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Corporation Tax Bill


Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 4 — Special provision for life assurance business

540

 

1157    

Exclusion for capital gains purposes of certain expenditure

(1)   

This section applies if in an accounting period a payment is made to a company

in respect of a land remediation tax credit.

(2)   

The qualifying land remediation expenditure in respect of which the payment

is made is to be treated as if it were excluded by section 39 of TCGA 1992 from

5

the sums allowable under section 38 of that Act.

1158    

Restriction on losses carried forward where tax credit claimed

(1)   

For the purposes of section 392A of ICTA (UK property business losses carried

forward) a company’s UK property business loss for an accounting period in

which it claims a land remediation tax credit to which it is entitled is treated as

10

reduced by the amount of the surrendered loss for the period.

(2)   

For the purposes of section 393 of ICTA (relief of trading losses against future

trading profits) a company’s trading loss for an accounting period in which it

claims a land remediation tax credit to which it is entitled is treated as reduced

by the amount of the surrendered loss for the period.

15

(3)   

Subsection (4) applies (instead of subsection (1)) if in an accounting period—

(a)   

as a result of section 432AB(3) of ICTA, a company’s UK property

business loss is treated for the purposes of section 76 of that Act as

expenses payable which fall to be brought into account at Step 3 in

subsection (7) of that section,

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(b)   

an amount falls to be carried forward to a subsequent accounting

period under section 76(12) of ICTA (unrelieved expenses carried

forward), and

(c)   

the company claims a land remediation tax credit for the period.

(4)   

The amount which falls to be carried forward to a subsequent accounting

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period under section 76(12) of ICTA is treated as reduced by the amount of the

surrendered loss for the period.

(5)   

References in this section to “the amount of the surrendered loss” for an

accounting period are to the amount of any qualifying land remediation loss in

respect of which a land remediation tax credit is claimed for the period.

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Chapter 4

Special provision for life assurance business

General

1159    

Limitation on relief under Chapter 2

(1)   

Chapter 2 does not apply to allow an insurance company—

35

(a)   

any deduction under section 1147, or

(b)   

any additional deduction under section 1149,

   

in calculating in accordance with the provisions mentioned in subsection (2)

the profits for an accounting period which arise to the company from its life

assurance business or from its gross roll-up business.

40

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 4 — Special provision for life assurance business

541

 

(2)   

The provisions referred to in subsection (1) are those applicable for the

purposes of section 35 (charge on trade profits).

I minus E basis

1160    

Provision in respect of I minus E basis

The remaining provisions of this Chapter apply if, for an accounting period, an

5

insurance company is charged to tax under the I minus E basis in respect of its

life assurance business.

Relief for qualifying Chapter 4 expenditure

1161    

Relief in respect of I minus E basis: enhanced expenses payable

(1)   

A company is entitled to relief for an accounting period if conditions A, B and

10

C are met.

(2)   

Condition A is that land in the United Kingdom is a management asset of the

company.

(3)   

Condition B is that at the time of acquisition of the land by the company all or

part of the land is or was in a contaminated state (see section 1145).

15

(4)   

Condition C is that the company incurs qualifying Chapter 4 expenditure in

the accounting period in respect of the land (see section 1162).

(5)   

For the company to obtain the relief it must make a claim.

(6)   

The relief is that the company may treat 150% of the qualifying Chapter 4

expenditure as expenses payable which fall to be brought into account for the

20

accounting period at Step 1 in section 76(7) of ICTA (deduction for expenses

payable).

(7)   

For the purposes of this section land is a management asset of a company if it

is—

(a)   

an asset provided for use or used for the management of life assurance

25

business carried on by the company, or

(b)   

an asset in respect of which expenditure is being incurred with a view

to such use by the company.

1162    

Meaning of “qualifying Chapter 4 expenditure”

For the purposes of this Chapter a company’s “qualifying Chapter 4

30

expenditure” in an accounting period means—

(a)   

its qualifying land remediation expenditure in the period, less

(b)   

the amount (if any) which as a result of paragraph (a) of Step 1 in

section 76(7) of ICTA is not to be brought into account at that step as

expenses payable for the period.

35

1163    

No relief if company responsible for contamination

A company is not entitled to relief under section 1161 in respect of expenditure

on land all or part of which is in a contaminated state if the land is in that state

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 4 — Special provision for life assurance business

542

 

wholly or partly as a result of any thing done, or omitted to be done, at any time

by—

(a)   

the company, or

(b)   

a person with a relevant connection to the company (see section 1178).

Life assurance company tax credits

5

1164    

Entitlement to tax credit

(1)   

A company is entitled to a life assurance company tax credit for an accounting

period if it has a qualifying life assurance business loss in the period (see

section 1165).

(2)   

For the company to obtain a life assurance company tax credit in respect of all

10

or part of the qualifying life assurance business loss it must make a claim.

(3)   

The amount of a life assurance company tax credit to which the company is

entitled is determined in accordance with section 1166.

(4)   

See also section 1168, which restricts the carry forward of expenses payable

where a company claims a life assurance company tax credit.

