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Corporation Tax Bill


Corporation Tax Bill
Part 16 — Companies with investment business
Chapter 4 — Rules restricting deductions

576

 

(4)   

For this purpose it does not matter whether a person receives, or is entitled to

receive, the benefit—

(a)   

from the local enterprise organisation or urban regeneration company

concerned, or

(b)   

from anyone else.

5

(5)   

In this section “disqualifying benefit” means a benefit the expenses of obtaining

which, if incurred by the contributor directly in a transaction at arm’s length,

would not be deductible as expenses of management under section 1219.

(6)   

Sections 83 (meaning of “local enterprise organisation”) and 86 (meaning of

“urban regeneration company”) apply for the purposes of this section as they

10

apply for the purposes of section 82.

Export Credits Guarantee Department

1245    

Payments to Export Credits Guarantee Department

(1)   

This section applies if—

(a)   

a sum is payable by a company with investment business to the Export

15

Credits Guarantee Department, and

(b)   

the sum is payable under an agreement entered into as a result of

arrangements made under section 2 of the Export and Investment

Guarantees Act 1991 (c. 67) (insurance in connection with overseas

investment), or with a view to entering into such an agreement.

20

(2)   

The sum is treated for the purposes of Chapter 2 as expenses of management.

Levies under FISMA 2000

1246    

Levies under FISMA 2000

(1)   

Sums—

(a)   

spent by a company with investment business in paying a levy, or

25

(b)   

paid by a company with investment business as a result of an award of

costs under costs rules,

   

are treated for the purposes of Chapter 2 as expenses of management.

(2)   

In this section “costs rules” has the meaning given by section 92(2).

(3)   

In this section “levy” has the meaning given by section 92(3).

30

Chapter 4

Rules restricting deductions

1247    

Introduction

(1)   

This Chapter contains provisions that restrict the deduction of expenses of

management under section 1219.

35

(2)   

Other provisions that prohibit or restrict the deduction of expenses of

management under section 1219 include—

(a)   

section 1290 (employee benefit contributions),

 
 

Corporation Tax Bill
Part 16 — Companies with investment business
Chapter 4 — Rules restricting deductions

577

 

(b)   

section 1298 (business entertainment and gifts),

(c)   

section 1302 (social security contributions),

(d)   

section 1303 (penalties, interest and VAT surcharges),

(e)   

section 1304 (crime-related payments),

(f)   

section 200 of FA 2004 (no other relief for employers in connection with

5

contributions),

(g)   

section 246 of FA 2004 (restriction of deduction for non-contributory

provision).

(3)   

See also section 196A of FA 2004 (employers’ contributions: power to restrict

relief).

10

1248    

Expenses in connection with arrangements for securing a tax advantage

(1)   

No deduction is allowed under section 1219 for any particular expenses of

management if any part of those expenses is incurred directly or indirectly in

consequence of, or otherwise in connection with, any arrangements for

securing a tax advantage.

15

(2)   

In subsection (1) “arrangements for securing a tax advantage” means

arrangements the main purpose, or one of the main purposes, of which is to

secure—

(a)   

the allowance of a deduction (or increased deduction) under section

1219, or

20

(b)   

any other tax advantage.

(3)   

Subsection (1) does not apply if, as a result of paragraph 7A of Schedule 23A to

ICTA (manufactured payments under arrangements having an unallowable

purpose), the company incurring the expenses is not entitled to a relevant tax

relief in respect of, or referable to, the whole or any part of the expenses.

25

(4)   

The reference in subsection (1) to expenses of management includes amounts

treated by any provision as deductible under section 1219.

(5)   

In this section—

“arrangements” includes any agreement, understanding, scheme,

transaction or series of transactions (whether or not legally

30

enforceable),

“relevant tax relief” has the same meaning as in paragraph 7A of Schedule

23A to ICTA, and

“tax advantage” has the meaning given by section 840ZA of ICTA.

1249    

Unpaid remuneration

35

(1)   

This section applies if—

(a)   

an amount is charged in respect of employees’ remuneration in the

accounts for a period of a company with investment business,

(b)   

the amount would apart from this section be deductible under section

1219 as expenses of management, and

40

(c)   

the remuneration is not paid before the end of the period of 9 months

immediately following the end of the period of account.

(2)   

If the remuneration is paid after the end of that period of 9 months, the

deduction for it is allowed for the period of account in which it is paid (and not

in accordance with the timing rule in section 1219(1)).

45

 
 

Corporation Tax Bill
Part 16 — Companies with investment business
Chapter 4 — Rules restricting deductions

578

 

(3)   

No deduction is allowed for the remuneration under section 1219 if it is not

paid.

1250    

Unpaid remuneration: supplementary

(1)   

For the purposes of section 1249 an amount charged in the accounts in respect

of employees’ remuneration includes an amount for which provision is made

5

in the accounts with a view to its becoming employees’ remuneration.

(2)   

For the purposes of section 1249 it does not matter whether an amount is

charged for—

(a)   

particular employments, or

(b)   

employments generally.

