Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 19 — General exemptions
594

Miscellaneous
1283
Interest from tax reserve certificates
No liability to corporation tax arises in respect of interest from tax reserve
certificates issued by the Treasury.
1284
Housing grants
5
(1)
No liability to corporation tax arises in respect of a payment if it is made—
(a)
under an enactment relating to the giving of financial assistance for the
provision, maintenance or improvement of housing accommodation or
other residential accommodation, and
(b)
by way of grant or other contribution towards expenses.
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(2)
It does not matter whether—
(a)
the payment is made to the person who incurs the expenses, or
(b)
the expenses have been, or are to be, incurred.
(3)
Subsection (1) does not apply so far as the payment is made towards an
expense which is deductible in calculating income for any corporation or
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income tax purpose.
1285
UK company distributions
(1)
Corporation tax is not chargeable on dividends or other distributions of a UK
resident company.
(2)
Dividends and other distributions of a UK resident company are not taken into
20
account as receipts in any calculation of income for corporation tax purposes.
(3)
Subsection (1) does not prevent any dividends or other distributions from
being taken into account in the calculation of chargeable gains.
(4)
Subsections (1) and (2) are subject to any exceptions made in the Corporation
Tax Acts.
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(5)
For exceptions see in particular—
(a)
section 130 (traders receiving distributions etc), and
(b)
section 219(4) and (4A) of FA 1994 (Lloyd’s underwiters: taxation of
profits).
1286
VAT repayment supplements
30
No liability to corporation tax arises in respect of a sum paid by way of
supplement under section 79 of VATA 1994 (VAT repayment supplements).
1287
Incentives to use electronic communications
No liability to corporation tax arises in respect of anything received by way of
incentive under any regulations made in accordance with Schedule 38 to FA
35
2000 (regulations for providing incentives for electronic communications).

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions
595

Part 20
General calculation rules
Chapter 1
Restriction of deductions
Unpaid remuneration
5
1288
Unpaid remuneration
(1)
This section applies if—
(a)
an amount is charged in respect of employees’ remuneration in a
company’s accounts for a period,
(b)
the amount would, apart from this section, be deductible in calculating
10
income from any source for corporation tax purposes, and
(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.
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(3)
No deduction is allowed for the remuneration if it is not paid.
(4)
Provision corresponding to that made by this section is made by—
(a)
section 1249 (in relation to expenses of management of a company’s
investment business), and
(b)
section 76ZL of ICTA (in relation to the expenses of insurance
20
companies).
1289
Unpaid remuneration: supplementary
(1)
For the purposes of section 1288 an amount charged in the accounts in respect
of employees’ remuneration includes an amount for which provision is made
in the accounts with a view to its becoming employees’ remuneration.
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(2)
For the purposes of section 1288 it does not matter whether an amount is
charged for—
(a)
particular employments, or
(b)
employments generally.
(3)
If the income is calculated before the end of the 9 month period mentioned in
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section 1288(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
(b)
if the remuneration is subsequently paid before the end of that period,
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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 1288 remuneration is paid when
it—

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions
596

(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 1288—
5
“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.
Employee benefit contributions
10
1290
Employee benefit contributions
(1)
This section applies if, in calculating for corporation tax purposes the profits of
a company (“the employer”) of a period of account, a deduction would
otherwise be allowable for the period in respect of employee benefit
contributions made or to be made (but see subsection (4)).
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(2)
No deduction is allowed for the contributions for the period except so far as—
(a)
qualifying benefits are provided, or qualifying expenses are paid, out
of the contributions during the period or within 9 months from the end
of it, or
(b)
if the making of the contributions is itself the provision of qualifying
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benefits, the contributions are made during the period or within 9
months from the end of it.
(3)
An amount disallowed under subsection (2) is allowed as a deduction for a
subsequent period of account so far as—
(a)
qualifying benefits are provided out of the contributions before the end
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of the subsequent period, or
(b)
if the making of the contributions is itself the provision of qualifying
benefits, the contributions are made before the end of the subsequent
period.
(4)
This section does not apply to any deduction that is allowable—
30
(a)
for anything given as consideration for goods or services provided in
the course of a trade or profession,
(b)
for contributions under a registered pension scheme or under a
superannuation fund to which section 615(3) of ICTA applies,
(c)
for contributions under a qualifying overseas pension scheme in
35
respect of an individual who is a relevant migrant member of the
pension scheme in relation to the contributions,
(d)
for contributions under an accident benefit scheme,
(e)
under Chapter 1 of Part 11 (share incentive plans),
(f)
under section 67 of FA 1989 (qualifying employee share ownership
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trusts), or
(g)
under Part 12 (other relief for employee share acquisitions).
(5)
For the purposes of subsection (4)(c) “qualifying overseas pension scheme”
and “relevant migrant member” have the same meaning as in Schedule 33 to
FA 2004 (see paragraphs 4 to 6 of that Schedule).
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Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions
597