15

1165    

Meaning of “qualifying life assurance business loss”

(1)   

For the purposes of this Chapter a company has a “qualifying life assurance

business loss” in an accounting period (“the relevant accounting period”) if in

the period—

(a)   

it is entitled to relief under section 1161, and

20

(b)   

an amount falls to be carried forward to a subsequent accounting

period under section 76(12) of ICTA (unrelieved expenses carried

forward).

(2)   

In determining for the purposes of subsection (1)(b) whether there is an

amount which falls to be carried forward to a subsequent accounting period

25

under section 76(12) of ICTA, no account is to be taken of the amounts specified

in subsection (3).

(3)   

Those amounts are amounts—

(a)   

brought forward from an earlier accounting period, and

(b)   

treated for the purposes of section 76 of ICTA as expenses payable

30

which fall to be brought into account for the relevant accounting period

in accordance with—

(i)   

Step 7 in section 76(7) of ICTA, as a result of a previous

application of section 76(12) or (13) of that Act, or

(ii)   

Step 3 in section 76(7) of ICTA, as a result of section 391 of this

35

Act (carry forward of surplus deficit).

(4)   

The amount of the qualifying life assurance business loss is—

(a)   

the amount which falls to be carried forward as mentioned in

subsection (1)(b), or

(b)   

if less, 150% of the qualifying Chapter 4 expenditure in respect of which

40

the relief was obtained.

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 5 — Tax avoidance

543

 

1166    

Amount of tax credit

(1)   

The amount of the life assurance company tax credit to which a company is

entitled for an accounting period is 16% of the amount of the qualifying life

assurance business loss for the period.

(2)   

The Treasury may by order replace the percentage for the time being specified

5

in subsection (1) with a different percentage.

(3)   

An order under subsection (2) may contain incidental, supplemental,

consequential and transitional provision and savings.

1167    

Payment of tax credit etc

(1)   

The provisions mentioned in subsection (2) have effect in relation to a life

10

assurance company tax credit subject to the modifications set out in subsection

(3).

(2)   

The provisions referred to in subsection (1) are—

section 1151(4) (payment of tax credit by officer of Revenue and Customs);

section 1155 (supplementary provision about payment of tax credit);

15

section 1156 (tax credit payment not income of company);

section 1157 (qualifying expenditure excluded for capital gains purposes).

(3)   

The modifications referred to in subsection (1) are as follows—

(a)   

for any reference to a land remediation tax credit substitute a reference

to a life assurance company tax credit, and

20

(b)   

in section 1157(2) for the reference to qualifying land remediation

expenditure substitute a reference to qualifying Chapter 4 expenditure.

1168    

Restriction on carrying forward expenses payable where tax credit claimed

(1)   

This section applies if a company claims a life assurance company tax credit to

which it is entitled for an accounting period.

25

(2)   

For the purposes of section 76 of ICTA the amount which may be—

(a)   

carried forward from the accounting period under subsection (12) of

that section, and

(b)   

brought into account in accordance with Step 7 in subsection (7) of that

section,

30

   

is treated as reduced by the amount of the surrendered loss for the period.

(3)   

The “amount of the surrendered loss” for the period means the amount of the

qualifying life assurance business loss in respect of which the land remediation

tax credit is claimed for the period.

Chapter 5

35

Tax avoidance

1169    

Artificially inflated claims for relief or tax credit

(1)   

To the extent that a transaction is attributable to arrangements entered into

wholly or mainly for a disqualifying purpose, it is to be disregarded for the

purposes mentioned in subsection (2).

40

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 6 — Supplementary

544

 

(2)   

Those purposes are determining for an accounting period the amount of—

(a)   

any relief to which a company is entitled under Chapter 2,

(b)   

any land remediation tax credits to which a company is entitled under

section 1151,

(c)   

any relief to which a company carrying on life assurance business is

5

entitled under section 1161, and

(d)   

any life assurance company tax credits to which such a company is

entitled under section 1164.

(3)   

Arrangements are entered into wholly or mainly for a “disqualifying purpose”

if their main object, or one of their main objects, is to enable a company to

10

obtain—

(a)   

relief under Chapter 2 to which the company would not otherwise be

entitled or of a greater amount than that to which it would otherwise be

entitled,

(b)   

a land remediation tax credit to which it would not otherwise be

15

entitled or of a greater amount than that to which it would otherwise be

entitled,

(c)   

relief under section 1161 to which it would not otherwise be entitled or

of a greater amount than that to which it would otherwise be entitled,

or

20

(d)   

a life assurance company tax credit to which it would not otherwise be

entitled or of a greater amount than that to which it would otherwise be

entitled.

(4)   

In this section “arrangements” includes any scheme, agreement or

understanding, whether or not legally enforceable.

25

Chapter 6

Supplementary

1170    

“Staffing costs”

(1)   

For the purposes of this Part the staffing costs of a company are amounts to

which any of subsections (2) to (5) applies.

30

(2)   

This subsection applies to an amount paid by the company to a director or an

employee of the company which—

(a)   

is earnings consisting of money, and

(b)   

is paid because of the director’s or employee’s employment.

