|
| |
| |
The qualifying investments test |
| |
493 | The qualifying investments test |
| |
(1) | An open-ended investment company, a unit trust scheme or an offshore fund |
| |
meets the qualifying investments test for the purposes of this Chapter if the |
| |
market value of the qualifying investments of the company, scheme or fund |
| 5 |
does not exceed 60% of the market value of all its investments. |
| |
(2) | References in this section and sections 494 and 495 to investments of an open- |
| |
ended investment company are references— |
| |
(a) | except where paragraph (b) applies, to the property subject to the |
| |
collective investment scheme constituted by the company, and |
| 10 |
(b) | in a case where under section 468A(3) of ICTA part of an umbrella |
| |
company is regarded as an open-ended investment company, to such |
| |
of the property subject to the collective investment scheme constituted |
| |
by the umbrella company as forms part of the separate pool in question, |
| |
| other than cash awaiting investment. |
| 15 |
(3) | References in this section and sections 494 and 495 to investments of a unit trust |
| |
scheme are references to investments subject to the trusts of the scheme, other |
| |
than cash awaiting investment. |
| |
(4) | References in this section and sections 494 and 495 to investments of an |
| |
offshore fund are references to assets of the fund, other than cash awaiting |
| 20 |
| |
(5) | In this section “collective investment scheme” has the meaning given by |
| |
section 235 of FISMA 2000. |
| |
(6) | A person with rights in a part of an umbrella company which is regarded |
| |
under section 468A(3) of ICTA as an open-ended investment company is |
| 25 |
treated for the purposes of this section as not owning shares in the umbrella |
| |
| |
(7) | For the meaning of references to investments subject to the trusts of the scheme |
| |
in the case of certain authorised unit trusts, see section 468(9) of ICTA |
| |
| 30 |
494 | Meaning of “qualifying investments” |
| |
(1) | In section 493 “qualifying investments”, in relation to an open-ended |
| |
investment company, a unit trust scheme or an offshore fund, means |
| |
investments of the company, scheme or fund of any of the following |
| |
| 35 |
(a) | money placed at interest, |
| |
| |
(c) | shares in a building society, |
| |
(d) | qualifying holdings in an open-ended investment company, a unit trust |
| |
scheme or an offshore fund, |
| 40 |
(e) | alternative finance arrangements, |
| |
(f) | derivative contracts whose underlying subject matter consists wholly |
| |
| |
(i) | the matters referred to in paragraphs (a) to (e) (other than |
| |
diminishing shared ownership arrangements), and |
| 45 |
| |
| |
|
| |
| |
| |
(g) | contracts for differences whose underlying subject matter consists |
| |
wholly of any one or more of— |
| |
| |
(ii) | creditworthiness, and |
| 5 |
| |
(h) | derivative contracts not within paragraph (f) or (g) where there is a |
| |
hedging relationship between the contract and an asset within |
| |
| |
| 10 |
“contract for differences” has the same meaning as in Part 7 (derivative |
| |
contracts) (see section 582), |
| |
“diminishing shared ownership arrangements” means arrangements to |
| |
which section 504 applies, |
| |
“hedging relationship” has the meaning given by section 496, |
| 15 |
“qualifying holding” has the meaning given by section 495(1), |
| |
“security” does not include shares in a company, and |
| |
“underlying subject matter” has the same meaning as in Part 7 (derivative |
| |
contracts) (see section 583). |
| |
| 20 |
(1) | For the purposes of section 494(1)(d) a holding in an open-ended investment |
| |
company, a unit trust scheme or an offshore fund is a qualifying holding at any |
| |
| |
| |
(b) | at any other time in the relevant accounting period, |
| 25 |
| the company, scheme or fund would itself fail to meet the qualifying |
| |
investments test, even on the assumption in subsection (2). |
| |
(2) | The assumption is that investments of the company, scheme or fund are |
| |
qualifying investments in relation to the company, scheme or fund only if they |
| |
are within section 494(1)(a), (b), (c), (e), (f), (g) or (h). |
| 30 |
(3) | In this section “holding”— |
| |
(a) | in relation to an open-ended investment company, means— |
| |
(i) | except where sub-paragraph (ii) applies, shares in the company, |
| |
| |
(ii) | in a case where under section 468A(3) of ICTA part of an |
| 35 |
umbrella company is regarded as an open-ended investment |
| |
company, rights in the separate pool in question, |
| |
(b) | in relation to a unit trust scheme, means an entitlement to a share in the |
| |
investments of the scheme, and |
| |
(c) | in relation to an offshore fund, means— |
| 40 |
(i) | shares in any company by which the fund is constituted, or |
| |
(ii) | an entitlement to a share in the investments of the fund. |
| |
(4) | In this section “relevant accounting period” means the accounting period |
| |
referred to in section 490(1). |
| |
| |
| |
|
| |
| |
496 | Meaning of “hedging relationship” |
| |
(1) | For the purposes of section 494, in relation to an open-ended investment |
| |
company, a unit trust scheme or an offshore fund, there is a hedging |
| |
relationship between a derivative contract (“the hedging instrument”) and an |
| |
asset (“the hedged item”) so far as condition A or B is met. |
| 5 |
(2) | Condition A is that the hedging instrument and the hedged item are |
| |
designated as a hedge by the company, scheme or fund. |
| |
(3) | Condition B is that the hedging instrument is intended to act as a hedge of |
| |
exposure to changes in fair value of a hedged item which is— |
| |
(a) | a recognised asset which could affect the total net return of the |
| 10 |
company, scheme or fund, or |
| |
(b) | an identified part of such an asset which is attributable to a particular |
| |
| |
(4) | For the purposes of subsection (3) “the total net return” of a company, scheme |
| |