10

(3)   

If the profits of the company are calculated before the end of the 9 month

period mentioned in section 1249(1)(c)—

(a)   

it must be assumed, in making the calculation, that any remuneration

which is unpaid when the calculation is made will not be paid before

the end of that period, but

15

(b)   

if the remuneration is subsequently paid before the end of that period,

nothing in this subsection prevents the calculation being revised and

any tax return being amended accordingly.

(4)   

For the purposes of this section and section 1249 remuneration is paid when

it—

20

(a)   

is treated as received by an employee for the purposes of ITEPA 2003

by section 18 or 19 of that Act (receipt of money and non-money

earnings), or

(b)   

would be so treated if it were not exempt income.

(5)   

In this section and section 1249

25

“employee” includes an office-holder and “employment” therefore

includes an office, and

“remuneration” means an amount which is or is treated as earnings for the

purposes of Parts 2 to 7 of ITEPA 2003.

1251    

Car or motor cycle hire

30

(1)   

Subsection (2) applies if, in calculating the corporation tax to which a company

with investment business is liable for an accounting period, a deduction is

allowed under section 1219 for expenses incurred on the hiring of a car or

motor cycle—

(a)   

which is not a qualifying hire car or motor cycle, and

35

(b)   

the retail price of which when new exceeds £12,000.

(2)   

The amount of the deduction which would otherwise be allowable is reduced

by multiplying the amount by the fraction—equation: over[plus[string["\xa3 12,000"],times[char[R],char[P]]],cross[num[2.0000000000000000,

"2"],times[char[R],char[P]]]]

   

where RP is the retail price of the car or motor cycle when new.

 
 

Corporation Tax Bill
Part 16 — Companies with investment business
Chapter 5 — Companies with investment business: receipts

579

 

(3)   

Subsection (4) applies if a deduction for expenses is reduced as a result of

subsection (2), or a corresponding provision, and—

(a)   

subsequently—

(i)   

there is a rebate (however described) of the hire charges, or

(ii)   

a debt in respect of any of the hire charges is released otherwise

5

than as part of a statutory insolvency agreement, and

(b)   

a credit representing the rebate, or the amount released, reverses (in

whole or in part) a debit representing the expenses.

(4)   

In applying subsection (2) of section 1230 (calculation of the reversal amount

for the purposes of the claw back rules)—

10

(a)   

take the amount given by Step 1,

(b)   

multiply that amount by the fraction set out in subsection (2) above

(instead of applying Step 2), and

(c)   

apply Step 3 to the amount given by paragraph (b).

(5)   

In this section “corresponding provision” means—

15

(a)   

section 56(2) (car or motor cycle hire: trade profits and property

income),

(b)   

section 48(2) of ITTOIA 2005 (car or motor cycle hire: trade profits and

property income), or

(c)   

section 76ZN(2) of ICTA (car or motor cycle hire: expenses of insurance

20

companies).

(6)   

The power under section 74(4) of CAA 2001 to increase or further increase the

sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power

to increase or further increase the sum of money specified in subsection (1)(b)

or (2).

25

(7)   

Sections 57 (meaning of “car or motor cycle” and other expressions) and 58

(hiring cars with low CO2 emissions before 1 April 2013) apply for the purposes

of this section as they apply for the purposes of section 56.

Chapter 5

Companies with investment business: receipts

30

1252    

Industrial development grants

(1)   

If a company with investment business receives a payment by way of a grant

under—

(a)   

section 7 or 8 of the Industrial Development Act 1982 (c. 52), or

(b)   

Article 7, 9 or 30 of the Industrial Development (Northern Ireland)

35

Order 1982 (S.I. 1982/1083 (N.I. 15)),

   

the payment is to be treated as an amount to which the charge to corporation

tax on income applies.

(2)   

Subsection (1) does not apply if—

(a)   

the grant is designated as made towards the cost of specified capital

40

expenditure,

(b)   

the grant is designated as compensation for the loss of capital assets, or

(c)   

the grant is for all or part of a corporation tax liability (including one

that has already been met).

 
 

Corporation Tax Bill
Part 16 — Companies with investment business
Chapter 6 — Supplementary

580

 

(3)   

Tax is not charged under this section if the payment is taken into account

(under another provision) in calculating profits for corporation tax purposes.

1253    

Contributions to local enterprise organisations or urban regeneration

companies: disqualifying benefits

(1)   

This section applies if—

5

(a)   

a deduction has been made under section 1219 by virtue of section 1244

(contributions to local enterprise agencies or urban regeneration

companies: expenses of management), and

(b)   

the contributor or a connected person receives a disqualifying benefit

that is in any way attributable to the contribution.

10

(2)   

The contributor is to be treated as receiving, when the benefit is received, an

amount—

(a)   

which is equal to the value of the benefit (so far as not brought into

account in determining the amount of the deduction), and

(b)   

to which the charge to corporation tax on income applies.

15

(3)   

In this section “disqualifying benefit” has the same meaning as in section 1244.

