|
| |
|
(5) | But where a company was, immediately before that date, a party to a |
| |
relevant contract that becomes a derivative contract for the purposes of |
| |
Schedule 26 to FA 2002 by virtue of those amendments, it is to be regarded |
| |
for those purposes as having been entered into by the company on that date |
| |
for a consideration equal to the notional carrying value (within the meaning |
| 5 |
of paragraph 43A(5) of that Schedule) on that date. |
| |
Restrictions on relief for interest payments |
| |
17 (1) | Section 384 of ITA 2007 (general restrictions on relief for interest payments) |
| |
| |
(2) | In subsection (2), for “interest is paid at a rate in excess of a reasonable |
| 10 |
commercial rate” substitute “the interest paid on a loan in a tax year exceeds |
| |
a reasonable commercial amount of interest on the loan for the relevant |
| |
| |
(3) | After subsection (2) insert— |
| |
“(3) | The relevant period is the tax year or, if the loan exists for part only |
| 15 |
of the tax year, the part of the tax year for which the loan exists. |
| |
(4) | A reasonable commercial amount of interest on the loan for the |
| |
relevant period is an amount which, together with any interest paid |
| |
before that period (other than unrelieved interest), represents a |
| |
reasonable commercial rate of interest on the loan from the date it |
| 20 |
was made to the end of that period. |
| |
(5) | “Unrelieved interest” means interest which because of subsection (2) |
| |
is not eligible for relief under this Chapter.” |
| |
(4) | The amendments made by this paragraph have effect in relation to interest |
| |
paid on or after 9 October 2007; but in relation to interest paid in the period |
| 25 |
beginning with that date and ending with 5 April 2008, they have effect as if |
| |
the references in section 384(2) and (3) to a tax year were to that period. |
| |
| |
| |
Manufactured payments: anti-avoidance |
| |
| 30 |
1 | Chapter 2 of Part 11 of ITA 2007 (manufactured payments) is amended as |
| |
| |
| |
2 | After section 572 insert— |
| |
“572A | Meaning of “avoidance arrangements” |
| 35 |
(1) | In this Chapter “avoidance arrangements” means any arrangements |
| |
the main purpose, or one of the main purposes, of which is to secure |
| |
a deduction for the purposes of income tax, or any other income tax |
| |
advantage, for any person. |
| |
|
| |
|
| |
|
(2) | In subsection (1) “arrangements” includes any agreement, |
| |
understanding, scheme, transaction or series of transactions |
| |
(whether or not legally enforceable). |
| |
(3) | In subsection (1) “income tax advantage” means— |
| |
(a) | a relief from income tax or increased relief from income tax, |
| 5 |
(b) | a repayment of income tax or increased repayment of income |
| |
| |
(c) | the avoidance, reduction or delay of a charge to income tax or |
| |
assessment to income tax, or |
| |
(d) | the avoidance of a possible assessment to income tax. |
| 10 |
(4) | In subsection (3)(a) “relief from income tax” includes a tax credit. |
| |
(5) | For the purposes of subsection (3)(c) or (d) it does not matter whether |
| |
the avoidance or reduction is effected— |
| |
(a) | by receipts accruing in such a way that the recipient does not |
| |
pay or bear income tax on them, or |
| 15 |
(b) | by a deduction in calculating profits or gains.” |
| |
| |
3 | In section 573(4) (manufactured dividends on UK shares: Income Tax Acts |
| |
to apply subject to sections 574 and 575 where payer is UK resident and not |
| |
a company), for “sections 574 and 575” substitute “section 574”. |
| 20 |
| |
4 (1) | Section 574 (allowable deductions for manufactured dividends on UK |
| |
shares: matching) is amended as follows. |
| |
(2) | In subsection (2), for the words after “allowable” substitute “for income tax |
| |
purposes as a deduction in calculating the net income of the payer (see Step |
| 25 |
2 of the calculation in section 23). |
| |
| This is subject to subsection (3).” |
| |
(3) | For subsections (3) to (9) substitute— |
| |
| |
(a) | deductible by virtue of subsection (2) only so far as it is not |
| 30 |
otherwise deductible and so far as section 263D of TCGA |
| |
| |
(b) | not deductible (whether by virtue of subsection (2) or |
| |
otherwise) if it (or any part of it) is made directly or indirectly |
