Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 17 — Partnerships
587

1269
Interpretation of clauses 1267 and 1268
In sections 1267 and 1268—
(a)
“profit-sharing arrangements” means the rights of the partners to share
in the profits of the trade or property business (as the case requires),
and
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(b)
references to the date on which the new basis was adopted are to the
first day of the first period of account for which it was adopted.
Miscellaneous
1270
Special provisions about farming and property income
(1)
The rule in section 36(2) (farming trades) operates in relation to firms so that—
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(a)
all farming in the United Kingdom which a firm carries on, other than
farming carried on as part of another trade, is treated as one trade, but
(b)
the farming carried on by a firm which is treated as one trade is not
included in any farming trade of any partner in the firm.
(2)
Section 205 (UK property business) operates in relation to firms so that—
15
(a)
every business and transaction mentioned in that section carried on, or
entered into, by a firm constitutes the firm’s UK property business, but
(b)
each business or transaction included in the firm’s UK property
business is not included in any UK property business of any partner in
the firm.
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(3)
Section 206 (overseas property business) operates in relation to firms so that—
(a)
every business and transaction mentioned in that section carried on, or
entered into, by a firm constitutes the firm’s overseas property
business, but
(b)
each business or transaction included in the firm’s overseas property
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business is not included in any overseas property business of any
partner in the firm.
1271
Sale of patent rights: effect of partnership changes
(1)
This section applies if each of the following conditions is met—
(a)
a person (“the trader”) sells the whole or part of any patent rights in
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carrying on a trade,
(b)
tax is chargeable under section 912 of this Act or section 587 of ITTOIA
2005 on the proceeds of the sale or on any instalment of those proceeds,
(c)
the tax is chargeable in one or more accounting periods or tax years
(referred to in this section as “the tax charge periods”),
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(d)
there is a change in the persons carrying on the trade at any time
between the beginning of the first of those tax charge periods and the
end of the last of them, and
(e)
the partnership condition and the continuity condition are met.
(2)
The partnership condition is that—
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(a)
the trader is a firm at the time of the sale, or
(b)
the trade is carried on in partnership at any time between the beginning
of the first of the tax charge periods and the end of the last of them.

Corporation Tax Bill
Part 17 — Partnerships
588

(3)
The continuity condition is—
(a)
in the case of an amount chargeable under section 912, that a company
which carried on the trade in partnership immediately before the
change continues to carry it on in partnership after the change, or
(b)
in the case of an amount chargeable under section 587 of ITTOIA 2005,
5
that a person who carried on the trade immediately before the change
continues to carry it on after the change.
(4)
Any amounts chargeable in respect of the proceeds or instalment that would
(apart from this section) be treated in accordance with Chapter 3 of Part 9 of
this Act or Chapter 2 of Part 5 of ITTOIA 2005 as profits of the seller of the
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patent rights chargeable in tax charge periods falling wholly after the change
are treated for corporation tax purposes—
(a)
as proceeds, arising at a constant daily rate during the remainder of the
relevant period, of a sale of patent rights by the person or persons
carrying on the trade after the change, and
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(b)
if the trade is carried on in partnership after the change, as arising to the
partners in shares calculated in accordance with the firm’s profit-
sharing arrangements.
(5)
If the change occurs during the course of a tax charge period—
(a)
any company that would, but for this section, have been charged to
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corporation tax in that period on a sum (“S”) in respect of the proceeds
or instalment is so charged on a fraction of S proportionate to the length
of the part of the period before the change, and
(b)
the balance of S not dealt with under paragraph (a) is treated for the
purposes of this section and section 861 of ITTOIA 2005 (sale of patent
25
rights: effect of partnership changes) as if it were an amount such as is
described in subsection (4).
(6)
In this section “the remainder of the relevant period” means—
(a)
if one or more tax charge periods begins after the tax charge period in
which the change occurs, the period beginning immediately after the
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change and ending 6 years after the beginning of the first of the tax
charge periods, or
(b)
otherwise, the period beginning immediately after the change and
ending at the end of the tax charge period in which the change occurs.
(7)
In this section “profit-sharing arrangements” means the rights of the partners
35
to share in the profits of the trade.
1272
Sale of patent rights: effect of later cessation of trade
(1)
This section applies if—
(a)
a person sells the whole or part of any patent rights in carrying on a
trade,
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(b)
by virtue of section 1271 amounts are chargeable to corporation tax
under section 912 as profits of one or more companies for the time being
carrying on the trade in partnership,
(c)
a partner which is a company ceases to carry on the trade after that, and
(d)
no company which carried on the trade immediately before the
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cessation continues to carry on the trade in partnership immediately
after the cessation.