or fund means its total net return calculated— |
| 15 |
(a) | in accordance with generally accepted accounting practice, or |
| |
(b) | in the case of accounts prepared in a jurisdiction outside the United |
| |
Kingdom, in accordance with generally accepted accounting practice in |
| |
| |
Power to change investments that are qualifying investments |
| 20 |
497 | Power to change investments that are qualifying investments |
| |
(1) | The Treasury may by order amend sections 493 to 496 so as to extend or restrict |
| |
the descriptions of investments of an open-ended investment company, a unit |
| |
trust scheme or an offshore fund that are qualifying investments for the |
| |
purposes of those provisions. |
| 25 |
| |
(a) | different provision for different cases, and |
| |
(b) | incidental, supplemental, consequential and transitional provision and |
| |
| |
(3) | In particular, the order may make such incidental modifications of section |
| 30 |
495(2) as the Treasury consider appropriate. |
| |
| |
| |
498 | Building society dividends and interest |
| |
(1) | This section deals with how building society dividends and interest are dealt |
| 35 |
with for corporation tax purposes. |
| |
(2) | Liability to pay building society interest or building society dividends is |
| |
treated for the purposes of Part 5 as a liability arising under a loan relationship |
| |
(so far it would not otherwise be such a liability). |
| |
| |
| |
|
| |
| |
(3) | If building society interest or building society dividends are payable to a |
| |
company, they are treated as so payable as the result of a right arising under a |
| |
loan relationship of the company (so far as they would not otherwise be so |
| |
| |
(4) | Subsection (3) applies to interest paid under a certified SAYE savings |
| 5 |
arrangement with a building society as if it were a dividend on a share in the |
| |
| |
| |
“building society dividends” means dividends payable in respect of |
| |
shares in a building society, |
| 10 |
“building society interest” means interest payable in respect of shares in, |
| |
deposits with, or loans to, a building society, |
| |
“certified SAYE savings arrangement” has the meaning given by section |
| |
| |
“dividend” includes any distribution, however described. |
| 15 |
| |
Industrial and provident societies |
| |
499 | Industrial and provident society payments treated as interest under loan |
| |
| |
(1) | Any dividend, bonus or other sum payable to a shareholder in— |
| 20 |
(a) | a registered industrial and provident society, or |
| |
(b) | a UK agricultural or fishing co-operative, |
| |
| is treated for corporation tax purposes as interest under a loan relationship of |
| |
the society or co-operative if it is payable by reference to the amount of the |
| |
shareholder’s holding in its share capital. |
| 25 |
(2) | If subsection (1) applies— |
| |
(a) | so far as the shareholder’s holding is held for the purposes of a trade, |
| |
the shareholder is treated for the purposes of section 297 as a party to |
| |
the loan relationship referred to in subsection (1) for that purpose, and |
| |
(b) | so far as the holding is held for any other purpose, the shareholder is |
| 30 |
treated for the purposes of that section as a party to that loan |
| |
relationship for that other purpose. |
| |
(3) | In subsection (1) “UK agricultural or fishing co-operative” means a co- |
| |
| |
(a) | which is established in the United Kingdom and UK resident, and |
| 35 |
(b) | whose primary object is assisting its members in— |
| |
(i) | carrying on agricultural or horticultural businesses on land |
| |
occupied by them in the United Kingdom, or |
| |
(ii) | carrying on businesses consisting in the catching or taking of |
| |
| 40 |
(4) | In subsection (3) “co-operative association” means a body with a written |
| |
constitution from which the Secretary of State considers that it is in substance |
| |
a co-operative association. |
| |
| |
| |
|
| |
| |
(5) | For the purposes of subsection (4), the Secretary of State must have regard to |
| |
the way in which the body’s constitution provides for its income to be applied |
| |
for its members’ benefit and all other relevant provisions. |
| |
(6) | In the application of subsections (4) and (5) in Northern Ireland for “the |
| |
Secretary of State” substitute “the Department of Agriculture and Rural |
| 5 |
| |
500 | Exclusion of interest where failure to make return |
| |
(1) | This section applies if for any accounting period a registered industrial and |
| |
provident society is obliged to make a return under section 887(2) of ITA 2007. |
| |
(2) | If the society has not made the return within 3 months after the end of the |
| 10 |
period, no interest paid by it in the period is to be brought into account for the |
| |
period for the purposes of Part 5. |
| |
(3) | It does not matter for the purposes of subsection (2) whether the payment |
| |
would be interest apart from section 499. |
| |
| 15 |
Alternative finance arrangements |
| |
| |
501 | Introduction to Chapter |
| |
(1) | This Chapter provides for alternative finance arrangements between |
| |
companies and financial institutions to be treated as loan relationships (see |
| 20 |
| |
(2) | In this Part “alternative finance arrangements” means— |
| |
(a) | purchase and resale arrangements, |
| |
(b) | diminishing shared ownership arrangements, |
| |
(c) | deposit arrangements, |
| 25 |
(d) | profit share agency arrangements, and |
| |
(e) | investment bond arrangements. |
| |
| |
(a) | “purchase and resale arrangements” means arrangements to which |
| |
| 30 |
(b) | “diminishing shared ownership arrangements” means arrangements to |
| |
which section 504 applies, |
| |
(c) | “deposit arrangements” means arrangements to which section 505 |
| |
| |
(d) | “profit share agency arrangements” means arrangements to which |
| 35 |
| |
(e) | “investment bond arrangements” means arrangements to which |
| |
| |
(4) | For the meaning of “financial institution”, see section 502. |
| |
| |
| |
|