(6)
See also—
section 1291 (making of “employee benefit contributions”),
section 1292 (provision of qualifying benefits),
section 1293 (timing and amount of certain qualifying benefits),
section 1294 (provision or payment out of employee benefit
5
contributions),
section 1295 (profits calculated before end of 9 month period),
section 1296 (interpretation of sections 1290 to 1296),
section 1297 (some special rules for companies carrying on a life assurance
business).
10
1291
Making of “employee benefit contributions”
(1)
For the purposes of section 1290 an “employee benefit contribution” is made if,
as a result of any act or omission—
(a)
property is held, or may be used, under an employee benefit scheme, or
(b)
there is an increase in the total value of property that is so held or may
15
be so used (or a reduction in any liabilities under an employee benefit
scheme).
(2)
For this purpose “employee benefit scheme” means a trust, scheme or other
arrangement for the benefit of persons who are, or include, present or former
employees of the employer.
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1292
Provision of qualifying benefits
(1)
For the purposes of section 1290 qualifying benefits are provided if there is—
(a)
a payment of money, or
(b)
a transfer of assets,

which meets condition A, B, C or D.
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(2)
Condition A is that the payment or transfer gives rise both to an employment
income tax charge and to an NIC charge.
(3)
Condition B is that the payment or transfer would give rise to both charges if—
(a)
the duties of the employment in respect of which the payment or
transfer was made were performed in the United Kingdom, and
30
(b)
the person in respect of whose employment the payment or transfer
was made met at all relevant times the conditions as to residence or
presence in Great Britain or Northern Ireland prescribed under section
1(6) of the Contributions and Benefits Act.
(4)
Condition C is that the payment or transfer is made in connection with the
35
termination of the recipient’s employment with the employer.
(5)
Condition D is that the payment or transfer is made under an employer-
financed retirement benefits scheme.
(6)
None of the conditions is met if the payment or transfer is by way of loan.
(7)
In this section—
40
“the Contributions and Benefits Act” means—
(a)
the Social Security Contributions and Benefits Act 1992 (c. 4), or

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions
598

(b)
the Social Security Contributions and Benefits (Northern
Ireland) Act 1992 (c. 7),
“employment income tax charge” means a charge to tax under ITEPA
2003 (whether on the recipient or on someone else), and
“NIC charge” means a liability to pay national insurance contributions
5
under section 6 (Class 1 contributions), section 10 (Class 1A
contributions) or section 10A (Class 1B contributions) of the
Contributions and Benefits Act.
1293
Timing and amount of certain qualifying benefits
(1)
If the provision of a qualifying benefit—
10
(a)
takes the form of a payment of money, and
(b)
is not made under an employer-financed retirement benefits scheme,

the benefit is provided for the purposes of section 1290 when the money is
treated as received for the purposes of Chapter 4 of Part 2 of ITEPA 2003
(applying the rules in section 18 of that Act (receipt of money earnings)).
15
(2)
If the provision of a qualifying benefit takes the form of a transfer of an asset,
the amount provided for the purposes of section 1290 is the total of—
(a)
the amount (if any) spent on the asset by a scheme manager, and
(b)
in a case where the asset was transferred to a scheme manager by the
employer, the amount of the deduction that would be allowable as
20
mentioned in subsection (1) of that section in respect of the transfer.
(3)
But if the amount given by subsection (2) is more than the amount that—
(a)
is charged to tax under ITEPA 2003 in respect of the transfer, or
(b)
would be so charged if condition B in section 1292 were met,

the deduction allowable under section 1290(2) or (3) is limited to that lower
25
amount.
1294
Provision or payment out of employee benefit contributions
(1)
For the purposes of section 1290(2)(a)—
(a)
any qualifying benefits provided, or
(b)
any qualifying expenses paid,
30

by a scheme manager after the receipt by the scheme manager of employee
benefit contributions are treated as being provided or paid out of the
contributions.
(2)
The rule in subsection (1) operates up to the total amount of the contributions
reduced by the amount of any benefits or expenses previously provided or
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paid as mentioned in section 1290(2)(a).
(3)
For the purposes of section 1290(3)(a) any qualifying benefits provided by a
scheme manager after the receipt by the scheme manager of employee benefit
contributions are treated as being provided out of the contributions.
(4)
The rule in subsection (3) operates up to the total amount of the contributions
40
reduced by the amount of any benefits or expenses previously provided or
paid as mentioned in section 1290(2)(a) or (3)(a).
(5)
For the purposes of this section no account is taken of any other amount
received or paid by the scheme manager.