| |
in consequence of, or otherwise in connection with, |
| 35 |
| |
(4) | In subsection (10), for “deductible if” substitute “otherwise deductible if, |
| |
apart from this section,”. |
| |
(5) | In the heading, omit “: matching”. |
| |
| 40 |
5 | Omit section 575 (allowable deductions for manufactured dividends on UK |
| |
shares: restriction on double-counting). |
| |
|
| |
|
| |
|
| |
6 | In section 578(3) (manufactured interest on UK securities: Income Tax Acts |
| |
to apply subject to sections 579 and 580 where payer is UK resident or acting |
| |
in course of trade carried on through UK branch or agency), for “sections 579 |
| |
and 580” substitute “section 579”. |
| 5 |
| |
7 (1) | Section 579 (allowable deductions for manufactured interest on UK |
| |
securities: matching) is amended as follows. |
| |
(2) | For subsections (3) to (8) substitute— |
| |
| 10 |
(a) | deductible by virtue of subsection (2) only so far as it is not |
| |
otherwise deductible, and |
| |
(b) | not deductible (whether by virtue of subsection (2) or |
| |
otherwise) if it (or any part of it) is made directly or indirectly |
| |
in consequence of, or otherwise in connection with, |
| 15 |
| |
(3) | In subsection (9), for “deductible if” substitute “otherwise deductible if, |
| |
apart from this section,”. |
| |
(4) | Omit subsection (10). |
| |
(5) | In the heading, omit “: matching”. |
| 20 |
| |
8 | Omit section 580 (allowable deductions for manufactured interest on UK |
| |
securities: restriction on double counting). |
| |
| |
9 | After section 581 insert— |
| 25 |
“581A | Avoidance arrangements |
| |
(1) | A manufactured overseas dividend is not deductible if it (or any part |
| |
of it) is made directly or indirectly in consequence of, or otherwise in |
| |
connection with, avoidance arrangements. |
| |
(2) | For the purposes of subsection (1) an amount is deductible if it is— |
| 30 |
(a) | deductible in calculating any of the payer’s profits or gains |
| |
for income tax purposes, or |
| |
(b) | deductible for those purposes in calculating the net income of |
| |
| |
| 35 |
10 | In section 583 (manufactured payments exceeding underlying payments), |
| |
| |
“(5) | Nothing in this section makes the excess deductible (whether by |
| |
virtue of this Chapter or otherwise) if it (or any part of it) is made |
| |
|
| |
|
| |
|
directly or indirectly in consequence of, or otherwise in connection |
| |
with, avoidance arrangements.” |
| |
| |
11 (1) | Section 263D of TCGA 1992 (gains accruing to persons paying manufactured |
| |
dividends) is amended as follows. |
| 5 |
(2) | In subsection (6)(b), for “adjusted amount” substitute “amount specified in |
| |
| |
(3) | For subsection (7) substitute— |
| |
“(7) | The amount referred to in subsection (6) above is the lesser of— |
| |
(a) | the amount of the manufactured dividend paid, and |
| 10 |
(b) | the amount of the dividend of which the manufactured |
| |
dividend is representative.” |
| |
12 | In ITA 2007, omit paragraph 335(5) of Schedule 1 (which amended section |
| |
| |
| 15 |
| |
Annual investment allowance |
| |
| |
| |
1 | CAA 2001 is amended as follows. |
| |
2 | In Part 2, after Chapter 3 insert— |
| 20 |
| |
AIA qualifying expenditure |
| |
38A | AIA qualifying expenditure |
| |
(1) | An annual investment allowance is not available unless the |
| |
qualifying expenditure is AIA qualifying expenditure. |
| 25 |
(2) | Expenditure is AIA qualifying expenditure if— |
| |
(a) | it is incurred by a qualifying person on or after the relevant |
| |
| |
(b) | it is not excluded by any of the general exclusions in section |
| |
| 30 |
(3) | “Qualifying person” means— |
| |
| |
(b) | a partnership of which all the members are individuals, or |
| |
| |
(4) | “The relevant date” means— |
| 35 |
(a) | for corporation tax purposes, 1 April 2008, and |
| |
|
| |
|
| |
|
(b) | for income tax purposes, 6 April 2008. |
| |
38B | General exclusions applying to section 38A |
| |
| Expenditure within any of the following general exclusions is not |
| |
AIA qualifying expenditure. |
| |
| 5 |
| The expenditure is incurred in the chargeable period in which the |
| |
qualifying activity is permanently discontinued. |
| |
| |
| The expenditure is incurred on the provision of a car (as defined by |
| |
| 10 |
| |
