraph and in that Schedule have the same
meanings in this paragraph as in that Schedule.
Continuity in relation to loan relationships
10
14    (1)
For the purposes of the application of Chapter 2 of Part 4 of FA 1996 (loan
relationships) in relation to a relevant transfer, the transferee and the
transferor are to be treated as if, at the time of the transfer, they were
members of the same group.
      (2)
In sub-paragraph (1) the reference to being members of the same group must
15
be construed in accordance with paragraph 12(8) of Schedule 9 to that Act.
Continuity in relation to derivative contracts
15    (1)
For the purposes of the application of Schedule 26 to FA 2002 (derivative
contracts) in relation to a relevant transfer, the transferee and the transferor
are to be treated as if, at the time of the transfer, they were members of the
20
same group.
      (2)
In sub-paragraph (1) the reference to being members of the same group must
be construed in accordance with paragraph 28(6) of that Schedule.
Leased assets
16    (1)
This paragraph applies for the purposes of section 781 of ICTA (assets leased
25
to traders and others) where—
(a)
the interest of the lessor or the lessee under a lease, or any other
interest in an asset, is transferred under a relevant transfer, or
(b)
a lease, or any other interest in a lease, is granted by a taxable public
body to another taxable public body in accordance with provision
30
contained by virtue of paragraph 5 or 11 of Schedule 12 to this Act in
a transfer scheme.
      (2)
Section 783(4) of ICTA is to be disregarded and the transfer or grant is to be
treated as made without any capital sum having been obtained in respect of
the interest or lease by the transferor or grantor.
35
      (3)
In the case of the transfer of an interest under a lease, payments made by the
transferor under the lease before the transfer takes effect are to be treated as
if they had been made under that lease by the transferee.
      (4)
Expressions used in this paragraph and in sections 781 to 785 of ICTA have
the same meanings in this paragraph as in those sections.
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Crossrail Bill
Schedule 13 — Transfer schemes: tax provisions
Part 3 — Transfers etc from taxable public bodies to exempt public bodies
209

Part 3
Transfers etc from taxable public bodies to exempt public bodies
Meaning of “relevant transfer” in Part 3 of Schedule
17
In this Part of this Schedule “relevant transfer” means a transfer, in
accordance with a transfer scheme, from a taxable public body to an exempt
5
public body.
Transfers of trading stock
18    (1)
This paragraph applies if under a relevant transfer trading stock of the
transferor is transferred to the transferee.
      (2)
Sub-paragraphs (3) and (4) have effect in computing for any corporation tax
10
purpose the profits of the trade in relation to which the stock is trading stock
immediately before the transfer takes effect (“the transferor’s trade”).
      (3)
The stock must be taken to have been—
(a)
disposed of by the transferor in the course of the transferor’s trade,
and
15
(b)
subject to that, disposed of when the transfer takes effect.
      (4)
The value of the stock is to be taken to be—
(a)
if consideration is given to the transferor in respect of the transfer, an
amount equal to the value of the consideration, or
(b)
if no such consideration is given, nil.
20
      (5)
For the purposes of this paragraph consideration given to a person
connected with the transferor is to be treated as given to the transferor.
      (6)
In this paragraph “trading stock” has the same meaning as in section 100 of
ICTA.
      (7)
For the purposes of this paragraph whether a person is connected with
25
another person is determined in accordance with section 839 of ICTA
(connected persons).
Capital allowances: determination of disposal value of plant or machinery
19    (1)
This paragraph applies to a relevant transfer of plant or machinery which is
a disposal event for the purposes of Part 2 of CAA 2001 (capital allowances
30
for plant and machinery).
      (2)
For the purposes of the application of section 61 of that Act in relation to the
transferor, the disposal value of the plant or machinery is to be treated—
(a)
if a capital sum is received by the transferor by way of consideration
or compensation in respect of the transfer, as an amount equal to that
35
sum, or
(b)
if no such sum is received, as nil.
      (3)
For the purposes of this paragraph a sum received by a person connected
with the transferor is to be treated as received by the transferor.
      (4)
Section 88 of CAA 2001 (sales at an undervalue) is to be disregarded.
40