1254    

Repayments under FISMA 2000

(1)   

If as a result of a repayment provision a payment—

(a)   

is made to a company with an investment business, and

(b)   

is not brought into account as a receipt of a trade under section 104, or

20

as a receipt of a property business as a result of section 210,

   

the payment is to be treated as an amount to which the charge to corporation

tax on income applies.

(2)   

In this section “repayment provision” means—

(a)   

any provision made by virtue of section 136(7) or 214(1)(e) of FISMA

25

2000, or

(b)   

any provision made by scheme rules for fees to be refunded in specified

circumstances.

(3)   

In this section “scheme rules” means the rules referred to in paragraph 14(1) of

Schedule 17 to FISMA 2000.

30

Chapter 6

Supplementary

1255    

Meaning of some accounting terms

(1)   

Any reference in sections 1225 to 1227 to expenses of management being

debited in accounts is to those expenses being brought into account as a debit

35

in—

(a)   

the company’s profit and loss account or income statement, or

(b)   

a statement of total recognised gains and losses, statement of changes

in equity or other statement of items brought into account in calculating

the company’s profits and losses for accounting purposes.

40

(2)   

In section 1229(1) “brought into account” means brought into account in—

 
 

Corporation Tax Bill
Part 17 — Partnerships

581

 

(a)   

the company’s profit and loss account or income statement, or

(b)   

a statement of total recognised gains and losses, statement of changes

in equity or other statement of items brought into account in calculating

the company’s profits and losses for accounting purposes.

(3)   

In this Part—

5

“credit” means an amount which for accounting purposes increases or

creates a profit, or reduces a loss, for a period of account, and

“debit” means an amount which for accounting purposes reduces a profit,

or increases or creates a loss, for a period of account.

Part 17

10

Partnerships

Introduction

1256    

Overview of Part

(1)   

This Part contains some special rules about partnerships.

(2)   

For restrictions that in some circumstances affect relief for losses, and certain

15

other reliefs, for a company that is a member of a partnership see section 116 of

ICTA (arrangements for transferring relief).

1257    

General provisions

(1)   

In this Act persons carrying on a trade in partnership are referred to

collectively as a “firm”.

20

(2)   

This section and sections 1259 to 1266 are expressed to apply to trades, but

unless otherwise indicated (whether expressly or by implication) also apply to

businesses that are not trades.

(3)   

In those sections as applied by subsection (2)—

(a)   

references to a trade are references to a business, and

25

(b)   

references to the profits of a trade are references to the income arising

from a business.

1258    

Assessment of partnerships

Unless otherwise indicated (whether expressly or by implication), a firm is not

to be regarded for corporation tax purposes as an entity separate and distinct

30

from the partners.

Calculation of partners’ shares

1259    

Calculation of firm’s profits and losses

(1)   

This section applies if a firm carries on a trade and any partner in the firm (“the

partner”) is a company within the charge to corporation tax.

35

 
 

Corporation Tax Bill
Part 17 — Partnerships

582

 

(2)   

For any accounting period of the firm, the amount of the profits of the trade

(“the amount of the firm’s profits”) is taken to be the amount determined, in

relation to the partner, in accordance with subsection (3) or (4).

(3)   

If the partner is UK resident—

(a)   

determine what would be the amount of the profits of the trade

5

chargeable to corporation tax for that period if a UK resident company

carried on the trade, and

(b)   

take that to be the amount of the firm’s profits.

(4)   

If the partner is non-UK resident—

(a)   

determine what would be the amount of the profits of the trade

10

chargeable to corporation tax for that period if a non-UK resident

company carried on the trade, and

(b)   

take that to be the amount of the firm’s profits.

(5)   

The amount of any losses of the trade for an accounting period of the firm is

calculated, in relation to the partner, in the same way as the amount of any

15

profits.

(6)   

This section is subject to section 1260.

1260    

Section 1259: supplementary

(1)   

In determining under section 1259 the profits of a trade for any accounting

period no account is taken of any losses for another accounting period.

20

(2)   

Profits and losses are determined under section 1259 on the basis that no

interest paid or other distribution made by the firm is a distribution for the

purposes of section 1305(1) (which provides that no deduction is allowed for

dividends or other distributions).

1261    

Accounting periods of firms

25

(1)   

In this Part references to an accounting period of a firm which carries on a trade

are to a period that would be an accounting period of the firm if the firm were

a company.

(2)   

For the purposes of subsection (1) it is to be assumed that the company by

reference to which the accounting periods of the firm are determined (“the

30

deemed company”)—

(a)   

is UK resident,

(b)   

acquires a source of income on the occurrence of an event that falls

within subsection (3),

(c)   

ceases to trade on the occurrence of an event that falls within subsection

35

(4), and

(d)   

ceases to trade, and immediately afterwards starts to trade, on the

occurrence of a change in the persons carrying on the trade falling

within subsection (5).

   

Paragraph (a) is subject to subsection (6).

40

(3)   

An event falls within this subsection if—

(a)   

immediately before the event no company carries on the trade in

partnership, and

 
 

 
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