Corporation Tax Bill
Part 17 — Partnerships
589

(2)
Any amounts mentioned in subsection (1)(b) which would have been
chargeable in any accounting period of a company later than that in which the
cessation occurred are charged in the accounting period of the company in
which the cessation occurred.
1273
Limited liability partnerships
5
(1)
For corporation tax purposes, if a limited liability partnership carries on a trade
or business with a view to profit—
(a)
all the activities of the limited liability partnership are treated as carried
on in partnership by its members (and not by the limited liability
partnership as such),
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(b)
anything done by, to or in relation to the limited liability partnership
for the purposes of, or in connection with, any of its activities is treated
as done by, to or in relation to the members as partners, and
(c)
the property of the limited liability partnership is treated as held by the
members as partnership property.
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References in this subsection to the activities of the limited liability partnership
are to anything that it does, whether or not in the course of carrying on a trade
or business with a view to profit.
(2)
For all purposes, except as otherwise provided, in the Corporation Tax Acts—
(a)
references to a firm include a limited liability partnership in relation to
20
which subsection (1) applies,
(b)
references to members of a firm include members of such a limited
liability partnership,
(c)
references to a company do not include such a limited liability
partnership, and
25
(d)
references to members of a company do not include members of such a
limited liability partnership.
(3)
Subsection (1) continues to apply in relation to a limited liability partnership
which no longer carries on any trade or business with a view to profit—
(a)
if the cessation is only temporary, or
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(b)
during a period of winding up following a permanent cessation,
provided that—
(i)
the winding up is not for reasons connected in whole or in part
with the avoidance of tax, and
(ii)
the period of winding up is not unreasonably prolonged.
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This is subject to subsection (4).
(4)
Subsection (1) ceases to apply in relation to a limited liability partnership—
(a)
on the appointment of a liquidator or (if earlier) the making of a
winding up order by the court, or
(b)
on the occurrence of any event under the law of a territory outside the
40
United Kingdom corresponding to an event specified in paragraph (a).

Corporation Tax Bill
Part 18 — Unremittable income
590

Part 18
Unremittable income
1274
Unremittable income: introduction
(1)
This Part applies if—
(a)
a company is liable for corporation tax on income arising in a territory
5
outside the United Kingdom, and
(b)
the income is unremittable.
(2)
For the purposes of this Part, income is unremittable if conditions A and B are
met.
(3)
Condition A is that the income cannot be transferred to the United Kingdom
10
by the company which is liable for corporation tax in respect of the income
because of—
(a)
the laws of the territory where the income arises,
(b)
executive action of its government, or
(c)
the impossibility of obtaining there currency that could be transferred
15
to the United Kingdom.
(4)
Condition B is that the company which is liable for corporation tax in respect
of the income has not realised it outside that territory for an amount in sterling
or in another currency which the company is not prevented from transferring
to the United Kingdom.
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1275
Claim for relief for unremittable income
(1)
If a company liable for corporation tax on unremittable income makes a claim
for relief under this section in respect of that income, it is not taken into account
for corporation tax purposes.
(2)
Subsection (1) is subject to section 1276.
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(3)
No claim under this section may be made in respect of any income so far as an
ECGD payment has been made in relation to it.
(4)
In subsection (3) “ECGD payment” means a payment made by the Export
Credits Guarantee Department under an agreement entered into as a result of
arrangements made under—
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(a)
section 2 of the Export and Investment Guarantees Act 1991 (c. 67)
(insurance in connection with overseas investment), or
(b)
section 11 of the Export Guarantees and Overseas Investment Act 1978
(c. 18).
(5)
A claim under this section must be made before the expiry of 2 years after the
35
end of the accounting period in which the income arises.
1276
Withdrawal of relief
(1)
This section applies if—
(a)
a claim under section 1275 has been made in relation to any income,
and
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(b)
either—

Corporation Tax Bill
Part 18 — Unremittable income
591

(i)
the income ceases to be unremittable, or
(ii)
an ECGD payment is made in relation to it.
(2)
In this section “ECGD payment” has the meaning given by section 1275(4).
(3)
If income ceases to be unremittable, the income is treated as arising on the date
on which it ceases to be unremittable.
5
(4)
If an ECGD payment is made in relation to income, the income is treated, to the
extent of the payment, as arising on the date on which the ECGD payment is
made.
(5)
The income treated as arising under subsection (3) or (4), and any tax payable
in respect of it under the law of the territory where it arises, are taken into
10
account for corporation tax purposes at their value at the date on which the
income is treated as arising.
(6)
Subsections (3) to (5) do not apply so far as the income has already been treated
as arising as a result of this section.
1277
Income charged on withdrawal of relief after source ceases
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(1)
This section applies if—
(a)
income is treated as arising as a result of section 1276, and
(b)
at the time it is so treated the company which would have become liable
for corporation tax as a result of that section—
(i)
has permanently ceased to carry on the trade or property
20
business from which the income arises, or
(ii)
in the case of income from another source, has ceased to possess
that source.
(2)
In the case of income from a trade—
(a)
the income is treated as a post-cessation receipt for the purposes of
25
Chapter 15 of Part 3 (trading income: post-cessation receipts), but
(b)
in the application of that Chapter to that income, section 189 (extent of
charge to tax) is omitted.
(3)
In the case of income from a property business—
(a)
the income is treated as a post-cessation receipt from a UK property
30
business for the purposes of Chapter 9 of Part 4 (property income: post-
cessation receipts), but
(b)
in the application of that Chapter to that income, section 281 (extent of
charge to tax) is omitted.
(4)
In the case of income from another source, the income is taxed as if the
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company continued to possess that source.
1278
Valuing unremittable income
(1)
If no claim is made under section 1275 in relation to unremittable income
arising in a territory outside the United Kingdom, the amount of the income to
be taken into account for corporation tax purposes is determined as follows.
40
(2)
If the currency in which the income is denominated has a generally recognised
market value in the United Kingdom, the amount is determined by reference
to that value.