| The expenditure is incurred wholly for the purposes of a ring fence |
| |
trade in respect of which tax is chargeable under section 501A of |
| |
ICTA (supplementary charge in respect of ring fence trades). |
| |
| 15 |
| The circumstances of the incurring of the expenditure are that— |
| |
(a) | the provision of the plant or machinery on which the |
| |
expenditure is incurred is connected with a change in the |
| |
nature or conduct of the trade or business carried on by a |
| |
person other than the person incurring the expenditure, and |
| 20 |
(b) | the obtaining of an annual investment allowance is the main |
| |
benefit, or one of the main benefits, which could reasonably |
| |
be expected to arise from the making of the change. |
| |
| |
| Any of the following sections applies— |
| 25 |
| section 13 (use for qualifying activity of plant or machinery |
| |
provided for other purposes); |
| |
| section 13A (use for other purposes of plant or machinery |
| |
provided for long funding leasing); |
| |
| section 14 (use for qualifying activity of plant or machinery |
| 30 |
| |
| This is subject to section 161 (pre-trading expenditure on mineral |
| |
exploration and access).” |
| |
3 | In Chapter 5 of Part 2 (allowances and charges), insert at the beginning— |
| |
“Annual investment allowance |
| 35 |
51A | Entitlement to annual investment allowance |
| |
(1) | A person is entitled to an allowance (an “annual investment |
| |
allowance”) in respect of AIA qualifying expenditure if— |
| |
(a) | the expenditure is incurred in a chargeable period to which |
| |
| 40 |
(b) | the person owns the plant and machinery at some time |
| |
during that chargeable period. |
| |
(2) | Any annual investment allowance is made for the chargeable period |
| |
in which the AIA qualifying expenditure is incurred. |
| |
|
| |
|
| |
|
(3) | If the AIA qualifying expenditure incurred in a chargeable period is |
| |
less than or equal to the maximum allowance, the person is entitled |
| |
to an annual investment allowance in respect of all the AIA |
| |
| |
(4) | If the AIA qualifying expenditure incurred in a chargeable period is |
| 5 |
more than the maximum allowance, the person is entitled to an |
| |
annual investment allowance in respect of so much of the AIA |
| |
qualifying expenditure as does not exceed the maximum allowance. |
| |
(5) | The maximum allowance is £50,000. |
| |
(6) | But if the chargeable period is more or less than a year, the maximum |
| 10 |
allowance is proportionately increased or reduced. |
| |
(7) | A person may claim an annual investment allowance in respect of all |
| |
the AIA qualifying expenditure in respect of which the person is |
| |
entitled to an allowance, or in respect of only some of it. |
| |
(8) | In determining when AIA qualifying expenditure is incurred, any |
| 15 |
effect of section 12 on the time at which it is to be treated as incurred |
| |
| |
(9) | The Treasury may by order substitute for the amount for the time |
| |
being specified in subsection (5) such other amount as it thinks fit. |
| |
(10) | An order under subsection (9) may make such incidental, |
| 20 |
supplemental, consequential and transitional provision as the |
| |
| |
(11) | This section is subject to— |
| |
(a) | sections 51B to 51N (restrictions on entitlement to annual |
| |
| 25 |
(b) | section 205 (reduction of allowance if plant or machinery |
| |
provided partly for purposes other than those of qualifying |
| |
| |
(c) | section 210 (reduction of allowance if it appears that a partial |
| |
depreciation subsidy is or will be payable), and |
| 30 |
(d) | sections 217, 218A and 241 (anti-avoidance: no allowance in |
| |
| |
| and needs to be read with section 236 (additional VAT liabilities). |
| |
51B | First restriction: companies |
| |
(1) | A company is entitled to a single annual investment allowance in |
| 35 |
respect of all the qualifying activities carried on by the company in a |
| |
| |
(2) | The company may allocate the annual investment allowance to the |
| |
relevant AIA qualifying expenditure as it thinks fit. |
| |
(3) | The relevant AIA qualifying expenditure is the AIA qualifying |
| 40 |
expenditure incurred by the company in the chargeable period |
| |
mentioned in subsection (1). |
| |
(4) | This section is subject to sections 51C, 51D and 51E. |
| |
|
| |
|