(3)   

This subsection applies to an amount paid by the company to a director or an

35

employee of the company, other than an amount paid in respect of benefits in

kind, if—

(a)   

the amount is paid in respect of expenses paid by the director or

employee, and

(b)   

the amount is paid because of the director’s or employee’s

40

employment.

(4)   

This subsection applies to secondary Class 1 national insurance contributions

paid by the company.

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 6 — Supplementary

545

 

(5)   

This subsection applies to contributions paid by the company to a pension

fund operated for the benefit of directors or employees of the company.

(6)   

In subsection (5) “pension fund” means a scheme, fund or other arrangement

established and maintained (whether in the United Kingdom or elsewhere) for

the purpose of providing pension benefits.

5

   

For this purpose “scheme” includes a deed, agreement or series of agreements.

(7)   

In subsection (6) “pension benefits” means pensions, retirement annuities,

allowances, lump sums, gratuities or other superannuation benefits (with or

without subsidiary benefits).

1171    

Staffing costs attributable to relevant land remediation

10

(1)   

This section applies for the purposes of this Part to identify the staffing costs of

a company which are attributable to relevant land remediation.

(2)   

The costs which are so attributable are those paid to, or in respect of, directors

or employees who are directly and actively engaged in relevant land

remediation.

15

(3)   

Subsection (4) applies if a director (“D”) or employee (“E”) is partly engaged

directly and actively in relevant land remediation.

(4)   

In that case—

(a)   

if the time D or E spends so engaged is less than 20% of D’s or E’s total

working time, none of the staffing costs relating to D or E is treated as

20

attributable to relevant land remediation,

(b)   

if the time D or E spends so engaged is more than 80% of D’s or E’s total

working time, the whole of the staffing costs relating to D or E is treated

as attributable to relevant land remediation, and

(c)   

in any other case, the appropriate proportion of the staffing costs

25

relating to D or E is treated as attributable to relevant land remediation.

(5)   

Subsection (6) applies if persons provide services (such as secretarial or

administrative services) in support of activities carried on by others.

(6)   

Those persons are not, as a result of providing those services, to be treated as

themselves directly and actively engaged in those activities.

30

1172    

Expenditure on materials

For the purposes of this Part expenditure on materials is attributable to

relevant land remediation if the materials are employed directly in the relevant

land remediation.

1173    

Expenditure incurred because of contamination

35

(1)   

This section applies to identify cases in which the condition in section 1144(3)

is to be treated as met (expenditure incurred because land in contaminated

state).

(2)   

If the only reason that expenditure on the land is increased is that the land is in

a contaminated state, the amount by which the expenditure is increased is to

40

be treated as expenditure meeting the condition in section 1144(3).

 
 

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 6 — Supplementary

546

 

(3)   

Subsection (4) applies if the main purpose of any works done, operations

carried out or steps taken is—

(a)   

to prevent or minimise, or remedy or mitigate the effects of, any harm,

or any pollution of controlled waters, by virtue of which the land is in

a contaminated state, or

5

(b)   

to restore the land or waters to their former state.

(4)   

Expenditure on such works, operations or steps is to be treated as meeting the

condition in section 1144(3).

(5)   

This section does not affect the width of the provision made by section 1144(3).

1174    

Sub-contractor payments

10

(1)   

Sections 1175 and 1176 apply if a company makes a sub-contractor payment.

(2)   

They apply for the purpose of determining the amount of the payment which

is “qualifying expenditure on sub-contracted land remediation” for the

purposes of section 1144(5).

(3)   

In this Chapter, a “sub-contractor payment” means a payment made by a

15

company to another person (“the sub-contractor”) in respect of relevant land

remediation contracted out by the company to that person.

1175    

“Qualifying expenditure on sub-contracted land remediation”: connected

persons

(1)   

This section applies if—

20

(a)   

a company makes a sub-contractor payment,

(b)   

the company and the sub-contractor are connected, and

(c)   

in accordance with generally accepted accounting practice, the whole

of the sub-contractor payment and all of the sub-contractor’s relevant

expenditure have been brought into account in determining the sub-

25

contractor’s profit or loss for a relevant period.

(2)   

The amount of the sub-contractor payment which is “qualifying expenditure

on sub-contracted land remediation” is—

(a)   

the entire payment, or

(b)   

if less, an amount equal to the sub-contractor’s relevant expenditure.

30

(3)   

“Relevant expenditure” of the sub-contractor means expenditure that—

(a)   

is incurred by the sub-contractor in carrying on, on behalf of the

company, the activities to which the sub-contractor payment relates,

(b)   

is not of a capital nature,

(c)   

is incurred on staffing costs or materials, and

35

(d)   

is not subsidised.

(4)   

“Relevant period” means a period—

(a)   

for which accounts are drawn up for the sub-contractor, and

(b)   

that ends not more than 12 months after the end of the company’s

period of account in which the sub-contractor payment is, in

40

accordance with generally accepted accounting practice, brought into

account in determining the company’s profit or loss.

 
 

 
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