Corporation Tax Bill
Part 19 — General exemptions
592

(3)
In any other case, the amount is determined according to the official rate of
exchange of the territory where the income arises.
Part 19
General exemptions
Profits from FOTRA securities
5
1279
Exemption of profits from securities free of tax to residents abroad (“FOTRA
securities”)
(1)
No liability to corporation tax arises in respect of profits from a FOTRA
security or a loan relationship represented by such a security if conditions A
and B are met.
10
(2)
Subsection (1) is subject to subsection (5).
(3)
Condition A is that the profits are stated in the exemption condition to be
exempt from corporation tax.
(4)
Condition B is that any requirements for obtaining the exemption imposed by
the security’s conditions of issue are met.
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(5)
This section does not affect the need to claim repayment of tax within the time
limit applicable for a claim.
(6)
Section 1280 applies for the interpretation of this section.
1280
Section 1279: supplementary provision
(1)
In this section and section 1279 “FOTRA security” means—
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(a)
a security issued with a condition about exemption from taxation
authorised by section 22 of F(No.2)A 1931,
(b)
a gilt-edged security which was issued before 6th April 1998 and
without any such condition (other than 3½% War Loan 1952 Or After),
or
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(c)
3½% War Loan 1952 Or After.
(2)
In section 1279 “the exemption condition” has the meaning given by
subsections (3) to (5), according to the kind of FOTRA security involved.
(3)
In relation to a security within subsection (1)(a), it means the condition
authorised by section 22 of F(No.2)A 1931.
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(4)
In relation to a security within subsection (1)(b), it means a condition with
which 7.25% Treasury Stock 2007 was first issued, being a condition treated by
section 161(1) of FA 1998 (non-FOTRA securities)—
(a)
as a condition with which the security within subsection (1)(b) was
issued, and
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(b)
as a condition authorised in relation to its issue by section 22 of
F(No.2)A 1931.
(5)
In relation to 3½% War Loan 1952 Or After, it means a condition of its issue
authorised by section 47 of F(No.2)A 1915.
(6)
In this section “gilt-edged security” means a security which—
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Corporation Tax Bill
Part 19 — General exemptions
593

(a)
is a gilt-edged security for the purposes of TCGA 1992 (see Schedule 9
to that Act), or
(b)
will be such a security on the making of an order under paragraph 1 of
Schedule 9 to that Act if the making of the order is anticipated in the
prospectus under which the security is issued.
5
Income from savings certificates
1281
Income from savings certificates
(1)
No liability to corporation tax arises in respect of income from authorised
savings certificates.
(2)
A savings certificate is authorised so far as its acquisition was not prohibited
10
by regulations made by the Treasury limiting a person’s holding.
(3)
In this section “savings certificates” means—
(a)
savings certificates issued under—
(i)
section 12 of the National Loans Act 1968 (c. 13) (power of
Treasury to borrow),
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(ii)
section 7 of the National Debt Act 1958 (c. 6) (power of Treasury
to issue national savings certificates), or
(iii)
section 59 of FA 1920 (power to borrow on national savings
certificates),
(b)
war savings certificates, as defined in section 9(3) of the National Debt
20
Act 1972 (c. 65), or
(c)
savings certificates issued under any enactment forming part of the law
of Northern Ireland and corresponding to section 12 of the National
Loans Act 1968.
(4)
But subsection (3)(c) does not include Ulster Savings Certificates (for which
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there are special rules in section 1282).
1282
Income from Ulster Savings Certificates
(1)
No liability to corporation tax arises in respect of income from authorised
Ulster Savings Certificates if condition A or B is met.
(2)
Condition A is that —
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(a)
the holder purchased them, and
(b)
at the time of the purchase the holder was resident in Northern Ireland.
(3)
Condition B is that the holder is so resident when they are repaid.
(4)
An Ulster Savings Certificate is authorised so far as its acquisition was not
prohibited by regulations made by the Department of Finance and Personnel
35
limiting a person’s holding.
(5)
The exemption under this section requires a claim.
(6)
In this Part “Ulster Savings Certificates” means savings certificates issued or
treated as issued under section 15 of the Exchequer and Financial Provisions
Act (Northern Ireland) 1950 (c. 3 (N.I.)).
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